New Fed Rule Gets Tougher on Appraisals for High-Risk Home Loans

Six federal agencies this week introduced a proposed rule toward new appraisal requirements for “higher-risk mortgage loans,” defined as loans that are secured by a consumer’s home and have interest rates above a certain threshold. Reverse mortgages, however, are not included in the definition. 

For higher-risk mortgage loans, the proposed rule would require creditors to use a licensed or certified appraiser who prepares a written report based on a physical inspection of the interior of the property, according to the Federal Reserve Board.

Additionally, creditors would be required to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report, under the proposed rule. 

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“The definition of ‘higher-risk mortgage’ expressly excludes qualified mortgages, as defined in TILA section 129C, as well as reverse mortgage loans that are qualified mortgages as defined in TILA section 129C,” according to the Federal Register notice on the proposed rule. 

The proposed rule, being issued by six agencies including the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency, is now open for comments. 

View the proposed rule

Written by Elizabeth Ecker

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