Proposed New Federal Rules Could Affect Refinancing Loans

When home owners start considering a refinance loan, their options include a variety of refinancing loan packages that require a new appraisal.

Any refinancing loan that taps into the equity of the property would require a new appraisal--the fair market value of the home must be considered as a part of the loan approval process.

The new appraisal is a common source of anxiety for those applying for conventional, FHA and VA refinancing loans. How does the borrower know what will come back on the new appraisal, and how much value does the home have in the current housing market? Many have been disappointed as current values don’t reflect what was expected. But new rules proposed by the Consumer Financial Protection Bureau (CFPB) could help.

According to an August CFPB press release, a new federal regulation currently under consideration would give homeowners added rights to information on how home values are determined--that information could later help borrowers get their home ready for a refinancing loan appraisal with repairs or upgrades; it could also help borrowers know what to expect from an “as-is” appraisal.

According to the CFPB official site, the proposed rule would “require mortgage lenders to provide home loan applicants with copies of written appraisals and other home value estimates developed in connection with the application. The rule would ensure that consumers receive information prior to closing about how the property’s value was determined.”

CFPB Director Richard Cordray says of the proposed rule, “When looking to buy a home or refinance a mortgage, consumers need the best available facts and data,” Cordray adds, “This rule would guarantee consumers receive important disclosures on how a lender determines the value of the home, making it easier for loan applicants to make informed decisions.”

The press release says recent changes to federal law already requires “that creditors provide mortgage applicants with a copy of written appraisals and home value estimates developed in connection with the application.” The new proposed rule “would require that creditors inform consumers within three days of applying for a loan of their right to receive a free copy of appraisal reports and home value estimates. Creditors would then be required to provide the reports to consumers as promptly as possible, but in no case later than three days before closing, regardless of whether credit is extended, denied, incomplete or withdrawn.”

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