Fannie & Freddie’s AI Appraisal Photo Recognition

Fannie & Freddie's AI Appraisal Photo RecognitionA colleague recently shared an important heads up regarding Fannie Mae and Freddie Mac’s plans to implement photo recognition AI to analyze appraisal photos. This technology can scan a single photo and extract over 100 data points related to quality, condition, and repairs. For example, it can identify flooring types, appliance models, and even assess light levels in a room.

Later this year, the GSEs plan to run all appraisal reports through this AI and cross-check the appraiser’s stated quality and condition ratings. If the AI’s analysis differs significantly from the appraiser’s, it will automatically generate a complaint letter to the appraiser’s state licensing board regarding a potential USPAP violation. While many of these letters in the past have been frivolous, the detailed support from the AI analysis will make complaints much more serious.

Better brush up on FNMA’s definitions, folks. And just when you thought it couldn’t get any crazier, borrower inspections are on the horizon too. Brace yourselves!

“Just a heads up for what’s coming in the appraisal world.

FNMA and Freddie are implementing photo recognition from AI. I saw the results of this AI over a year ago and it’s amazing what they can scan from a single photo. The AI scans your photos, and gives accurate Quality / Condition / Repairs. It also can check flooring, appliances, even the darkness of the room. Over 100 data points.

I’m telling you this because what’s going to happen later this year, is every report will be run through the AI and checked against what we put in our reports. Especially Quality and Condition.

If we are too far off, an automatic letter goes to the state. Mis-representing Quality and Condition can definitely be a USPAP violation that states can enforce. So far most of FNMA’s letters have been junk, but with AI they will have support for their complaint.

I’d highly suggestion everyone read up on FNMA’s quality and condition definitions.

This is coming your way sometime this summer or early fall.

Next that’s coming, borrower inspections. That’s probably a year or so away.”

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46 Responses

  1. Avatar Spencer Paul says:

    This part I really don’t see as a big deal. AI would be doing the work the UW should be doing in the first place. IT is doing it faster. I’m not going to say more accurately because I really don’t know. I have been saying it for the past year now, AI and tech is going to replace the entire process of buying a home. There will be no middle man/women between FNMA and a loan product, no UW, no LO, no Realtors and sadly no Appraiser’s. One self contained entity that would have the power to raise and lower markets with potential for fraud.

    6
    • Avatar ej says:

      I use True Adjustmnet Trends from Homeputer. Remarkably, it doesn’t require photos to assess and rate the condition and quality of comparables. This extends beyond just the comps in your grid to every single comparable in your model. Consequently, Fannie would find it nearly impossible to dispute either my condition and quality ratings or my adjustments. Fannie does not know what they are doing. Lol

      6
      • Baggins Baggins says:

        Except for the fact that the home inspection photos will also be analyzed and input in that database, along with all the appraisal photos from the properties you selected as comps, as they were once subject homes themselves. Here comes the automation that the big fintechs are already using, now centralized.

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  2. Avatar Frustrated Appraiser says:

    Why is AI going to be allowed to be “ASSumed” more knowledgeable than an appraiser who actually saw the property with their own eyes? While a pic can be worth 1000 words, they also can be very misleading. Steamy pile of horse manure. Seems time for appraisers to stop completing FNMA/FRMC work.

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    • Avatar Spencer Paul says:

      Because the powers that be have deemed us irrelevant, inaccurate and bias, so we are being replaced piece by piece.

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  3. I think this will be difficult for them to accomplish. Doubt the scanner can ascertain the difference between fake and real granite, marble, wood, tile… I doubt it will know all appliance brands since the 1920’s. I think that the appraiser should be able to easily discern these things. My only fear is if appraiser writes vinyl floor and scanner thinks the wood pattern is real wood.

    Someone would still have to be scanning the house so a human is still involved at this point. When scanners can tell what type of view the property has then we may have to worry about becoming obsolete. Right now scanners, robots can’t ascertain view, lot type, specific location in a neighborhood or development, condition or upgrades, floor tilt, water damage…and other heavily weighted factors in property appraisal. Their ability will get better over time.

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  4. Avatar EC says:

    It seems to me they’re wasting valuable time on something that means very little to the greater “picture” behind valuation…pun intended. It’s not all about the photos.

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  5. Avatar Jerrod Gates says:

    LOL, do you think the Department of Commerce has enough members and time to handle all the new complaints. Everyone I know, self included, has waited over a year with a state complaint.

    Fannie Mae wants perfection from us and then gives out appraisal waivers.

