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Washington
Agencies CFPB release mortgage appraisal proposals
WASHINGTON (8/16/12)--Separate proposals that would create new appraisal requirements for "higher-risk" mortgage loans, and give homebuyers greater access to home value appraisals, were released by federal financial regulators on Wednesday.

The high-risk loan proposal was released by the National Credit Union Administration, Consumer Financial Protection Bureau (CFPB) and other federal financial regulators. The Truth in Lending Act defines higher-risk mortgages as mortgage loans secured by a principal dwelling with annual percentage rates that exceed the average prime offer rate by 1.5% for first-lien loans, 2.5% for first-lien jumbo loans, and 3.5% for subordinate-lien loans.

The proposal would require mortgage creditors offering these higher-risk mortgages to use licensed or certified appraisers who prepare written reports, based on physical inspections of a home's interior, when they determine the value of a given home.

Mortgage lenders would also be required to provide homebuyers with a free copy of the resulting home appraisal report.

If the seller of a given home has purchased the home for less than the current sale price within the last six months, an additional appraisal document would be provided to the homebuyer.

That document would detail the difference in sale prices, any changes in market conditions, and any improvements that have been made to the property since it was purchased by the current owner. "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 agencies said in a release.

In its separate release, the CFPB has proposed requiring lenders to provide home appraisal and valuation data to all mortgage applicants. "When looking to buy a home or refinance a mortgage, consumers need the best available facts and data," CFPB Director Richard Cordray said. "This rule would guarantee consumers receive important disclosures on how a lender determines the value of the home, making it easier for loan applicants to make informed decisions."

Both proposals would require lenders to provide appraisal documents to borrowers at least three days before closing.

Public comment on both of these proposals will be accepted until Oct. 15.

The CFPB said a final rule on its home appraisal proposal is expected to be released in January.

For more on the proposals, use the resource links.
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