Mortgage Appraisal Waivers and Prepayment Speeds

Joshua Bosshardt, William Doerner and Fan Xu ()
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Fan Xu: Federal Housing Finance Agency

No 22-01, FHFA Staff Working Papers from Federal Housing Finance Agency

Abstract: This paper examines factors affecting the use of appraisal waivers for mortgages guaranteed by Fannie Mae and Freddie Mac and the effect of appraisal waivers on prepayment speeds. We find that the alignment of Freddie Mac’s eligibility criteria with those of Fannie Mae around the start of the COVID-19 pandemic was associated with an increase in the use of appraisal waivers. Conditional on satisfying the basic eligibility criteria, appraisal waivers are more common for refinance loans, loans serviced by nonbanks, and less risky borrowers. We also find that appraisal waivers were associated with higher conditional prepayment rates during 2020, but to a lesser extent in 2021 as refinancing activity slowed down. Much of this association can be explained by correlations between appraisal waivers and other observable determinants of prepayment speeds.

Keywords: appraisal waiver; prepayment; nonbanks (search for similar items in EconPapers)
JEL-codes: G21 G23 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2022-11
New Economics Papers: this item is included in nep-ban and nep-ure
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Published in Cityscape, 2022, volume 24, number 3, pages 61-86

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https://www.fhfa.gov/research/papers/wp2201 (text/html)
https://www.huduser.gov/portal/periodicals/cityscape/vol24num3/ch3.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:hfa:wpaper:22-01

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