Matt Stepanovich of SingleSource Property Solutions: The ABCs of Appraisal Modernization

Matt Stepanovich serves as Vice President, Appraisal Modernization & Quality Control for SingleSource Property Solutions, where he oversees the company’s appraisal modernization initiatives. A Certified Residential Real Estate Appraiser with more than two decades of experience in the valuation and financial services industries, he has owned a successful real estate appraisal firm for over 15 years and has extensive knowledge and expertise in hybrid and alternative valuation products. He has also served as SVP of sales and operations for a regional real estate company and VP of sales for a national real estate inspection and hybrid valuation firm.

MBA NEWSLINK: What are the range of valuation requirements under the appraisal modernization initiative?

Matt Stepanovich

MATT STEPANOVICH, SingleSource: Among the new options put forth by the GSEs, the requirements depend on the type of transaction and level of risk involved. In the simplest scenario, there would be enough data to support a waiver of all valuation requirements. In the least optimistic scenario, a full appraisal report will be required. Many of today’s transactions fall somewhere in between.

Take Fannie Mae’s value acceptance + property data option, for example. This option is only available if the loan case file’s final submission results in an eligibility message for a value acceptance + property data offer.  After receiving the offer, the lender arranges for the collection of relevant property data and the lender or service provider submits it through Fannie Mae’s API so it can be integrated into the valuation process.

In situations where the value acceptance + property data offer is lost, perhaps because there were changes in the loan characteristics after the property data was collected, the lender has a couple of options. They could share the property data they collected with an appraiser and have the appraiser perform a hybrid appraisal, a desktop appraisal or a traditional appraisal.

NEWSLINK: How did the pandemic affect implementation of appraisal modernization?

STEPANOVICH: I think it was a catalyst. All of a sudden, those of us in the valuation industry couldn’t do business the way we were used to – health concerns and social distancing requirements forced everyone to consider alternative ways to gather data. As a result, everyone looked to data, which created an accelerated push for innovation. It’s a big reason why appraisal modernization is taking off now, and why we’re seeing more sophisticated technological tools and data-driven approaches as well as an increasing reliance on AVMs and desktop appraisals.

NEWSLINK: What is “value acceptance”?

STEPANOVICH: Value acceptance is Fannie Mae’s new term for appraisal waivers. When the loan originator submits the loan application in the Desktop Underwriter, they will be notified whether there is enough history on the subject property to accept the value stated by the homeowner without the need to determine a new value. To make that determination, Fannie Mae harnesses its expansive database of over 61 million appraisal reports as well as proprietary analytics from Collateral Underwriter.

Not all transactions are eligible for value acceptance offers, however–only approved one-unit properties and certain refinance and purchase transactions, given they meet specified LTV and combined LTV ratios as well as other parameters. They won’t be offered in cases in which an appraisal seems necessary or for high-value properties or new construction loans.

NEWSLINK: What share of transactions are expected to qualify for value acceptance?

STEPANOVICH: I expect the share will be low, at least initially. A critical component behind value acceptance is the availability of robust historical data on the subject property. Many properties don’t have enough historical data accumulated yet to establish a suitable level of confidence. However, as more data is gathered and the technology continues to improve, we expect the share of transactions qualifying for value acceptance to steadily increase.

NEWSLINK: What happens if the estimated value is not acceptable?

STEPANOVICH: If the estimated value is not accepted–perhaps due to discrepancies in the data or a lack of adequate supporting information–the next step would probably involve obtaining a property data report compiled by a certified property inspector, who conducts a thorough evaluation of the property. This new data would then become a part of that property’s data history for future use.

NEWSLINK: What is the implementation timeline for the modernization effort?

STEPANOVICH: Fannie Mae has been testing appraisal modernization concepts for about five years. They realize this is a slow process and are focused on educating lenders and services about it. That being said, appraisal modernization is already happening. Desktop Underwriter was updated in mid-April to support value acceptance, value acceptance + property data, hybrid appraisals and other completion alternatives.

However, appraisal modernization will be an ongoing journey. The idea is to move away from a one-size-fits-all model and toward a more balanced spectrum of valuation options that mix traditional appraisals with innovative technologies and alternatives. It’s a gradual process, and a key part of that process will be ensuring lenders and service providers are adequately informed and prepared.

NEWSLINK: Who is responsible for training real estate agents or inspectors about appraisal modernizations?

STEPANOVICH: The responsibility for training and educating real estate agents or inspectors falls primarily on the service providers that employ them. Ongoing education will be vital, too, since appraisal modernization will continue to evolve. By the way, service providers are also required to do background checks, in addition to a number of other onboarding requirements, on their agents and inspectors to ensure the people they hire are trustworthy and competent. The end goal is to ensure that everyone involved in the valuation process has access to the latest knowledge and methods and adheres to the highest standards of integrity and professionalism.

NEWSLINK: What is a gestation letter?

STEPANOVICH: Traditionally, when appraisers identified minor repairs needed to a property, the borrower would make the repairs, notify the lender, and the lender would notify the appraiser. The appraiser would then inspect the property and use a form 1004 to confirm completion of the repairs.

Now, because mobile technology enables homeowners to take verified photos and videos of the repairs, and digitally deliver these documents to prove the work was done, the appraiser doesn’t need to do an inspection. Instead, they can provide what is called a gestation letter, which is a document validating the completion of the repairs based on the digitally submitted proof. It’s yet another example of how digital innovation is transforming the valuation process—and we’re all for it.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to NewsLink Editor Michael Tucker at or Editorial Manager Anneliese Mahoney at