In an August 15, 2012 press release, the six federal financial regulatory agencies – Board of Governors of the Federal Reserve System (FRB), Bureau of Consumer Financial Protection (CFPB), Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance Agency (FHFA), National Credit Union Administration (NCUA), and Office of the Comptroller of the Currency (OCC) – issued a proposed rule to establish appraisal requirements for higher-risk mortgage loans. The proposed rule defines a higher-risk mortgage as a closed-end consumer loan secured by a principal dwelling with an APR exceeding rate thresholds that are substantially similar to rate triggers currently in Regulation Z for “higher-priced mortgage loans” (see existing 12 CFR 1026.35). In general, loans are higher-risk mortgage loans under this proposed rule if the APR exceeds the APOR by 1.5 percent for first-lien loans, 2.5 percent for first-lien jumbo loans, and 3.5 percent for subordinate-lien loans. The proposed rule would exclude qualified mortgages (to be defined by separate rule making) and reverse mortgage loans from the definition of higher-risk mortgage loan. The proposed rule would require creditors to use a licensed or certified appraiser who prepares a written appraisal report that includes a physical inspection of the interior of the property. The proposed rule also would require creditors to disclose to applicants at application the purpose of the appraisal, that the applicant will be provided a copy of the appraisal, and that the applicant may choose to have a separate appraisal conducted at applicant’s expense.

Complete Memorandum