A finding from an automated underwriting system that allows a borrower to waive the appraisal requirement for their transaction.
A Property Inspection Waiver (PIW) or Property Inspection Alternative (PIA) are findings from automated underwriting systems (“DU” for Fannie Mae and “LP” for Freddie Mac). Receiving either of these automated findings for a loan file means that the appraisal requirement may be waived on a purchase or refinance if the borrower agrees to do so.
The benefits of a PIW include eliminating the cost of the appraisal, avoiding the possibility of an appraisal shortfall, and allowing the transaction to close faster (since the lender and other parties involved won’t be waiting for the appraisal inspection, report, or review to be completed). There is no set formula to determine how to successfully obtain a PIW or PIA finding through DU or LP, respectively. The results are based on a variety of criteria including overall risk evaluations and whether or not there is an existing appraisal of the subject property within Fannie Mae’s or Freddie Mac’s database.
Any significant changes to a borrower’s financial profile during the closing process (e.g., a decline to qualifying income, a new debt incurred, etc.) may result in losing the PIW or PIA finding and having to proceed with an appraisal report instead. Although losing the PIW or PIA is a rare occurrence during closing, we do always put the possibility on our client’s radars before proceeding.