Federal regulators Wednesday unleashed new appraisal rules on residential funders, requiring an additional appraisal for “high risk” mortgages—but only if the home seller is unloading the property for more money within six months of the original purchase.
Moreover, the mortgage originator cannot make the borrower pay for the second appraisal and must provide a free copy to the applicant.
In a joint statement from the nation’s six financial service regulators, the proposed language is aimed at preventing property flipping “by seeking to ensure that the value of the property being used as collateral for the loan legitimately increased.”
The proposed rule was mandated under the Dodd-Frank Act. All appraisers used for these mortgages must be licensed or certified.
The six agencies include the Consumer Financial Protection Bureau and Federal Housing Administration, as well as the FDIC and Federal Reserve.
Regulators define a high-risk mortgage as any first lien where the annual percentage rate exceeds the average prime offer rate by 1.5%. For jumbos the trigger is 2.5% and for seconds, 3.5%.
Earlier this year, the CFPB announced that it planned to
