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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 56 July 2024 E A B O U T L O O K Desktop Underwriter® capabilities that enable lenders to automatically validate borrower assets, income, and employ- ment using a single asset report. This not only improves the mortgage origination process from a loan quality perspective but increases our ability to identify rent payments and help lenders qualify more first-time homebuyers. In the appraisal space, we are continuing to increase the adoption of appraisal alternatives and take steps to address potential instances of appraisal bias. In February 2024, we added condos as eligible properties for value acceptance + property data, which reduces origination cycle time and borrower costs. Between January 2020 and May 2024, we estimate that the use of appraisal alternatives on loans sold to us saved mortgage borrowers approximately $2.56 billion. We're continu- ing to build on our lessons learned to help more homebuyers take advantage of ap- praisal alternatives in the future. We also recently announced a new reconsideration of value (ROV) policy, which standardizes elements that must be part of a lender's ROV policies and procedures, as well as formalizes a framework for borrowers to appeal an appraisal when they believe the opinion of value is unsupported, may be deficient, or reflects prohibited discrimi- natory practices. This policy educates bor- rowers about their rights and the process to appeal an appraisal on their own behalf, creates uniform industrywide expectations for how to manage ROVs, and maintains appraiser independence. Q: What is a recent "win" you or your team have celebrated? What lessons did you take away from this achievement? Williamson: In 2021, Fannie Mae intro- duced an annual appraisal text scanning review process that allows us to identify the use of terms in appraisal reports that are explicitly prohibited per our Selling Guide (B4-1.1-04) policies. In that first year, we sent education letters to more than 1,500 appraisers, alerting them of violations. The following year, about 79% of the appraisers who received a letter in 2021 had no new findings. In 2023, 91% of appraisers who received a letter in 2022 had no new findings. This is also reflect- ed in the overall occurrence rate, which declined from 0.15% of appraisal reports in 2021 to just 0.03% in 2023. These statistics show remarkable prog- ress, and we're continuing to identify new educational opportunities in appraisal reporting. In 2023, we expanded our text scanning to include language that may infer consideration of protected class along with additional cases of subjectivity or unsupported assumptions, sending more than 1,900 feedback letters. Education is an essential part of our appraisal monitoring and quality processes and a key pillar of our overall initiatives to continue to miti- gate appraisal bias. This includes industry research, valuation modernization, tech- nological innovations, and expansion of the Appraiser Diversity Initiative™, which is designed to attract new entrants to the real estate appraisal field. Importantly, addressing appraisal bias remains a con- certed effort among a number of industry participants, including the Federal Hous- ing Finance Agency, the U.S. Department of Housing and Urban Development, and Freddie Mac, and we're excited about the continued progress appraisers have made to become more objective in their report- ing to eliminate unsupported assumptions and consideration of protected class. Q: What is one area where servicing should be focused on innovating or improving, and why? Williamson: An essential component of Fannie Mae's mission is to support sustain- able homeownership. That includes pro- viding borrowers experiencing unforeseen financial challenges with loss mitigation options, such as mortgage forbearance, loan modification, and payment deferral. We recently announced enhancements to our flex modification terms, which expand borrower eligibility and provide more eq- uitable payment reductions to eligible bor- rowers, underscoring our focus on home retention strategies that enable borrowers who are facing a long-term hardship to remain in their homes. We remain com- mitted to ensuring our retention workout options provide appropriate borrower assistance regardless of the economic envi- ronment while also managing our book of business responsibly by reducing defaults and mitigating credit losses. Mortgage servicers play a key role in that commitment, communicating with borrowers throughout the lifecycle of their loans and providing assistance when needed. Like many other indus- tries, servicing communication tools have been modernized to provide multiple consumer engagement capabilities and digital touchpoints. Instead of relying on phone calls and mail correspondence as the only way for a borrower to discuss their loan with their servicers, they are now able to connect via text message, live chat, or an app. Servicers have also deployed self-serve options that allow borrowers to move through the servicing loan life cycle, which improves the user experience and provides efficiencies and cost savings for servicers. Borrowers who are experiencing a financial hardship that may impact their ability to pay their mortgage can learn about loss mitigation options and, in many cases, sign up for a loss mitigation solution directly from their mobile app or tablet. Additionally, AI communication tools provide a path toward achieving fair servicing by using data-driven insights to identify dispari- ties and mitigate risks. "Especially in this difficult homebuying market, we are continuing to advance our efforts to strengthen loan quality performance by improving the capabilities of our digital tools." —Jake Williamson, SVP of Single-Family Collateral & Quality Risk Management, Fannie Mae