According to the regulators, including the Federal Reserve and the Consumer Financial Protection Bureau, new rules have been proposed which had made it mandatory for all the high risk mortgage lenders to get property appraisals for the first time.
Here are the main points of the new appraisal rule as proposed by the Federal Reserve and the Consumer Financial Protection Bureau:
- Certified appraiser: All the high risk mortgages will require an appraisal by a licensed or certified appraiser.
- Written inspection: The lenders should also apply for a written inspection of the home's interior in case of high risk mortgages.
- Free copy of appraisal: Under the new rule, the consumers will be able to receive all the required information about their property appraisal, including a free copy of the appraisal.
- Second appraisal: Lenders and borrowers will have to go for a second appraisal if the seller bought the home at a lower price in the last six months.
- Fraudulent flipping of homes: The fraudulent flipping of properties with the help of inflated appraisals had become rampant in the last few years. The new rules are intended to prevent such fraudulent flipping of properties.
The proposed new rules will apply on those people's homes whose interest rates are above a variable threshold. The bar is based on a loan's interest rate and by how much it exceeds the Average Prime Offer Rate. The new proposed rule is open for public comment until October 15, 2012. It should be noted here that the new rule was proposed jointly by the Federal Reserve, Consumer Financial Protection Bureau, Federal Deposit Insurance Corp., Federal Housing Finance Agency, National Credit Union Administration and the Office of the Comptroller of the Currency.