Fannie Mae said Thursday that it would no longer require an appraisal or property inspection of some borrowers trying to refinance a Fannie mortgage. Analysts said the change would have a marginal impact.
Starting April 4, Fannie said, its Desktop Underwriter system will validate property values for refis of Fannie loans by means of automated models instead of requiring an appraisal or property inspection.
Brian Faith, a Fannie spokesman, said the change and several others would let "potentially millions of current mortgage holders" take advantage of historically low interest rates and "break the logjam in mortgage refinancing."
Derek Chen, an analyst at Barclays Capital Inc., wrote in a research note Thursday that the changes amount to "a mere automation of existing underwriting standards."
Eligibility for the appraisal waiver will depend on which loan-to-value ratios are used, he wrote.
The new guidelines will require lenders to enter an estimated current value of the house without an appraisal. The value submitted by the lender would then be compared with an estimate from an automated valuation model.
"If the values are consistent," then Fannie would grant an appraisal waiver, Mr. Chen wrote.
The changes "are likely to have only a marginal impact on the refinanc[ing] ability of homeowners" because of the many eligibility requirements borrowers must satisfy to get the waiver, he wrote.
The guidelines should help shorten refinancing timelines, reduce refinancing costs, and free up some origination capacity, Mr. Chen wrote. But all told, they would have a "very limited effect on homeowners' ability to refinance."
Rodney Anderson, the executive director and senior managing partner of Rodney Anderson Lending Services, a unit of the Dallas lender Everett Financial, said he has received hundreds of applications from borrowers who are ineligible for refinancing.
"The problem is that many people are upside-down on their houses and Fannie and Freddie have tightened the guidelines so much that they can't refinance their homes," he said. "Nobody really sees how this can benefit people."
Fannie also loosened some eligibility requirements for its limited cash-out DU Refi Plus program.
Borrowers with loan-to-value ratios of 80% or less will no longer be subject to a minimum credit score of 580, and adjustable-rate mortgage holders with LTVs of 80% or less no longer must achieve a minimum 680 credit score.
Carla Bandy, a senior underwriter at Everett Financial, said it was too early to tell what impact the changes would have.
"If you have a Fannie loan and are trying to refinance, there's probably a comfort level because they already have you in a loan and you've made your payments," she said, adding that reducing the FICO minimum to 580 "piqued my curiosity."
"I don't know if our investors will go along with that because they often put on their own overlays" on top of what Fannie requires, she said.
