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CFPB: New appraisal rules

By Polyana da Costa · Bankrate.com
Thursday, August 16, 2012
Posted: 1 pm ET

If you are buying or refinancing a home, you have the right to know how much the property is worth -- or at least how much the appraiser thinks the home is worth and why.

The Consumer Financial Protection Bureau wants to make this notion crystal clear to lenders.

On Wednesday, the CFPB proposed a rule that would require lenders to notify mortgage applicants of their right to receive a copy of the appraisal of the home being financed. Lenders would be required to provide copies of all written reports associated with the appraisal no later than three days before the loan closes.

Currently, borrowers have the right to request copies of appraisals under the Equal Credit Opportunity Act. But many borrowers are not aware of their rights, and some are charged a fee to receive a copy of the appraisal. Under the new rules, lenders would still be able to charge borrowers a fee to hire an appraiser to conduct the appraisal, but they would be prohibited from charging a fee to release a copy of the documents.

"When looking to buy a home or refinance a mortgage, consumers need the best available facts and data," says CFPB Director Richard Cordray. "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."

A separate proposed plan, issued by the CFPB and five other federal agencies, would tighten appraisal rules on "higher-risk mortgage loans" to help prevent fraud. The rule would require lenders to get a written appraisal report based on a physical inspection of the property. Borrowers must receive a free copy of the report before closing.

Lenders would also be required to obtain a second appraisal, at no cost to the borrower, if the borrower is buying a home that sold for a lower price in the past six months. The idea is to avoid the flipping craze seen during the housing boom, when you could buy a home for $200,000 and sell it weeks later for $300,000.

"This requirement would address fraudulent property flipping by seeking to ensure that the value of the property being used as collateral for the loan legitimately increased," the agencies' press release says.

If only these rules had been in place seven or eight years ago. Better late than never.

What do you think of the proposals? This is your chance to speak up.

The agencies will accept comments from the public on the proposed rules until Oct. 15. The final rule will be issued in January.

If you want me to keep you posted, follow me on Twitter @Polyanad. If not, you should still follow me.

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4 Comments
Jess
August 22, 2012 at 7:21 am

Darn strait Brian. I have lost $50k in equity in my house and I'm trying to re-fi it so I can rent it out and buy a second house till I can sell the first. EVery time I talk to a new mortgage company it seems like they want me to fork over more and more money and the appraisals get lower and lower. The banks and the appraisal companies committed FRAUD PURE AND SIMPLE. All I ask is that I be able to refi my house at what I owe and NOT PAY PMI on a house I"ve owned for 8 yrs and have paid 40% or so off. The banks are STILL lending too much money to people who can't afford it, too.

Brian Medlen
August 20, 2012 at 7:40 pm

At what point and time is someone going to address the low apprasal problem we are having. I have several homes and when I went to refi them the appraisals came in low. I offered to pay for a new appraisal and the banks said they were going to stick with the lowest appraisal even though they new it was low.I believe the banks are still part of the problem not the solution. Brian