New Blog from Blue Appraisals

Fannie announced it will not permit the cancellation of mortgage insurance coverage based on property values provided by automated valuation models (AVMs).

Fannie issued the clarification in response to several inquires on the matter.

"A borrower is allowed to request cancellation of borrower-purchased mortgage insurance coverage for any conventional mortgage, regardless of closing date, when that loan reaches a specified loan-to-value ratio", according to the statement. But Fannie Mae requires that value be established by a current appraisal based on an interior and exterior property inspection.

However, an AVM relies on public record information to determine estimated value without any assessment of the current condition of the property.

That’s why Fannie Mae will not permit the cancellation of mortgage insurance coverage based on the estimated value provided by an AVM. The company said "an appraisal completed by a qualified appraiser is the most appropriate standard and most reliable indicator for determining property value", according to the statement.

This announcement also requires lenders to use appraisals based on an interior and exterior inspection, (no driveby's), on all manually underwritten mortgages.