Inspection-based waivers saved borrowers an estimated $10.8 million in the past 12 months

Inspection-based waivers saved borrowers an average of $375 per loan, and $10.8M in total in the past 12 months. This is based on 28,745 inspection-based waivers being used on loans, and an average borrower fee of $600 for a 1004 single-family residential appraisal, and $225 for an inspection. Inspection-based waivers are being used as an alternative solution to appraisals, and not simply replacing appraisal waivers, so material cost and time savings are being passed onto borrowers when lenders use these solutions.

Eligibility for an inspection-based waivers is determined by the GSE automated underwriting systems, and one of the factors is the existence of a contemporary appraisal. Despite February being the lowest issuance volume in the past 12 months, the use number of lenders and loans using inspection-based waivers once again increased.

For February 2024, GSE issuance totaled $37.1N, down 7.67% on the prior month. For property valuations, $35.2BN (87.7%) closed using appraisals, down 8.1%, and $3.92BN (10.6%) closed utilizing appraisal waivers, down 5.9% on the prior month. Lenders closed 659$MM (1.78%) with inspection-based waivers, up 4.9% on January 2024.

Overall, inspection-based waivers comprised 14.4% of the combined appraisal waiver (non-appraisal) solutions by loan balance, the highest since inspection-based waiver solutions became available in the GSE selling guides. By number of loans delivered, inspection-based waivers reached 17.3% of all waiver solutions, up 5.3% from January 2024, and again the highest since inspection-based waiver solutions.

Market share of inspection-based waivers

Fannie Mae Valuation Acceptance + Property Data market share of inspection-based waivers increased marginally to 41.8%, on 12.1% lower volume over the prior month. The 372 lenders who have delivered loans through Fannie Mae Valuation Acceptance + Property Data, including 198 independent mortgage companies and 107 banks and 67 credit unions, remained the same as the prior month.

Freddie Mac ACE+ PDR (Automated Collateral Evaluation plus Property Data Report) market share was 58.2% as utilization increased by 3.6% month-over-month. Freddie Mac participation continues to grow steadily with 320 lenders taking advantage of the solution, including 123 community banks, 26 credit unions, and 171 non-banks.

Inspection-based waivers saved borrowers extra fees

GSE purchase issuance dropped 11.5% to $31.3BN for February with refinance increasing 20.2% to $5.82BN. The purchase share of inspection-based waivers was 52.7%, with cash-out refinances at 36.7% and 10.6% for non cash-out refinances.

In the past 12 months 377 lenders have accepted inspection-based waivers for purchase transactions, with 242 for Freddie Mac and 288 for Fannie Mae. For refinance transactions, the total is 394 lenders, with 258 for Freddie Mac and 270 for Fannie Mae.

Retail channels rebounded in February

Retail channel utilization of inspection-based waivers in February jumped 14% to $400M (60.7%). Mortgage brokers volume decreased 9.2% to $151M (22.9%) delivered and the correspondent channel reduced 3% at $108M (16.4%)

Banks expanding utilization

In February, banks increased their usage of the solutions with JP Morgan Chase, Truist, Plains Capital, Flagstar and Huntington all posting positive gains over the prior month on declining issuance. JP Morgan Chase entered the top 10 for the first time. Of the 775 bank sellers, 772 (99.6%) utilized appraisals, 489 (63.1%) utilized appraisal waivers and 156 (20.1%) utilized inspection-based waivers when delivering loans in 2023. More details are available in a recent article GSE appraisal alternatives growing at banks in 2024.

More information about inspection-based waivers