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Home Value Explorer®

Frequently Asked Questions

General

  1. How does the performance of Home Value Explorer (HVE®) compare to other automated valuation tools?
  2. How does Freddie Mac ensure accuracy of the HVE data?
  3. How can lenders access HVE?
  4. What characteristics are most important in determining the HVE point value?
  5. What property types are assessed by HVE? 
  6. When I use HVE on the “front end” of origination to estimate value, if I sell the loan to Freddie Mac will I receive representation and warranty relief for the appraised value?
  7. Can you use HVE point values for Freddie Mac Relief Refinance MortgagesSM – Same Servicer?
  8. Does HVE provide coverage in all states?
  9. What factors are considered for rural properties? And how is rural defined? 
  10. How often is HVE data updated?
  11. How accurate is HVE in the current market?
  12. Why should I consider a HVE point value with a Low Confidence Score?
  13. Some AVM vendors are rated higher in different areas of the country. Why is that?
  14. What are the advantages/disadvantages of using only a hedonic model?
  15. How do I determine what is a good HVE point value? 

Property Types

  1. Are newly constructed homes included in the HVE model? 
  2. Does the HVE model include short payoffs, REO sales or restructured loans?
  3. Is manufactured housing included in the HVE model?
  4. How does HVE treat properties in non-disclosure states?
  5. How does HVE evaluate cooperative properties? 
  6. Why do some properties not get a HVE hit?

General

  1. How does the performance of Home Value Explorer (HVE) compare to other automated valuation tools? 

    Home Value Explorer (HVE) is consistently rated among the top automated valuation models (AVMs) in the industry for accuracy and coverage. Freddie Mac participates in testing with third-party AVM testing companies and with large lenders on an ongoing basis. We use the results of these tests to continue to improve the performance of our model. HVE has an average national hit rate of 80 percent, making it among the leading AVMs for overall geographic coverage in the United States.

  2. How does Freddie Mac ensure accuracy of the HVE data?

    HVE is continually tested by third-party AVM testing companies, distributors and large national lenders. HVE undergoes regular analysis within Freddie Mac as part of our internal model validation process. We perform extensive in- and out-of-sample testing. Each quarter, the model is recalculated based on analysis of the current quarter’s data which ensures the ongoing accuracy of the values.

  3. How can lenders access HVE?

    HVE is part of the Freddie Mac Home Value Suite, a defined set of valuation modeling tools that automate, streamline, and drive down the cost of collateral valuation. Home Value Suite is licensed and serviced through a distributor network; each distributor provides unique value-adds with distinct pricing, packaged products, reseller networks, and/or service commitments.

  4. What characteristics are most important in determining the HVE point value?

    The HVE application uses Freddie Mac's proprietary algorithm that blends multiple model estimates returned by the repeat sales model which uses property sales data and the hedonic model which uses property characteristics data.

  5. What property types are assessed by HVE?

    The HVE point value can be returned on one-unit properties including single-family, condominium and townhouse property types.

  6. When I use HVE on the “front end” of origination to estimate value, if I sell the loan to Freddie Mac will I receive representation and warranty relief for the appraised value?

    No, lenders must still represent and warrant the appraised value as outlined in the Freddie Mac Single-Family Seller/Servicer Guide (Guide). Freddie Mac does not view the HVE point value as a replacement for an appraisal. Seller/Servicers can use the HVE point value as a workflow tool to help identify appraisals with outlying values.

  7. Can you use HVE point values for Freddie Mac Relief Refinance MortgagesSM – Same Servicer?

    Yes, provided the Guide eligibility requirements are met. Those requirements include, but are not limited to, the following: Property must be a one-unit attached or detached dwelling, or a unit in a condominium project or planned unit development

    • Property must not be a Manufactured Home, dwelling on a leasehold estate, or if a Seller is permitted to deliver cooperative share mortgages, a cooperative unit

    • You must confirm that the standard deviation for the HVE point value estimate is no greater than 0.20 (corresponding to a Medium or High Confidence Score)

    • As of the Freddie Mac delivery date, the HVE point value estimate may not be more than 180 days old, starting from the date you accessed the information in the look-up tool.

    See Guide Section A24.3(d) for additional information and Section A24.4(c) for special delivery requirements for mortgages using HVE point values. Please remember that receiving a HVE point value estimates from the look-up tool does not indicate loan eligibility for the Relief Refinance offering, nor property eligibility for use of HVE point value estimates. 

  8. Does HVE provide coverage in all states?

    Yes, HVE covers all 50 states and the District of Columbia, with data from nearly 3,000 counties.

  9. What factors are considered for rural properties? And how is rural defined?

    Rural areas are those outside metropolitan and micropolitan statistical areas, where homes are few and scattered. HVE uses both hedonic modeling and repeat sales modeling. In many cases, even in rural areas when there are few neighboring properties the repeat transactions model will provide good estimates of value. Generally accuracy tends to be lower in rural areas with few nearby properties.

