When you apply for a mortgage, the lender must give you a copy of the appraisal of the home you are purchasing or refinancing. That’s the latest basic right that mortgage borrowers have gained as regulators unveil a series of new requirements the lending industry will have to follow a year from now.
Current law gives the mortgage applicant the right to request a copy of the appraisal from the lender, but most borrowers are not aware they can ask for one. When the new rule goes into effect, borrowers will automatically get free copies of appraisals, even if they don’t request them.
Until then, it’s a good idea to ask your lender to give you a copy of the appraisal.
Under the new rule, lenders will be required to notify borrowers of their rights no more than three days after they apply for a loan. Once the appraisal is completed, the lender will have to send the borrower a copy of the report. This should take place at least three days before closing.
Regulators also issued a separate rule last week that tightens the appraisal requirements for higher-priced mortgages, which are generally subprime loans. For this type of mortgage, lenders will be required to have the appraiser physically inspect the home before determining the value of the property. Some lenders use a valuation system based on recent sales to figure out how much the home is worth.
In addition, a second appraisal will be required when the home being financed was purchased for a lower price in the last six months. The lender will pay for the extra step and will be required to provide a free copy of both appraisals to the borrower.
This rule was designed to prevent fraudulent appraisals, which contributed to the property-flipping craze during the housing boom. During flipping's heyday, many appraisers and lenders seemed to have no problem signing off on the sale of overpriced homes.
Do you think these rules will help prevent another housing crash?
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