Limited use of inspection based waivers at credit unions an opportunity

The adoption and use of inspection based waivers at credit unions has remained low for the first 6 months of 2024. This article provides a review and benchmark of the average and top lender use of inspection based waivers for credit unions.

Eligibility estimate approach

A note on the methodology used and information presented on appraisal waiver and inspection based waivers at credit unions:

• The goal is to assess overall lender adoption & utilization of the waiver solutions.
• We determine ‘total eligibility’ from the GSE published eligibility requirements (‘credit box’) as this changes infrequently, and gives a baseline of comparison.
• The actual number of appraisal waivers and inspection based waivers offered via GSE automated underwriting systems will be significantly lower, and based on the specific loan characteristics; some lenders will not see few, if any, offers.
• The GSEs do not publish separate eligibility criteria for appraisal waivers (AWs) & inspection based waivers (IBWs) – there is a single credit box for AWs and IBWs.
• The GSE have similar eligibility requirements, but there are notable differences.
• The unit volumes are based on GSE issuance in Q2 2024.

Inspection based waivers at credit unions – eligibility

The eligibility estimates show, as expected, that non cashout refinances have the largest credit box (86%), with overall eligibility across purchase and refinance at 57%.

Credit unions – average vs top lender utilization

Of the 6,783 loans in the credit box GSE sellers delivered only 1,453 (21%) using an appraisal waiver or inspection based waiver.

Average lender utilization – industry benchmark

For credit unions the average utilization for appraisal waivers was 20% and for inspection based waivers was just 1.3%.

Top lender utilization – benchmark

Top performing credit unions utilization of inspection based waivers, at 20%, is many times the average credit union. Although overall GSE issuance was low in Q2 2024, some lenders like The Golden 1 CU and MidFlorida CU optimized their use of appraisal and inspection based waivers. Their adoption provides a useful benchmark for credit unions to evaluate their adoption of these solutions.

Number of credit unions adopting solutions

In Q2 2024, a total of 21 credit unions delivered loans using inspection based waivers out of a total of 343 GSE sellers for the quarter. Of these, 9 used Freddie Mac solutions, representing 8.0% of the 113 active sellers. For Fannie Mae, 15 delivered loans using inspection based waivers out of 275 (5.5%) active sellers.

More information about inspection based waivers at credit unions

For lenders who wish to learn more, you can check out the the following articles. These include links to the Freddie Mac ACE+ PDR and Fannie Mae Valuation Acceptance and collateral valuation modernization strategies, new programs, selling guide updates, FAQs, process flow, job aids, approved technology and service providers, and information about the property data standards and user guides:

• Implementing the Freddie Mac Inspection-based Waivers – Quick Reference for Lenders
• Implementing the Fannie Mae Inspection-based Waivers – Quick Reference for Lenders

In addition, you can access the Freddie Mac ACE+ PDR Solution page and the Fannie Mae Value Acceptance + Property Data FAQ.