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Appraisal Institute Concerned with Freddie Mac Policy Changes

November 1, 2016 08:00 AM

CHICAGO (Nov. 1, 2016) – Citing similarities to previous policies that “turned out to be disastrous for the entire economy,” the nation’s largest professional association of real estate appraisers today expressed “serious concerns” with changes to Freddie Mac’s Loan Advisor Suite.

Under its new policy announced Oct. 24, Freddie Mac will waive appraisals in lieu of an “appraisal alternative” in a host of situations, including first-purchase loans. The Appraisal Institute’s Oct. 31 letter to Federal Housing Finance Agency Director Mel Watt asked Freddie Mac to re-evaluate the new policy.

“The policy change by Freddie Mac appears to be oriented to purchase-mortgage transactions or transactions with the highest risk to the agency,” the Appraisal Institute said in its letter. “It has become standard practice to obtain a complete interior inspection appraisal to understand things such as property condition.”

The Appraisal Institute’s letter noted that Freddie Mac’s new policy “appears to harken back to the loan production-driven days in the years leading up to the 2007-2008 financial crisis.” The letter noted that it has taken many years for the mortgage finance sector to recover, but that progress has been made partly because fundamental risk management activities like appraisal have been reinforced by mortgage lenders.

“Today, there is little doubt that markets are more secure because of most first-purchase mortgages utilizing real estate appraisals as a fundamental tenet of residential mortgage risk management,” the Appraisal Institute’s letter said. “Reducing appraisal requirements sends the wrong signal to mortgage loan sellers about the importance of risk management practices.”

Freddie Mac (the Federal Home Loan Mortgage Corporation, or FHLMC) is a government-owned corporation that buys mortgages and packages them into mortgage-backed securities. Freddie Mac and Fannie Mae reportedly own or insure $4.6 trillion in residential mortgages, or 45.9 percent of the market.

The Federal Housing Finance Authority is a government agency created by the Housing and Economic Recovery Act of 2008 that regulates the secondary mortgage market by overseeing the activities of Fannie Mae, Freddie Mac and the 12 federal home loan banks, according to

Read the Appraisal Institute’s letter here.


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The Appraisal Institute is a global professional association of real estate appraisers, with nearly 20,000 professionals in almost 60 countries throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Individuals of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA, SRA, AI-GRS and AI-RRS designations. Learn more at




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