WASHINGTON – Jan. 18, 2013 – Six federal financial regulatory agencies today issued the final rule on new appraisal requirements for “higher-priced mortgage loans” (HPML). It becomes effective in one year, Jan. 18, 2014.

The rule springs from the Truth in Lending Act made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). Under the Act, an HPML is secured by a consumer’s home and has an interest rate above a specific threshold.

Under the rule, a licensed appraiser must provide a written appraisal based on a physical visit to the property. Creditors must disclose the purpose of the appraisal and give applicants a free copy of a report.

The creditor must also pay for a second appraisal if the seller bought the property within six months and if the current price exceeds a threshold written into the new rule. The second mandatory appraisal is intended to cut down on fraudulent property flipping by ensuring that the value of the property legitimately increased.

The rule exempts several types of loans, such as qualified mortgages, temporary bridge loans and construction loans, loans for new manufactured homes, and loans for mobile homes, trailers and houseboats. The rule also has second-appraisal exemptions in rural areas and with some other transactions.

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 issued the rule.

The complete rule can be downloaded from the Federal Reserve’s website.

© 2013 Florida Realtors®