New appraisal requirements are being proposed for mortgage lenders. In addition to a deadline for a new appraisal disclosure, creditors will also face a deadline to provide a copy of the appraisal report to loan applicants.
Prospective borrowers on new loans will need to be advised of their right to receive a free copy of their real estate appraisal within three days of applying for a mortgage, according regulatory requirements proposed Wednesday. The requirement also applies to other home-value estimates.
While the reports should be given to the prospective borrowers as promptly as possible, they must be provided at least three days prior to closing — though applicants can waive the three-day requirement.
The proposed rule from the Consumer Financial Protection Bureau, which would amend the Equal Credit Opportunity Act’s Regulation B, is implementing the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The ECOA prohibits lenders from discriminating on the basis of race, national origin, sex or other protected classes — and the rule will make it easier for prospective borrowers to determine if a loan application was denied as a result of a discriminatory appraisal.
Mortgage loan applicants are expected to be better informed because the rule would help inform about how lenders determine property values before they get to the closing table.
“When looking to buy a home or refinance a mortgage, consumers need the best available facts and data,” CFPB Director Richard Cordray said in a statement. “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.”
Copies of the appraisals also need to be provided to consumers even if the loan application is denied, incomplete or withdrawn.
Although a free copy needs to be provided to the loan applicants, lenders can still charge reasonable fees associated with conducting appraisals and home value estimates.
Only first liens are impacted by the proposal.
Comments are being accepted at www.regulations.gov until Oct. 15 on the proposed rule, which is expected to become final in January 2013.
Also today, another proposed rule was jointly issued by the CFPB, the Federal Housing Finance Agency and federal banking and credit union regulators on appraisal requirements for higher-risk loans.
