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.
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