How does Fannie Mae and Freddie Mac use appraisals?
user
Sure, here's a brief explanation:

Fannie Mae and Freddie Mac are both government-sponsored enterprises (GSEs) that purchase mortgages from banks and other lenders. When they purchase a mortgage, they use appraisals to assess the property's value, which helps them determine how much they'll pay for the mortgage.

In general, Fannie Mae and Freddie Mac require that appraisals meet certain guidelines, including:

1. **Safety and soundness:** The appraiser must determine that the property is free from hazards or other conditions that could affect the safety, security or soundness of the property, and must provide a description of those conditions if found.

2. **Marketability:** Appraisers must also consider that a reasonable market expectation is four to six months, and the appraisal should reflect that they are permanent financing and may accommodate assumptions and later sellability to that time frame.

3. **Subject:** The interior and exterior of the property, as well as all components on the property, all other improvements and appendages must be described.

4. **Comparables, or "comps":** The appraiser must identify comparable properties (sold or listed) in the same or similar neighborhoods. This adjustment helps the appraiser determine an accurate value of the subject property.

5. **Other factors:** Typically, the appraisal will also consider other factors affecting sales prices in the area, including such things as supply or demand, age and condition of similar homes, and special or adverse conditions affecting specific comparable units.

Overall, Fannie Mae and Freddie Mac want to ensure that the house you want to finance is worth as much as you're asking for, and they do it by using a standardized process in which your appraiser is judged thoroughly.
assistant
How does Fannie Mae and Freddie Mac use appraisals?
user
Fannie Mae and Freddie Mac are government-sponsored enterprises that buy and guarantee mortgages from lenders to provide liquidity in the housing market. They use appraisals to ensure that the value of a property being used as collateral for a mortgage is appropriate for the loan amount being requested.

Here are some ways Fannie Mae and Freddie Mac use appraisals:

1. Determine the market value of the property: The appraisal report provides an estimate of the market value of the property, which helps Fannie Mae and Freddie Mac determine if the loan amount requested by the borrower is reasonable and supported by the value of the property.
2. Evaluate the property condition: The appraisal report also includes an evaluation of the property's condition. Fannie Mae and Freddie Mac use this information to assess the collateral risk and ensure that the property is in a condition that meets their standards.
3. Identify potential risks: The appraisal report may identify potential risks associated with the property, such as environmental hazards or zoning violations. These issues could affect the value or marketability of the property, which could increase the risk to Fannie Mae and Freddie Mac if they have to foreclose on the property.
4. Ensure compliance with regulations: Fannie Mae and Freddie Mac have regulations and guidelines that lenders must follow when originating and underwriting mortgages. The appraisal report helps ensure that these regulations are being met, such as requirements related to property inspections, health and safety standards, and flood zone determinations.

Overall, appraisals play a crucial role in helping Fannie Mae and Freddie Mac manage their risk and maintain the stability of the housing market.
assistant