On February 5, 2025, Fannie Mae and Freddie Mac (collectively, the “GSEs”) announced updates to their selling guides to expand the permitted use of hybrid appraisals.
Freddie Mac Bulletin 2025-01 announced that hybrid appraisals will be allowed for Loan Product Advisor submissions on or after April 7, 2025. Lenders will be required to submit the loan in compliance with the Uniform Property Dataset.
Fannie Mae Selling Guide Announcement SEL-2025-01 states that eligibility requirements have been updated to allow for hybrid appraisals, with Desktop Underwriter (DU) to be updated on the weekend of March 22, 2025. Hybrid appraisals must be completed on the Uniform Residential Appraisal Report (Fannie Mae Form 1004 Hybrid / Freddie Mac 70H Hybrid) or the individual Condominium Unit Appraisal Report (Fannie Mae Form 1073 Hybrid / Freddie Mac Form 465H Hybrid). The DU Underwriting Finding Report will return a message specifying if a loan is eligible for the hybrid appraisal option.
The GSEs allow the following transaction types to utilize a hybrid appraisal:
- existing one-unit properties, including a condominium or PUD;
- existing properties with an incomplete construction or renovation project;
- properties in community land trusts;
- Texas Home Equity 50(a)(6) loans.
Certain properties and transaction types are specifically excluded from utilizing a hybrid appraisal and must still provide a traditional appraisal, including:
- two-to-four unit properties, cooperatives, and manufactured homes;
- new construction-to-permanent financing (singe-close and two-close)
- HomeStyle Renovation and HomeStyle Energy loans;
- proposed construction;
- manually underwritten loans.
The GSEs’ selling guides require all hybrid appraisals to be completed by a licensed appraiser, utilizing comprehensive property data, gathered by a trained and vetted third-party data collector (such as a real estate agent, insurance inspector, appraiser, etc.) to development an opinion of value. At a minimum, the appraiser must include consideration for interior and exterior property data, but may additionally consider other sources of information, if needed.
This hybrid blend of traditional and technology-driven appraisals is intended to reduce the time and resources required to complete a reliable property valuation. However, lenders remain responsible for ensuring that the appraisals conducted are thorough and compliant with all regulatory requirements.
