What ACE Means for Your Home Purchase or Refinance
Automated Collateral Evaluation represents a major shift in how some mortgages get processed. Instead of waiting weeks for an appraiser to visit your property, Fannie Mae's computer system analyzes your loan application and property data to determine if an appraisal is necessary.
When you apply for a mortgage, your lender submits your information to Fannie Mae's Loan Product Advisor system. If the system determines your loan meets specific risk criteria, you'll receive an ACE offer. This means Fannie Mae will accept either your purchase price or your estimated property value without requiring a traditional appraisal.
Say you're buying a $400,000 home in a stable neighborhood with a 10% down payment. Your lender runs your application through the system, and you get an ACE offer. Instead of scheduling an appraisal and waiting 1-2 weeks for the report, your lender can move forward with your loan using the $400,000 purchase price as the property value.
For refinances, the process works differently. Your lender must establish an estimated value using their written procedures. They might use an automated valuation model, an online tool, or even your own estimate of your home's worth. The key requirement is that they can't manipulate this value just to qualify for ACE or better loan terms.
Loan Types and Property Limits That Qualify
ACE eligibility depends on strict loan-to-value limits that vary by transaction type and occupancy. For purchases and no-cash-out refinances, you can borrow up to 90% of the property value whether it's your primary home or second home.
Cash-out refinances face tighter restrictions. On your primary residence, you can only borrow up to 70% of the property value. Second homes drop to 60% for cash-out refinances.
Your property must be a single-unit dwelling that you'll use as either your primary residence or second home. Investment properties don't qualify for ACE under any circumstances.
The $1,000,000 limit applies to both purchase price and estimated value. If you're buying a $999,000 home, you might qualify. At $1,000,001, you definitely need a traditional appraisal.
Properties and Loan Types That Don't Qualify
Several property types automatically disqualify you from ACE consideration. Manufactured homes can't use ACE, regardless of whether they're permanently attached to the land. Properties with leasehold estates also require traditional appraisals.
Non-arm's length transactions eliminate ACE eligibility. This includes purchases from family members, business partners, or any situation where the buyer and seller have a relationship that might affect the sales price.
If the seller is a lender or government entity, you'll need an appraisal. This rule prevents conflicts of interest where the entity selling the property also has a stake in the mortgage approval.
Specialty loan programs don't work with ACE. This includes renovation loans, construction-to-permanent financing, and cooperative share loans. These transactions involve unique risks that require human evaluation.
Properties with resale restrictions generally can't use ACE, though age-restricted communities are an exception. Community land trusts, where you own the home but lease the land, also require traditional appraisals.
When Your Lender Must Decline ACE
Even if you receive an ACE offer, your lender might be required to obtain an appraisal anyway. Federal or state laws sometimes mandate appraisals for certain transaction types or loan amounts.
If you're using rental income from an accessory dwelling unit to qualify for your mortgage, your lender must get an appraisal. The income calculation requires specific property evaluation that ACE can't provide.
Your lender must also decline ACE if they discover property defects that warrant professional evaluation. Active roof leaks, foundation problems, or environmental contamination all require appraisal reports with condition ratings.
Say your home inspection reveals significant foundation settling. Even with an ACE offer, your lender would need to order an appraisal to properly assess how the foundation issues affect the property value and marketability.
How Long Your ACE Offer Lasts
ACE offers expire after 120 days from the date Fannie Mae's system generates them. If your loan closing gets delayed beyond this timeframe, your lender must resubmit your application to check if you still qualify.
Any changes to your loan data can invalidate your original ACE offer. This includes adjustments to loan amount, property address, purchase price, estimated value, or occupancy type. Your lender would need to resubmit the application and might receive a different eligibility determination.
For delayed settlements that occur more than 120 days after your loan documents are signed, your lender must verify that the property value hasn't declined below the original estimate or purchase price.
Special Situations and Disaster Areas
Properties in disaster-declared areas can still qualify for ACE, but your lender must confirm the disaster hasn't affected the property's value or marketability. This requires additional due diligence beyond the standard ACE process.
Your lender must review available information about disaster impacts in your area and specifically warrant that your property remains unaffected. This might involve checking FEMA flood maps, local damage reports, or other relevant data sources.
What Your Lender Can and Cannot Claim
If your lender accepts an ACE offer, they cannot represent that Fannie Mae performed any property review or valuation. The ACE process is purely automated based on data analysis, not human property evaluation.
This distinction matters for disclosure purposes and sets proper expectations about the level of property review involved in your transaction. Your lender should be clear that ACE represents a data-driven approval process, not a property inspection or appraisal by Fannie Mae.
