Lenders now accountable for real estate appraisals
July 22, 2004
Housing agency posts new rule to curb predatory lending
As part of an ongoing effort to curb predatory lending and increase accountability in its mortgage insurance programs, The Department of Housing and Urban Development today published a final rule that makes lenders accountable for appraisals on mortgages insured by the Federal Housing Administration.
The rule takes effect Aug. 19.
Predatory lending occurs when home purchasers become unwitting victims of lenders, sellers and appraisers, often working together. Unsuspecting home buyers either purchase homes with inflated sales prices or are substantially overcharged with mortgage costs and fees.
The final rule, "Lender Accountability for Appraisals," makes lenders accountable for the quality of appraisals performed by the appraisers the lender hires. It strengthens HUD's regulations concerning the lenders' responsibilities when they select appraisers to determine the market value of properties that will be security for FHA-insured mortgages. The rule aims to ensure home buyers will receive accurate statements of appraised values on homes they purchase using FHA mortgage insurance.
"Holding lenders accountable when appraisers they select engage in fraudulent activities is another step this administration is taking to protect home buyers, particularly minorities, from unscrupulous predatory lending practices," said Assistant Secretary for Housing-Federal Housing Commissioner John Weicher.
The rule specifies that lenders submitting appraisals to HUD that do not meet FHA requirements can be subject to the imposition of sanctions by HUD's Mortgagee Review Board. This new rule applies to both sponsor lenders who underwrite loans and loan correspondents who originate loans on behalf of their sponsors.
Copyright: Inman News Features