A new rule passed Jan. 15 gives mortgage lenders an additional year to institute appraisal standards for higher-risk loans, Bloomberg reported. The extension is one of the revisions that regulators made to the Dodd-Frank Act to address concerns from financial firms.
Six agencies were involved in approving the rule, including the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Housing Finance Agency and the National Credit Union Administration.
The rule takes effect Jan. 14, 2014, and will require lenders that issue loans that don’t meet the qualified mortgage standard to get written reports by certified appraisers who have conducted physical inspections of homes, Bloomberg reported.
“This rule, along with the CFPB’s recently issued qualified mortgage rule, are key components in addressing the practices that contributed to the worst economic crisis since the Great Depression,” Comptroller Thomas Curry said, Bloomberg reported. “It will bring transparency and clarity to the appraisal process for higher-risk residential mortgages.”
In addition to the physical inspection, the rule will require a second appraisal in situations where a home is being flipped for a quick, higher resale. However, a second appraisal will not be required if the new sale price increased only slightly.