New appraisal disclosure rules for lenders
New consumer protection rules kicked in January 18th that give mortgage applicants more information on why a loan was accepted or rejected. The rule will serve to empower buyers by providing appraisals and other data early enough so that the buyer has an opportunity to contest the results.
The Consumer Financial Protection Bureau (CFPB) will oversee the change.
Under the new rule a lender:
• has three days after a mortgage application is submitted to tell an applicant that he or she will “promptly get a copy of any appraisal”
• must provide a free copy of any valuation, which may include many commonly used reports, such as an appraisal report, an automated valuation model report, or a broker price opinion
• has to give an applicant the copies “promptly after the reports are completed” or three days before the loan closes, whichever is earlier
• has to provide the copies promptly even if your loan doesn’t close
• may charge an applicant a “reasonable fee for the cost of the valuation”
• can ask an applicant to waive the three-day deadline if the applicant agrees; in that case, the copies would be provided at closing
Buyers who don’t waive their right to early documents should receive a copy of the appraisal earlier in the process, giving them more time to review the underlying data the appraiser used.
The new rule applies only to first liens, including construction loans and reverse mortgages. It does not apply to second mortgages or home equity loans.
Before the new rule, regulations required that creditors provide copies of appraisals to applicants upon request and notify them of their right to make that request.
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