    The amount of Grey between a C3-C4 and A Q5 and Q4. BTW, who holds AI accountable. Shouldn’t the users of the AI be held accountable for the inaccuracy of the AI platform. It’s not a perfect program and thing will go wrong.

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  6. Avatar Older and maybe Wiser says:

    Maybe I won’t renew for another 2 years.

    Maybe now….it’s time to buy that RV and hit the highway.

    Being an appraiser has gone way beyond the absurd.

    Why risk losing everything I have built up if they want A.I. to judge me and issue me a warning on my 20+ years of experience?

    Let the young people do what’s left in appraising since they have far less to loose.

    11
  7. I just hate the idea that they will automatically send a complaint to the State Boards because they ASSUME AI is better than someone who actually saw the property. So does anyone think that more C4 and Q4’s are on the horizon? Just wondering? Why is everything about this profession….Tail wagging the dog? Our clients, lenders, Realtors, everyone wants to tell us how to do our job. They do not believe us, they want to control us as it has been for decades. We are the gate keepers and they hate that! We are the only ones to prevent over lending and over buying and protect the public trust, but we have been manipulated for so long and many Appraisers fell on the sword of pressure and trying to keep their jobs, so here we are with zero respect. No other profession is placed between a rock and a hard spot like we are.

    If they had just let us do the job without pressure on values, we would never be in the mess we are in! We have been pressured to hit a number before the crash, after the crash and currently! Let us do our damn job and tell YOU the client what the value of the property is not the other way around.

    11
    • Baggins Baggins says:

      Pressuring appraisers works, and works very well. Now they appear to be running afoul of GLB laws on privacy. Turn down your camera settings to small kb’s. This news may correlate to the active development of the over valuation tool, also soon to be released.

      Have you ever checked out what’s actually happening with AI systems? Do not talk to robots.
      https://www.reddit.com/r/artificial/

      Somewhere out there is a patent for this technology that we can read all the details. Google this and have fun researching; How to find all patents for one company. / Fintechs are already bragging about automated review tech and it’s emerging presence in over half of all major lending activity. / What is a ‘borrower inspection’?

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      • Avatar Sheri says:

        A borrower inspection is just that. The borrower is lead through a video inspection on his/her phone by an appraiser sitting at a computer. The appraiser gives the borrower instructions on what to view and the borrower takes video while walking through the property. The appraiser sitting at his/her desk can watch the video as it is being recorded by the borrower and take snapshots of items of importance through coordination with the borrower. It is geo stamped and the property address and location is confirmed before starting the inspection. Pointless in my opinion because it takes longer to lead the borrower through the inspection steps than it would if the appraiser simply did the inspection himself/herself. Too much could go wrong causing the appraiser to spend unnecessary time troubleshooting the process.

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    • Avatar Spencer Paul says:

      No one likes accountability, or truth when it isn’t “their” truth. This notion of “my truth” is nothing more the self deception. There is a cognitive dissonance between what they know to be right and what they want. So, in the efforts to obtain what they want, they have to “make up” stuff that sounds logical and reasonable to bridge that gap. Uneducated people think that Ai is better and superior to human when analyzing human purchasing behaviors. What would happen if a trend took place that anything looking like Joan Gains style was horrible and they would purchase such a house. Would the AI regression analysis and AVM be able to deal with a swift harsh change in tastes – I seriously doubt it.

      4
  8. Avatar Will says:

    My eye balls, my opinion rating, my signature, my certification, my designation and my E & O Insurance. I could care less what FNMA’s AI program says.

    3
    • Baggins Baggins says:

      Bureaucrats installing AI systems at the government level; We will add your biological and technical distinctiveness to our own. Your culture will adapt to service us. Resistance is futile.

      3
  9. Avatar bob jones says:

    I call BS. The quality of my photos make it hard for me to see anything of substance and I was in the house. Another opinion is that if this AI app can extract 100+ points from a photo, it can probably do face recognition on family photos hanging on walls creating a big potential privacy issue. If they wanted to help our industry they would make all appraisals available to us, the appraisers so we can read property descriptions, condition ratings, and the like.

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    • Avatar Spencer Paul says:

      And yet FNMA also uses the census block adjustments for location on the Valuation Acceptance and Appraisal waivers. Who’s calling whom bias and socioeconomics and ethnic make-up?

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  10. Avatar Eric Kretz says:

    I couldn’t care less about FNMA/Freddie scanning my photos, they do whatever makes them feel funny.

    The concern is if A.I. doesn’t like something in the appraiser photos and doesn’t concur with the quality/condition or materials reported, it gets sent to your state licensing board. Thats the real issue. Are the complaints sent after a review or is it an automated process without a human checking the A.I. results? Is there any due process for the appraiser?

