Recently there have been more home loans closing in Santa Cruz, without the need to obtain an appraisal. The reasoning behind this is that the large purchasers of all mortgages, Fannie Mae and Freddie Mac (government-sponsored entities), have been putting together databases where they have been tracking Santa Cruz county property sales along with the property characteristics for years now. Amongst all the information they collect, we know they have been keeping track of bedroom count, bathroom count, square footage of the homes, any upgrades, and quality of construction. This has allowed them to amass a large amount of information from properties across Santa Cruz and the country.
When borrowers go into a bank to obtain a loan, the bank very routinely offers a loan to the borrower that will be eventually purchased by Fannie Mae or Freddie Mac. Over 70% of all mortgages are secured this way. By the bank doing this, they can check if the property for which the loan is being applied for is within the scope of data collected by the agencies. If the data shows that the value is within a “reasonable range” and there is sufficient information regarding property sales in the area, they will issue what is called a Property Inspection Waiver or PIW for short. The PIW allows a bank to close the loan without the need for an appraisal as this requirement has essentially been met with this waiver.
In order to obtain a PIW, the complete loan file must be run through Fannie Mae/Freddie Mac system to confirm that it is acceptable. If there is no appraisal required, the buyer or borrower of the property in Santa Cruz still has the ability to request an appraisal if they wish to do so. False beliefs are that a larger down payment or higher credit score would allow the PIW to be issued, but this is not correct.
In general, all this is done to make it easier for buyers to be able to buy a property. It’s an example of how the lending industry is using technology to make the experience much more efficient for borrowers, allow for fewer obstacles and ultimately get more people into homes.