  10. How often is HVE data updated?

    The HVE model is completely rebuilt monthly. HVE data is updated monthly using external data sources that capture repeat sales and tax assessor data along with data from Freddie Mac’s own portfolio.

  11. How accurate is HVE in the current market?

    HVE is one of the most accurate AVMs in the industry. All AVMs are challenged to maintain accuracy in such an unprecedented and volatile market. The HVE or AVM values are not a substitute for an appraisal. They may help identify appraisals that need further review. We recommend you use HVE and other AVM values:

    • As a “tool” in the origination process
    • In addition to your standard collateral review

  12. Why should I consider a HVE point value with a Low Confidence Score?

    Less than 5 percent of all properties evaluated by HVE receive a low confidence rating. And although the confidence level is low, the HVE valuation can provide valuable information, especially in the case of rural properties. A HVE value with a Low Confidence Score can be used as a “trigger” to review the appraisal more closely. The goal is to enhance collateral review of as many loans as possible.

  13. Some AVM vendors are rated higher in different areas of the country. Why is that?

    HVE is consistently rated as one of the industry’s top AVMs in accuracy and coverage. All AVMs have geographic strengths and weaknesses that are due to the availability of data to the AVM in that locale. HVE has an advantage over other AVMs due to the fact that it incorporates the property data from Freddie Mac’s portfolio of loans. We have over 76 million property addresses in our database. In addition, because our large database is based on our portfolio of loans, HVE has the unique advantage of being able to value many properties within the 12 non-disclosure states.

    Freddie Mac obtains new property data each month. The modeling team completely rebuilds the model each quarter.

  14. What are the advantages/disadvantages of using only a hedonic model?

    The hedonic model is a statistical model that estimates a property value by treating it as a bundle of characteristics (number of bedrooms, number of bathrooms, etc.).There are no advantages to using only a hedonic model. Best estimates are provided when both hedonic information and repeat sales information are used and combined statistically.

  15. How do I determine what is a good HVE point value?

    Forecast Standard Deviation (FSD) represents the probability that the AVM value falls within a statistical range of the actual market value, measured against a sales price. FSD measures how accurately the particular AVM value estimates value for the specific property. FSD also statistically links a confidence level to HVE’s forecast of property value.

    The lower the FSD, the smaller the error in predicting actual market value and the higher the level of confidence HVE has in the value. (The closer the AVM value will be to the actual sales price).

    HVE derives the confidence levels from the FSD and summarizes within high, medium, and low value ranges. The confidence levels can be defined in the following manner:

    • High – at least as accurate (typically more accurate) than an average appraisal.
    • Medium – comparable to or somewhat less accurate than an average appraisal.
    • Low – less accurate than an average appraisal (more common for rural areas).

    Confidence Levels Related to Forecast Standard Deviation
    High <.130 FSD ~70% of HVE estimates
    Medium > .130 and <.200 FSD ~25% of HVE estimates
    Low > .200 FSD ~5% of HVE estimates


Property Types

  1. Are newly constructed homes included in the HVE model?

    A newly constructed home is incorporated into the HVE model when either Freddie Mac purchases the loan and obtains the property information, or the deed of the property is recorded in the local tax assessor’s office and that information is captured and sold to Freddie Mac by independent data aggregators.

  2. Does the HVE model include short payoffs, REO sales or restructured loans?

    No,  there are no known REO, short sales, or restructured loans included in the model.

  3. Is manufactured housing included in the HVE model?

    Manufactured housing is not included in the HVE model. A HVE point value will not be returned for manufactured housing.

  4. How does HVE treat properties in non-disclosure states?

    If Freddie Mac purchases a loan in a non-disclosure state, it will include the property data in the HVE model.

  5. How does HVE evaluate cooperative properties?

    Cooperative properties (co-ops) are excluded from the HVE model. However, Freddie Mac frequently receives co-op data that is coded incorrectly as a condominium and could get included in the model as a result.

  6. Why do some properties not get a HVE hit?

    Here are some key reasons why properties do not receive a HVE point value:
    • The address could not be verified by United States Postal Service standards as an existing address
    • There is no subject history for a new construction loan because:
      • Not enough raw data to generate a value with a certain degree of confidence in rural areas
      • "Noise" in the historical data on the subject property.

        Example: 123 Main Street, 20902 has a HVE point value of $300,000, but sells in a foreclosure for $150,000, which may result in that property being excluded for a period of time until the modeling algorithm determines a new reasonable value with minimum confidence criteria being met.
    • If the variance of the information is too high, HVE will not produce a value.

    In some areas we do not get assessment records and must do valuations using ONLY the repeat sales method. In that instance, we need prior transaction information in order to valuate. If there are no prior sales in area, then there is no valuation.

For more details on Home Value Explorer, review:

© 2012 Freddie Mac

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