By Nikkita Phanda 

Automated collateral evaluation (ACE) is a capability within Freddie Mac’s automated underwriting system (AUS), Loan Product Advisor® (LPA®), that can be used to deliver a loan without an appraisal report on eligible loan types. 

Here is what lenders need to understand about ACE, how it works, who qualifies and what to consider before relying on it.  

What Freddie Mac's ACE is 

In the mortgage industry, ACE is a Freddie Mac capability that leverages proprietary Freddie Mac models, 40 years of historical data and public records and advanced algorithms. These inputs help determine the acceptability of the value and assess the condition risk without an appraisal report. If the system determines that collateral risk is low and data confidence is high, it may offer ACE as part of the underwriting findings.  

The case for ACE 

For borrowers, ACE delivers two concrete advantages in cost savings and speed. Borrowers can save money and close faster than they would with a traditional appraisal. In a competitive purchase market or a time-sensitive refinance, those numbers matter. 

For lenders, the value is different but equally tangible. ACE delivers representation and warranty (R&W) relief on value, condition, and marketability when eligibility requirements are met. This means that Freddie Mac will not exercise remedies, including repurchase request, for breach of selling representations and warranties related to value, condition, and marketability when ACE is accepted and requirements are met. That shifts collateral risk upstream, reduces underwriting conditions and gives underwriting teams more predictability throughout the loan lifecycle.  

How ACE differs from ACE+ PDR  

One important distinction in the Freddie Mac offering is the difference between ACE and ACE+ PDR. 

ACE allows the loan to be delivered without an appraisal report and does not require a property inspection. Nobody visits the property and no report is required. The value determination is made entirely through LPA based on existing data. 

ACE+ PDR is a collateral valuation offering that allows lenders to deliver eligible loans without an appraisal report but adds a requirement for a Property Data Report (PDR). In this case, a trained data collector visits the property to document an on-site data collection of property characteristics. The PDR is reviewed by the Lender to ensure the property meets Freddie Mac’s ACE+ PDR eligibility requirements and property eligibility requirements. The PDR step adds a layer of property-level verification without requiring an appraiser or an appraisal report. 

Understanding the solution being offered is an important operational consideration for lenders scaling their use of the offering.  

What LPA evaluates for ACE eligibility 

A critical point for lenders new to ACE is that the offering is not something you can select or request. LPA either offers it based on what it sees in the data or it does not. Lenders cannot manually create an ACE offer. 

LPA evaluates the full picture, including loan type, loan-to-value (LTV) ratio, property characteristics, prior transaction history, and the depth of comparable sales data. Conforming conventional loans on one-unit properties with moderate LTVs and strong data histories are the most common ACE recipients. Freddie Mac’s ACE eligibility includes both purchase and refinance transactions. A full overview of ACE, including the process, eligibility, ineligibility, and other requirements, can be found in the Freddie Mac Selling/Servicing Guide (Guide) Section 5602.3 and 5602.4, respectively.  

ACE eligibility doesn't end at the offer 

Successfully scaling ACE requires more than understanding the eligibility criteria. It requires active monitoring throughout the loan process. 

An ACE offer issued by LPA is based on the loan data submitted at that moment. If key characteristics change before closing, such as LTV, purchase price, or property information, a different ACE eligibility determination may be provided. Lenders without clear internal processes for tracking AUS findings and flagging mid-process changes are vulnerable to last-minute changes to eligibility that can disrupt closing timelines. 

For loans with an ACE+ PDR offer, the lender’s underwriting decision is directly tied to the quality of the property data report. That makes vendor selection and quality control critical for the process.  

How Class Valuation supports ACE execution 

For ACE+ PDR transactions, lenders need a data collection partner with national coverage, consistent quality standards, and workflows built specifically around Freddie Mac's Guide requirements. 

Class Valuation's property data collection program is designed to meet both needs. Our trained, background-screened data collectors operate within an integrated technology and quality control framework aligned with ACE+ PDR standards including Uniform Property Dataset (UPD) and Uniform Property Data Report (UPDR). When a loan does not qualify for ACE+ PDR and requires a full appraisal or hybrid solution, the process transitions without disruption to the broader workflow. 

That flexibility allows lenders to pursue ACE eligibility where it makes sense while maintaining the operational controls that protect the file from origination through closing. 

Getting the most from ACE 

ACE is one of the more powerful tools available to lenders managing collateral risk and operational efficiency when it is used with a clear understanding of how it works and where its boundaries are. 

Borrowers benefit from a faster, less expensive process. Lenders benefit from R&W relief and a more streamlined path to closing. But those benefits depend on the data and the operational execution being sound throughout. The full parameters and lender requirements for ACE are available in Freddie Mac’s Single-Family Seller/Servicer Guide. 

Nikkita Phanda is Senior Vice President of Digital Operations at Class Valuation, where she leads initiatives focused on appraisal modernization and digital valuation solutions. She oversees the development of hybrid and property data collection programs while managing the company's second mortgage and servicing valuation divisions. Prior to joining Class Valuation, Nikkita served as Senior Vice President of Operations at Incenter Appraisal Management, where she led large-scale operational strategy and growth initiatives.