References
For the official guidelines, see 5602.3: Automated collateral evaluation (ACE) in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
No spam · Unsubscribe anytime
Original Freddie Mac Guideline Text
This section contains requirements related to:
Automated collateral evaluation (ACE) overview
Process for qualifying for and accepting the ACE offer
Ineligible Mortgages
Conditions that prevent the Seller from accepting an ACE offer
Acceptable age of the ACE offer
Data changes that impact ACE eligibility
ACE requirements for Settlement Dates more than 120 days after the Note Date
ACE eligibility in disaster areas
Seller representation of property review or valuation
(a)
®
Mortgages, the Seller may receive the option to accept an ACE offer and originate the Mortgage without an appraisal.
If the Seller accepts the ACE offer, Freddie Mac will:
Accept the value of the Mortgaged Premises as:
The purchase price of the Mortgaged Premises, for purchase transactions, or
The estimated value of the Mortgaged Premises, for refinance transactions
Not exercise its remedies, including the issuance of repurchase requests, in connection with a breach of the Seller’s selling representations and warranties related to the value, condition and marketability of the Mortgaged Premises
For refinance transactions, the Sellers must have written procedures in place that prohibit changes to the estimated value in Loan Product Advisor for the purpose of obtaining ACE or more favorable mortgage terms (e.g., avoiding mortgage insurance).
The procedures must include a process for establishing the estimated value, which may include, but is not limited to, the use of the Borrower’s estimated value, an Automated Valuation Model (AVM) or an online valuation tool or website.
(b)
Process for qualifying for and accepting the ACE offer
For a Mortgage to qualify for an ACE offer:
The Mortgage must be an Accept Mortgage
The Last Feedback Certificate must indicate the Mortgage is eligible for representation and warranty relief with ACE. (This represents the “offer.”)
The final submission of the Mortgage to Loan Selling Advisor
®
must indicate the representation and warranty relief status is “Y” or “Yes”
In lieu of accepting the ACE offer, the Seller may deliver the Mortgage with a PDR or an appraisal report if the eligibility requirements for ACE+ PDR or the selected appraisal type are met
To accept the ACE offer, the Seller must deliver the Mortgage with the ULDD Data Points described in the data delivery instructions in
Section 6302.10(c)
.
(c)
Eligible Mortgages
To be eligible for an ACE offer, the Mortgage must:
Be secured by a 1-unit dwelling that is either a Primary Residence or a second home
Meet the following occupancy and maximum loan-to-value (LTV)/total LTV (TLTV) ratio requirements:
90%
“No cash-out” refinance
90%
70%
60%
(d)
Ineligible Mortgages
The following Mortgages are ineligible for ACE:
Mortgages for which an appraisal or a PDR has been obtained in connection with the Mortgage
Mortgages secured by one of the following:
A leasehold estate
Mortgages secured by Mortgaged Premises subject to resale restrictions (excluding those subject to age-based resale restrictions)
Mortgages secured by a property acquired in a Non-arm’s Length Transaction
Mortgages secured by a property where the property owner at the time of sale (i.e., the property seller) is a lender or a government entity
Mortgages with an estimate of value or purchase price greater than $1,000,000
®
®
®
Renovation Mortgages
Seller-Owned Modified Mortgages that are Home Possible
®
Mortgages
Texas Equity Section 50(a)(6) and Texas Section 50(f)(2) Mortgages
(e)
Conditions that prevent the Seller from accepting an ACE offer
Sellers may not accept the ACE offer if:
An appraisal is required by law or regulation
Rental income from an ADU on a subject 1-unit Primary Residence is used to qualify the Borrower
The Seller is aware, based on a review of the sales contract, property inspection, disclosure by the Borrower, etc. , of an adverse physical property deficiency that warrants a PDR or an appraisal report being obtained. Examples include, but are not limited to:
A contaminated site or hazardous substance that affects the property or the Neighborhood in which the property is located
The property has a deficiency that is consistent with a C5 or C6 condition rating (e.g., active roof leak(s), damaged or failing foundation)
(f)
Acceptable age of the ACE offer
The ACE offer provided through the Loan Product Advisor Feedback Certificate message is valid for 120 days. If the offer is more than 120 days old on the Note Date, resubmission to Loan Product Advisor is required to determine ongoing ACE eligibility.
(g)
Data changes that impact ACE eligibility
If the Seller changes loan data (e.g., address of the property, loan amount, purchase price, estimate of value, loan type, property type, occupancy of the property, etc.) in a subsequent submission, the original offer will become invalid, and Loan Product Advisor may provide a different ACE eligibility determination.
(h)
ACE requirements for Settlement Dates more than 120 days after the Note Date
If the Settlement Date is more than 120 days after the Note Date, the Seller must warrant that the value of the subject property as of the Settlement Date is no less than the estimated value or sales price submitted to Loan Product Advisor.
(i)
ACE eligibility in disaster areas
Sellers may accept an ACE offer for properties located in disaster areas if the Seller can represent and warrant that the value and marketability of the Mortgaged Premises has not been adversely impacted. See
Section 4407.1
for property condition requirements.
(j)
Seller representation of property review or valuation
A Seller that has accepted an ACE offer must not make any representation that Freddie Mac has performed a property review or obtained a valuation of the Mortgaged Premises.