    I’d just rather them come out and say what they really want – that they don’t want appraisers.

    The appraisal industry really is becoming a clown world.

    10
    • Avatar Spencer Paul says:

      Do you want to know something…The appraisal board member in the state of WA of folks that could not pass the AQB qualifying test. None are appraiser’s, so all the have to go on is did we violate USPAP. IN this case, they would be very hard pressed to find anything that would be in violation of USPAP. I’m not afraid of the love letters from FNMA. If they blacklisted me, that is a different story, to which I would sue and base my suite on lost wages over the course of a remaining 20 year career in the appraisal profession.

      4
  11. Avatar cassandra says:

    Well, if I get a complaint, things will slow WAYYYY down in my area. I cover 8 counties. I got off the VA last year because I was tired of the constant scope expansions, tidewaters and reviewers being on different pages. I was the only appraiser in 3 of those counties and 1 of 2 in 2 others. I hear VAs are taking 2 months to get to now. Oh well. Same with This complaint stuff. I’m retired, got retirement coming in, bought the RV. One auto-complaint and my area will be an appraiser wasteland. The other guy that covered a lot of my territory is in his 70s.

    7
    • Retired Appraiser Retired Appraiser says:

      Bravo! It won’t be long before every appraiser is in their 70s. It has already become a side hustle for retirees on social security.

      7
    • Avatar Eric Kretz says:

      Interesting.
      Here in Colorado, VA allegedly had a ‘shortage’ of appraisers from 2015 through 2022. Their answer was to hire new (incompetent) appraisers, and then pressure the older and seasoned appraisers to cover the rural areas and different counties they might not cover or be geographically competent in. It was a sh!tshow, and the front range is still reeling from this bad policy.

      It was pretty offensive that they would send a Denver metro appraisers to my normal county coverage area, then ask me to appraise some turd 2 hours away in a rural area I’ve never covered. Oh yeah, here’s another $100 for your time. I declined them all and subsequently my VA volumed slowed. I went from 2-3 VA appraisals a week to 1 every 2 weeks.

      To add insult to injury, the Denver RLC is still sending appraisers out their normal areas in this slower market. The realtors I talk to are super pissed off about values being either $40k over or under contract due to these geographically incompetent appraisers screwing up the local market. (Data cancer)

      It is now rumored that VA acknowledges it has too many panel appraisers and is looking to purge that list. Time will tell.

      3
      • Avatar Spencer Paul says:

        That is interesting. I have heard similar stories here in the PNW. I have tried to expand my coverage areas for more rural type places to keep work coming in and in all accounts I was rejected. Well, unless I wanted to cover area that are even farther than my 3 hour radius of coverage. I said no thank you. I drive far enough as it is and if the markets shifted to the positive 10% I would be very busy. Nothing but driving and complex properties that no one else wants to do.

        1
      • Avatar Bill Johnson says:

        With a crazy amount of VA appraisers in San Diego (San Diego County / 3.3 million population) year to date the average assignment spread is every 11 days (less than 3 a month).

        Seek the truth.

        2
        • Avatar Spencer Paul says:

          The guy that made this change to flood the panel with crappy Appraiser and try to run it like and AMC…they should have done some homework before making such a decision.

          6
  12. Avatar JL says:

    Just ran across this gem from 10/2023. In case you want to know why they want AI – it’s all about speed and accuracy is a small after-thought.

    https://www.fanniemae.com/media/49231/display

    They trained this system on our intellectual property, just like LLMs on novels. It’s theft, and appraisers should organize a class action.

    5
    • Baggins Baggins says:

      Yep, I posted a similar document the other day in the redlining thread, along with a patent document which describes down to the minute details, how the lenders automatic systems classify some groups of people and not others in clusters, including demographic, spending habits, community factors, earnings, spending, and social media presence. That determines the risk score of the individual.

      This is a social credit scoring system. Reasons why there is less emphasis on fico scores, income, and ltv ratios. People are in for a wild surprise when these sorts of activities roll out in the real world and they become aware of what’s happening. From page 54. The people worried about having generational wealth with held from them may want to consider canceling their social media accounts, resist the idea of identity politics which they’ve so freely pursued of late. Called this one well over twenty years ago which is why we never had social media accounts or post with our real names. Voluntarily relinquishing ones fourth amendment rights so they can post selfies online and join digital clubs. Look where all that led to today. This below is but one of many hundreds if not thousands of activities which quantum computing in the wrong hands will bring forth to society. Social media loan scoring.

