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CFPB Issues Two New Appraisal Rules, which will take Effect in Jan. 2014


CFPB Issues Two New Appraisal Rules, which will take Effect in Jan. 2014The Consumer Financial Protection Bureau (CFPB) officially issued both the new ECOA Appraisal Rule and the new Appraisals for High-Risk Mortgages Rule late last week, and is giving the industry a year to prepare and familiarize itself with the new regulations.


ECOA Appraisal Rule:
This new rule will require lenders to inform a consumer of their right to receive a free copy of the subject property’s appraisal report within three business days after they receive a consumer’s mortgage application. Lenders must then provide the free copy of the appraisal report to the loan applicant no later than three days before their loan is set to be closed. The new rule will allow for the three day deadline to be waived—with consent given by the applicant—as long as the applicant receives a free copy of the appraisal report before the loan is closed.

The ECOA Appraisal Rule will help implement requirements under the Dodd-Frank Act, which stipulate that mortgage lenders must give consumers a copy of the subject property’s appraisal report free of charge. However, a lender may generally still charge the consumer a reasonable fee for the cost of conducting the appraisal, and this new rule will only apply to first-lien mortgage applications.

Under the current law, consumers must request a copy of the appraisal report from lenders when they want to see how the estimate was determined, and lenders can charge consumers a fee for obtaining the report.

The ECOA Appraisal Rule will officially take effect on January 18, 2014.


Appraisals for High-Risk Mortgages:
For higher-risk mortgage loans, creditors will be required to use a licensed or certified appraiser who prepares a written report based on a physical inspection of the interior of the property. The recently issued rule will also require creditors to disclose information to applicants regarding the purpose of the appraisal, and they must provide consumers with a free copy of the appraisal report.

The proposed rule also cites that creditors will have to obtain an additional appraisal—at no cost to the consumer—for a home-purchase higher-risk mortgage loan if the seller acquired the property for a lower price than their asking price during the previous six months. This is simply an extra measure to ensure that consumers aren’t being taken advantage of, and that the value of the property has been legitimately increased.

Several types of loans will be exempt from this new rule, and they are as follows: qualified mortgages; temporary bridge loans and construction loans; loans for newly manufactured homes; and loans for mobile homes, trailers, and houseboats.

The Appraisals for High-Risk Mortgages Rule will implement amendments to the Truth and Lending Act, which was enacted by the Dodd-Frank Act back in 2010. As stipulated by Dodd-Frank, mortgage loans are considered higher-risk if they are secured by a consumer’s home and have interest rates above a certain threshold. Under the recently issued rule, those thresholds include first-lien loans with an APR 1.5 percentage points higher than the average prime offer rate, first-lien jumbo loans with an APR 2.5 percentage points higher than APOR, and subordinate-lien loans with APRs that are 3.5 percentage points higher than APOR.

The Appraisals for High-Risk Mortgages Rule will officially take effect on January 18, 2014.



We are subtituting (today) collateral on an exisitng Home Equity Line of credit, a mobile Homes, does this new law apply.
Posted @ Thursday, February 06, 2014 5:12 PM by Ana Harris
Ana, the answer is yes. The consumer is entitled to a copy of the valuation.
Posted @ Monday, February 10, 2014 12:42 PM by Zach Bodack
when to use an appraisal acknowledment and waiver of delviery timing reqiremetns? what are the rules? Do we need to have it dated three days before closing and provide a copy within 30 days, is that what I am understanding?
Posted @ Wednesday, April 23, 2014 4:45 PM by Ana
No, the borrower needs a copy 3 days prior to closing, and it must be documented for auditing purposes. However, if the loan does not close, the borrower must receive the copy of the report within 30 days from declination of the loan.
Posted @ Thursday, April 24, 2014 9:50 AM by Zach Bodack
When requesting a copy of the appraisal report, will this report be a detailed appraisal report? Or that brief report that's sent from the lending company just basically telling you what your property is worth ?
Posted @ Thursday, August 14, 2014 12:50 PM by Jennifer
Jennifer, you will receive the detailed appraisal report, along with any Automated Valuation Model reports that may have also been run on your property.
Posted @ Thursday, August 14, 2014 1:11 PM by Zach Bodack
i prepare real estate market valuations. i call them "market valuations" i am not a licensed appraiser. can lenders accept my market valuations, assuming they are prepared in an appropriate manner?
Posted @ Wednesday, January 14, 2015 6:54 PM by Alan Nevin
Alan, they cannot accept your "market valuations" unless you are licensed and certified, and they won't make any exceptions. This is against regulation, and lenders will face thousands-of-dollars in fines if they are caught accepting appraisals from non-licensed individuals. If you truly want to pursue a career in real estate appraisals, you must take the appropriate classes and become licensed and certified before any lender or Appraisal Management Company will work with you.
Posted @ Thursday, January 15, 2015 8:44 AM by Zach Bodack
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