Spokane Journal of Business

Loan appraisal requirements set to change

Regulators are wanting closer look at homes with higher-priced mortgages

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Six federal financial regulatory agencies last month issued a final rule that establishes new appraisal requirements for what are being termed as higher-priced mortgage loans.

The rule implements amendments to the Truth in Lending Act made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Under the Dodd-Frank Act, mortgage loans are higher priced if they are secured by a consumer's home and have interest rates above certain thresholds.

For higher-priced mortgage loans, the rule requires creditors to use a licensed or certified appraiser who prepares a written appraisal report based on a physical visit of the interior of the property. The rule also requires creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report.

If the seller acquired the property for a lower price during the prior six months and the price difference exceeds certain thresholds, creditors will have to obtain a second appraisal at no cost to the consumer. This requirement for higher-priced home-purchase mortgage loans is intended to address fraudulent property flipping by seeking to ensure that the value of the property legitimately increased.

The rule exempts several types of loans, such as qualified mortgages, temporary bridge loans, and construction loans, as well as loans for new manufactured homes, and loans for mobile homes, trailers, and boats that are dwellings.

The rule also has exemptions from the second appraisal requirement to facilitate loans in rural areas and other transactions.

The rule is being issued by the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp., the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency. It will become effective Jan. 18, 2014.

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