New Appraisal Standards Approved for Higher-Risk Mortgages —Appraiser News, Bloomberg, Housing Wire, Mortgage News Daily, Appraisal Scoop, Real Estate Advantage

Rule Will Require a Second Appraisal in Situations Where a Home is Being Flipped for a Quick, Higher Resale 

A new rule passed Jan. 15 gives mortgage lenders an additional year to institute appraisal standards for higher-risk loans, Bloomberg reported, and Appraiser News Online highlighted.  The extension is one of the revisions that regulators made to the Dodd-Frank Act to address concerns from financial firms.    Appraiser News Online explains that:   

Six agencies were involved in approving the rule, including the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Housing Finance Agency and the National Credit Union Administration.

The rule takes effect Jan. 14, 2014, and will require lenders that issue loans that don’t meet the qualified mortgage standard to get written reports by certified appraisers who have conducted physical inspections of homes, Bloomberg reported.

“This rule, along with the CFPB’s recently issued qualified mortgage rule, are key components in addressing the practices that contributed to the worst economic crisis since the Great Depression,” Comptroller Thomas Curry said, Bloomberg reported. “It will bring transparency and clarity to the appraisal process for higher-risk residential mortgages.”

The Bloomberg piece, “Appraisal Standards for Higher-Risk Mortgages Passed by FDIC,” written by Jesse Hamilton, adds additional detail:

Creditors issuing loans at above-average interest rates that don’t meet the “qualified mortgage” standard will need to get written reports by certified appraisers who physically inspect homes under rules approved today by the Federal Deposit Insurance Corp., one of six agencies that must sign off. The chiefs of the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency — as FDIC board members — also approved the rule.

. . . In addition to the initial physical inspection, the rule requires a second appraisal when a home is being turned around for a quick, higher resale. The final rule doesn’t require the second appraisal if the new sale price is only marginally higher — a point requested in an Oct. 15 letter from Wells Fargo & Co. (WFC), the largest U.S. home lender, which had also asked for the 12-month implementation.  The rule, which goes into effect Jan. 14 next year, uses the Truth in Lending Act definition of a “higher-priced mortgage loan” to maintain consistency.

The six U.S. regulators involved in the joint rule include the FDIC, OCC, CFPB, the Federal Reserve, Federal Housing Finance Agency and the National Credit Union Administration. Other regulators will follow the FDIC, with the NCUA voting “early next week,” said John Fairbanks, an NCUA spokesman.

Read the entire Bloomberg piece here. 

New Appraisal Standards Aim to Address Issues That Led to Recent Financial Crisis

see also:

• Consumer Financial Protection Bureau adopts rule to improve consumer access to appraisal reports   —Appraisal Scoop
• FDIC gives more time on appraisal rules for high-risk loans  —Housing Wire
• Appraisal Standards for Higher-Risk Mortgages Passed by FDIC  —Real Estate Advantage
• Appraisal Rules for Higher-Price Mortgages Released by Regulators  —Mortgage News Daily