Mortgage servicer Freddie Mac is hoping to automate home appraisals in an effort to speed up the closing process and reduce fees for home buyers.
Freddie Mac said it would soon be rolling out a new program that allows buyers to skip traditional appraisals.
The new program is called Automated Collateral Evaluation (ACE), which is essentially a computer algorithm that relies on data from multiple listing services, public records and historical home values to determined a property’s collateral risk. The system can also assess if a property needs to be appraised by a human, or if the data is sufficiently accurate that an automated appraisal is good enough.
Freddie Mac said the program is also on offer to borrowers interested in refinancing their homes.
Not everyone will qualify for the new program, however, at least at this stage. Lenders can assess whether or not a property is eligible for ACE by submitting data through Freddie’s Loan Product Advisor tools. gible for ACE by submitting data through Freddie’s Loan Product Advisor. The program will then factor in credit, capacity, and collateral to assess the quality of the loan and determine whether the estimated value of the home provided by the lender is acceptable, Freddie official said.
Those that do qualify for an automated appraisal can save up to $500 in fees, and close on their transaction up to 10 days faster, Freddie said.
“By leveraging big data and advanced analytics, as well as 40-plus years of historical data, we're cutting costs and speeding up the closing process for borrowers,” said David Lowman, Freddie Mac’s executive vice president of single-family business. “At the same time, we’re providing immediate collateral representation and warranty relief to lenders. This is just one example of how we are reimagining the mortgage process to create a better experience for consumers and lenders.”
The technology could also have the side-effect of speeding up traditional appraisal times as well, as it would reduce the burden amid a shortage of qualified appraisers that was highlighted by the National Association of Realtors in a report earlier this year.
ACE will be available for home purchases beginning Sept. 1; it has been available for qualified refinances since June 19.