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Agencies Issue Proposal on Appraisals for Higher-Risk Mortgages

Posted on 8/16/2012

Six federal financial regulatory agencies yesterday issued a Dodd-Frank Act-mandated proposed rule that would establish new appraisal requirements for "higher-risk mortgage loans." Mortgage loans secured by a consumer's home with interest rates above a certain threshold are considered higher-risk under Dodd-Frank.

The proposed rule would require creditors making such loans to use a licensed or certified appraiser to prepare a written report based on a physical inspection of the property's interior. The proposal also would mandate that creditors disclose information about the appraisal's purpose and provide consumers with a free copy of the appraisal report.

Creditors also would 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 during the previous six months. The requirement is intended to address fraudulent property-flipping by seeking to ensure that the value of the property used as loan collateral legitimately increased. The comment deadline is Oct. 15.

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