      AI-based Borrower Default Risk Assessment: Have AI systems examine all available information or data (financial and non-financial such as social media activities) to predict the probability of borrower defaulting on the loan to allow lenders to take proactive steps

      1
  13. Avatar Joseph says:

    AI is not perfect, but FannieMae doesn’t care about that, their ONLY goal is to get rid of the appraisers any way they can. I don’t know why some government office is keeping better watch on Fannie; oh wait, it’s too big to fail, another bailout is on the horizon. I’m meeting with my attorney to formulate wording in my reports that will satisfy the difference between the real Condition and Quality ratings are as seen by ME and those seen by AI, something like “the appraiser’s personal inspection and reported Condition & Quality rating is in line with FannieMae’s guidelines which are not exact and may or may not agree with an AI inspection which is not a real human being”…

    5
    • Baggins Baggins says:

      ‘Intended users does not include artificial interface software or any such AI based interface, or quantum computing systems.’ Something like that. Attornies advisement is going to be basically irrelevant, as states and federal are still racing to catch up with some form of regulatory structure.

      Meanwhile; The saga of AI regulation proposals in Colorado continues on. FNMA AI/ML systems fairly categorized as a high risk system? It’s only the bulk of the entire residential property in America, so yes, probably yes. These people are missing the big picture and are still worried about deep fakes. AI has gone so much further than that already. Fannie probably has their own Dwave computer by now, if not a few dozen of them.
      https://www.coloradopolitics.com/opinion/hasty-ai-regulation-hurts-colorado-small-biz-opinion/article_8bab5cfa-0c10-11ef-b401-6336e9c8936d.html

      Quotes: Legislators agree on the need for action to create clear guidelines and standards for how companies collect, use and share data. /

      I don’t like the future.

      2
  14. Baggins Baggins says:

    https://ppubs.uspto.gov/pubwebapp/static/pages/ppubsbasic.html
    Patent research. On the ‘Search’ drop down menu, click assignee name. / On the ‘For’ drop down menu, enter; Fannie, zillow, pick a company.

    The fluid nature of the software, the differences between avm’s vs the appraisers acceptable and recognized valuation methods approach. How various functions to come about the end avm value result are fluid and flexible, able to alter result output based on a myriad of algorithmic settings priorities alongside random data gathering.

    Zillow patent for determining a current home value: Step one: Select recent sales from geographic area. Is that related to census tracts? A mass appraisal software program. A ‘train bias correction module’. Curious. Page 42. And that’s how avm systems work. Find the one Fannie uses for ‘value acceptance.’

    https://ppubs.uspto.gov/dirsearch-public/print/downloadPdf/11449958

    2
  15. Kathy Morton Bunting Hoey on Facebook Kathy Morton Bunting Hoey on Facebook says:

    Hopefully state boards will realize what they are doing and throw the AI generated complaint letters in the trash where they belong.

    5
  16. Avatar William Turner says:

    A complaint to the Maryland Appraisal Commission automatically gets referred directly to the appraiser who must respond within 30 days. Although I like Baggins statement: ‘Intended users does not include artificial interface software or any such AI based interface, or quantum computing systems.’ but it will not save any time responding to an Appraisal Board. I think perhaps appraisers need to begin referring referrals to the State and Federal banking commissions. Like every time you receive a request to change your report, report it. We need a nice easy form to fill in and send to our State banking commission, to FNMA and to our legislature, this could be an email. Something like: “I was required to change my report.” Alternatively, or in addition to: I read about a teacher who added a hidden statement in her assignments, to test whether the student was using ai to write their paper. Can we add a statement in our appraisals that will shut down AI, something that a reader will not see, but will pause the ai review, we will want it embedded in the photos as well? Baggins can you find us a work around? 72 years young and still appraising. My partner appraised until he was 94.

    2
  17. Avatar DGK says:

    Haven’t read all of the above, but this concept simply wreaks of setup, conspiracy, sting, & entrapment, and is as simple as holding an appraiser accountable for matching a preliminary title report that was never provided and not otherwise available to the “valuation expert” at the time the assignment order was placed and accepted. I have no problem whatsoever with the AI technology, but unless or until the process and search software is made available to the appraiser as a function of each assignment at the time the order is placed, whoever catches appraiser oversight with such technology should be arrested and at the very least sanctioned against doing so ever again. Cmon, folks, there ain’t an appraiser out there with more than a year of experience that hasn’t later found something in one of their own property photos that they overlooked when at the sight, under artificial light, with defects obscured by the property owner, who standing over the appraiser’s shoulder distracting them during inspection. If I get turned in to the State without an opportunity to respond first….. somebody is going to get sued. Having been through a state investigation, I can assure the industry that setup, entrapment, and sting efforts all exist at that level, as does overlooking fact in favor of accusation. Be very careful out there, because right or wrong it is very, very, expensive.

