Use of inspection based waivers at banks driven by largest originators

The adoption and use of inspection based waivers at banks has grown conservatively for the first 6 months of 2024. This article provides a review and benchmark of the industry average and top bank use of inspection based waivers for banks.

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• The GSEs do not publish separate eligibility criteria for appraisal waivers (AWs) & inspection based waivers (IBWs) – there is a single credit box for AWs and IBWs.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 banks – eligibility

The eligibility estimates show, as expected, that non cash out refinances have the largest credit box (85%), with overall eligibility across purchase and refinance at 55%.

Banks – average vs top bank utilization

Of the 42,070 loans in the credit box GSE sellers delivered 10,066 (24%) using an appraisal waiver or inspection based waiver.

Average lender utilization – industry benchmark

For banks the average utilization for appraisal waivers was 22.5% and for inspection based waivers was 1.4%, and 23.9% overall.

Top bank utilization – benchmark

Top bank utilization of appraisal waivers is similar to the average at 21.3%, but use of inspection based waivers is higher at 6.5%. Their adoption provides a useful benchmark for banks to evaluate their adoption of these solutions.

Number of banks adopting

In Q2 2024, a total of 82 (12.6%) banks delivered loans using inspection based waivers out of a total of 649 GSE sellers for the quarter. Of these, 80 used Freddie Mac solutions, representing 18.3% of the 438 active sellers. For Fannie Mae, 19 delivered loans using inspection based waivers out of 390 (4.9%) active sellers. Both GSEs experienced marginal growth in the number of banks using the solutions from Q1 2024.

Large bank adoption

Large banks including Flagstar Bank, JP Morgan Chase, Truist Bank, Citizens Bank and US Bank are all using inspection based waivers, with Truist utilization the highest at 3%. To-date, Wells Fargo Bank and Citibank have not used GSE inspection based waiver solutions.

More information about inspection based waivers at banks

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.