Fannie, Freddie update reconsideration of value rules

While Fannie Mae has “retired” the term appraisal waiver from its seller guide, the change in the latest update, which could have the most impact on consumers involves the reconsideration of value policy.

The Fannie Mae announcement is SEL-2025-07. Freddie Mac put out a similar ROV update on Wednesday in its bulletin 2025-12.

Some of the updates seem to more closely align Fannie Mae policies with those at Freddie Mac, as speculation regarding a merger and initial public offering to release them from conservatorship continues.

What are the changes to the reconsideration of value guidelines

Reconsideration of value was a hot button topic in the mortgage industry, especially in light of the findings of the Biden Administration Property Value and Appraisal Equity initiative which the Trump Administration repealed.

In March, the Federal Housing Administration cancelled the Biden Administration’s reconsideration of value process for its program.

Both the Fannie and Freddie announcements remove a lender requirement to provide an initial ROV disclosure at the time the borrower submits a loan application.

Now the disclosure must be provided along with delivery of the appraisal report.

The GSEs also simplified documentation requirements to require only items related to the outcome, not the start of the ROV, be retained in the loan file.

This change is effective immediately. Fannie Mae Selling Guide Supplement UAD 3.6 has also been updated to cover this change.

Why Fannie Mae is dropping the “appraisal waiver” term

As for the appraisal waiver terminology change, the Fannie Mae bulletin said it was “to more accurately reflect the evolving role of our valuation solutions.” As a result, the wording is no longer to be used in connection with “value acceptance” in the Selling Guide.

“Furthermore, the continued use of dual terms creates confusion, undermines product promotion, and delays industry alignment around a unified term,” the announcement said. Where appraisal waiver stood alone in the guide, it has been changed to value acceptance, and where it appeared in parenthesis after that nomenclature, it was removed.

The move promotes a more consistent message across the mortgage industry, and reinforces Fannie Mae’s commitment to modernizing the valuation process.

Right now, the GSEs are about to enter a limited production phase of UAD 3.6, with the end goal of retiring the Fannie Mae Form 1004 and related documents.

Updating MH Advantage rules

Another change expands eligibility to include single-wide MH Advantage homes. The new criteria also encompass a similar program offered by Freddie Mac.

“It also includes the recognition of Freddie Mac CHOICEHome as an MH Advantage manufacturing and design equivalent as evidenced by the CHOICEHome label.” This is an alternative to the MH Advantage requirement that eligible properties need to have a program sticker. “The lender remains responsible for ensuring all MH Advantage site improvement requirements in the Selling Guide are met,” the bulletin added.

Changes to life estate property eligibility

Finally, Fannie Mae updated requirements to clarify that fee simple ownership of a property in a life estate is eligible under the guidelines.

To qualify:

• The life tenant must be a borrower;
• One or more of the remaindermen, the person who inherits or is entitled to inherit the property after the life estate ends (according to Investopedia), may be borrowers; and
• Both the life tenant and the remaindermen must sign the security instrument in order to convey their respective interests.

Fannie Mae also clarified characteristics of similar arrangements like “lady bird deeds” [where the property owner designates who will inherit the property after death, bypassing probate] and “transfer on death deeds” which do not qualify as life estates.

Freddie Mac changes

In its update, Freddie Mac increased maximum loan-to-value ratio, total LTV and home equity line of credit total LTV to 95% for purchase or no-cash-out refinance loans secured by a two-to-four-unit primary residence.

But manually underwritten and super conforming mortgages are not included in this revision, Freddie Mac said.

Freddie Mac’s automated underwriting system, Loan Product Advisor, is not being updated until Oct. 5. Until then, a seller may disregard any “ineligible” LPA feedback message which is in conflict with the update.

“Feedback messages are for guidance purposes only and are not part of, and are not a replacement or substitute for, the requirements in the Guide and other Purchase Documents,” Freddie Mac said.

Freddie’s new TPO definitions

Another portion of the Freddie Mac update added new language around third-party oversight in its guide. This includes defining an aggregator and a third-party originator.

“These updates provide more direct guidance regarding Sellers’ responsibility around oversight of Third-Party Originators and due diligence,” the bulletin said. “These updates will also clarify expectations for risk management, which may require procedural updates by Sellers.”