AI Urges FHFA Action on Enterprise Underwriting Standards

The Appraisal Institute sent a letter to the Federal Housing Finance Agency Sept. 13 urging it to integrate a credible appraisal process into any plan involving loans backing properties with sustainable or energy-efficient features.

The letter was in regard to the Property Assessed Clean Energy program whose purpose is to encourage residential property owners to make energy-efficient improvements to their residences and finance those improvements through a tax lien.


The FHFA has highlighted several concerns related to implementation of the PACE program and, while it has proposed a rule to prevent Fannie Mae or Freddie Mac from purchasing loans backed by PACE loans, it has developed three different risk mitigation alternatives. The second and third alternatives involve appraisal and/or loan-to-value ratio provisions. AI believes that a thorough and credible appraisal process may enhance risk management in those provisions.

AI’s letter also addressed the market impact of energy-efficient improvements and made recommendations to FHFA, specifically to establish a scope of work for appraisals that requests analysis of green and energy-efficient features on properties and requires use of highly-qualified and competent real estate appraisers in any future rulemaking.

Read AI’s letter.

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