The Federal Deposit Insurance Corp. board of directors approved stricter appraisal requirements for higher-cost mortgages with the release of a final rule on Tuesday. Federal regulators have also expanded the types of loans that will be exempt from the new standards.
"The rule, mandated by the Dodd-Frank Act, requires creditors to obtain a written appraisal and provide a copy to borrowers at least three business days before closing. When an application is submitted, a lender must notify the borrower that the appraisal will take place and that the applicant has the option to foot the bill for a separate appraisal," writes American Banker's Joe Adler.
FDIC Chairman Martin Gruenberg said at the meeting that the rule "will help ensure that borrowers who are paying higher-cost mortgage loans pay a fair-market price for their homes and obtain a free copy of their appraisal before becoming financially obligated."
As required by Dodd-Frank, the regulators exempted so-called "qualified mortgages," a new category of ultra-safe loans that satisfy the Consumer Financial Protection Bureau rules for determining a borrower's repayment ability, from the appraisal standards. It also added new carve-outs for finacing for mobile homes, initial construction loans and short term "bridge" loans with no more than a year maturity.
For the full piece see "Agencies Ease New Appraisal Regime for Higher-Priced Loans" (may require subscription).