Federal regulators propose loosening home appraisal rules
A joint proposal by three federal agencies released Nov. 20 could speed up an estimated 40 percent of residential real estate transactions in the U.S. by changing requirements surrounding appraisals. Under the proposed rules, certain residential real estate transactions valued at less than $400,000 would not require a certified home appraisal before receiving regulatory approval. Currently, that appraisal threshold stands at $250,000.
According to a news release from the Office of the Comptroller of the Currency, which is spearheading the proposed change, this would mark the first time since 1994 that the appraisal threshold for non-government-backed loans has been changed, and “responds to concerns raised by financial institutions about the time and cost associated with completing residential real estate transactions.”
The Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (FDIC) also support the change. Under current federal regulations, most mortgage lenders must obtain an appraisal of a home’s fair market value from a licensed appraiser before closing the loan. This appraisal is usually part of the buyer’s closing costs.
However, appraisals take time to schedule and can complicate the transaction if they come in significantly higher or lower than the list price. Government-sponsored loan programs — like FHA loans,
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