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Regulators outline proposed rule for appraisals on high-risk loans

Lenders offering high-risk mortgages in the future may have to hire certified, licensed appraisers to conduct interior property inspections to comply with federal appraisal standards, the Federal Reserve said.

The Fed and five other agencies charged with fleshing out Truth in Lending Act rules tied to the Dodd-Frank Act outlined their latest proposal for how appraisals should be conducted when dealing with high-risk loans.

Dodd-Frank identifies mortgages as higher-risk if they are secured by a home and have interest rates above a certain threshold.

Under the proposed rule, creditors issuing high-risk mortgages would have to use a licensed or certified appraiser to prepare a written report based on a complete, physical inspection of the property's interior.

Creditors also would be forced to disclose to loan applicants the purpose of the appraisal and to provide them with a free copy of the report.

And if a seller acquired the property for a lower price than its current listing within a six-month timeframe, creditors offering a high-risk loan would be forced to obtain an additional appraisal at no cost to the consumer to prevent fraudulent property flipping.

The public will have 60 days, or until Oct. 15, to comment on the rule.

The proposed rule was drafted by the Federal Reserve, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp., the Federal Housing Finance Agency, the National Credit Union Administration and the Office of the Comptroller of the Currency.

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