The nation's six federal financial regulatory agencies have issued a proposed rule to establish new appraisal requirements for what they describe as ‘higher-risk mortgage loans.’
According to the regulators, the proposed rule would implement amendments to the Truth in Lending Act enacted by the Dodd-Frank Act, in which mortgages are considered higher-risk if they are secured by a consumer's home and have interest rates above a certain threshold. For higher-risk mortgage loans, the proposed rule would require creditors to use a licensed or certified appraiser who prepares a written report based on a physical inspection of the interior of the property.Â
The proposed rule also would require creditors to disclose to applicants information about the purpose of the appraisal and would provide consumers with a free copy of any appraisal report. Creditors would have to obtain an additional appraisal at no cost to the consumer for a home-purchase higher-risk mortgage loan if the seller has acquired the property for a lower price during the past six months.
The agencies, in their proposal, say this requirement would address fraudulent property flipping by seeking to ensure that the value of the property being used as collateral for the loan legitimately increased.
The proposed rule is being issued by the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration and the Office of the Comptroller of the Currency. The public will have until Oct. 15 to review and comment on most of the proposal.