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MortgageAppraisals & Valuations

Banks can now postpone some appraisals until 120 days after a mortgage closes

Appraisal delay rule is now official

Banks can now delay getting an appraisal on a property for as many as 120 days after a mortgage closes.

The rule change, which was proposed last week by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency, is now official after the rule was published in the Federal Register on April 17, 2020.

Under the new rule, banks can postpone an appraisal on a residential or commercial property for 120 days after the loan is closed.

But the rule only applies to banks under the oversight of the Fed, FDIC and OCC, and the rule change only applies to loans kept in banks’ portfolios.

Loans sold to or guaranteed by the Federal Housing Administration, Department of Housing and Urban DevelopmentDepartment of Veterans AffairsFannie Mae, or Freddie Mac will still require an appraisal before closing, per each agency’s or company’s rules.

The rule applies to “residential and commercial real estate secured transactions, including loans for new money or refinancing transactions.”

In the interim final rule, which can be read here, the regulators note how the current environment is impacting the ability of certain people to buy a home or refinance if they want to or need to.

As for why the regulators proposed the rule change, they cited the need to “extend financing to creditworthy households and businesses quickly in the wake of the national emergency declared in connection with COVID-19.”

While the regulators are allowing banks to delay appraisals until four months after a mortgage closes, they cautioned that banks should still utilize sound lending practices.

“Regulated institutions that defer receipt of an appraisal or evaluation are still expected to conduct their lending activity consistent with the underwriting principles in the agencies’ Standards for Safety and Soundness and Real Estate Lending Standards that focus on the ability of a borrower to repay a loan and other relevant laws and regulations,” the regulators state. “These deferrals are not an exercise of the agencies’ waiver authority, because appraisals and evaluations are being deferred, not waived.”

Despite that, a number of appraisers told HousingWire last week that they are worried about the rule and its impact. Chief among those concerns was what would happen if a property’s value dropped in the 120-day appraisal delay window.

In spite of those concerns, the appraisal delay rule is now official and will be in place until Dec. 31, 2020.

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