    3
    • Avatar Eric Kretz says:

      “I can assure the industry that setup, entrapment, and sting efforts all exist at that level, as does overlooking fact in favor of accusation. Be very careful out there, because right or wrong it is very, very, expensive.”

      There is a video a few years back of a Tennessee state appraisal board hearing where a board member was caught on camera saying to other board members “an appraiser comes in the door, stubs his toe, and we fine him $4,000” or something very similar.

      The powers that be can turn anything into a racket. (USPAP) It just sucks when you’re the one in the crosshairs.

      3
  18. “I’m sorry Dave, but that kitchen was clearly C2 not C3. Open the pod bay doors HAL! I’m sorry Dave, but I cannot allow that to happen…..

    2
  19. Avatar And the nightmare gets worse says:

    In addition to damaging more appraiser’s lives, I can think of several dozens of ways this new system will be abused. This invasive, soon to be requirement, is likely to look for more than appraisal related items. What books are on your shelves, what do personal displayed photos and/or artwork on the walls reveal? Do the homeowners have a gun safe that shows up in the pictures? Does the homeowner grow food or have chickens (which is becoming a growing gov.t control issue)? And on and on and on. All part of total control objectives. This information will and is becoming part of the growing, all encompassing data base/profile for each citizen; and possibly used against you sooner or later. Of course appraisers will be eliminated in lieu of a data gatherer who will inspect each property and also do photos. What other tasks will these data gathers also be trained in (behind the scenes)?. They can spy without a warrant. If you think this sounds far-out there, think again. Professional appraisal groups – way to little, way to late. You failed appraisers and irreparably damaged yourselves and the integrity of professional designations. You have wasted the time and money of many. Do you sleep at night? If yes; How?

    2
    • Avatar DGK says:

      I swear this happened recently.

      Bear in mind my single SFR dwelling reports are now over 50 pages long to accommodate 30 of them with nothing to do with value or marketability, but an entire report was rejected because of a painting on the wall the client wanted removed with no explanation. The picture was NOT a photo, and had three musicians, like a small combo, with a trumpet, a sax, and drums….. two white and one black musician, with one that might have looked under 18 years old. No other possible offensive issues, and there were two other photos in the report, different rooms, with what appeared to be music related paintings by the same artists that the client apparently had no problem with. Now, to help me with my criminal bias issues (40 years of appraising without a glitch), I inquired as to the reason. Was it music, young people, a black trumpet player with two whites to make the trio, the size of the picture frame, the location within a stairwell, ???? what was the objection so I would not make the same catastrophic mistake again in the future. Never heard from them again on the matter, so delays beyond my control and absolutely nothing learned. Gottaluvit. Since I have, for years now, blurred or removed license plates, anything to do with hunting magazines, wall trophies, sexual oriented magazines, bottles of alcohol, religious symbols of any kind, pictures on the refrigerator, any and all photos anywhere in the house, college degrees, professional licenses, depictions of weapons of any kind, anything in any rooms that might suggest a child’s room or a single mom, scribbled telephone numbers, and anything that hints of something that someone, somewhere, might be offended over, and still got hammered for an artist painting with no problems I was, or am, aware of. Go figure, huh? I remove so much that once in awhile some reviewer asks what I am trying to hide?

      So, the moral? Good luck AI, I’m on to you.

      2
  20. Avatar William Turner says:

    I looked closely at Baggins chart, May 7, the last section, personal data about people and how loans may be based upon their personal likes and dislikes. Today I read the last couple of comments on AI looking at the photographs of the interior and thought about AI figuring out who lives in the house, and now our photos of that person’s belongings may also follow them. WHAT ABOUT PRIVACY? Perhaps we need to blur all photographs to protect the occupants privacy, and to protect our selves from being a part of this privacy breach. Will the home owner begin getting tooth paste advertisements, when AI sees what they use in the bathroom? Are FNMA and FREDDIE selling this information to “Third Party Participants?”

    1
  21. Avatar Cassandra says:

    We need to alert the public with our concerns. One large national newspaper to do a story about the possible ramifications to privacy, intended or unintended. What an uninformed homeowners tour might reveal. I’ll bet one would be interested

    1

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Fannie & Freddie’s AI Appraisal Photo Recognition

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