Some Appraisals Postponed Upto 120 Days After Closing

Under a new rule, banks can postpone an appraisal on a residential or commercial property for as many as 120 days after the mortgage loan is closed. The rule change, previously proposed last week by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency, is now official after the rule was published in the Federal Register on April 17, 2020.

The rule applies to “residential and commercial real estate secured transactions, including loans for new money or refinancing transactions.” But the rule only applies to banks under the oversight of the Fed, FDIC and OCC, and the rule change only applies to loans kept in banks’ portfolios.

Loans sold to or guaranteed by the FHA, Department of Housing and Urban Development, Department of Veterans Affairs, Fannie Mae, or Freddie Mac will still require an appraisal before each mortgage closing, per each agency’s or company’s own rules.

Regulators noted how the current environment continues to impact the ability of certain people to buy a home or refinance if they want to or need to.

Which is why the regulators proposed the rule change. They agreed and cited the need to “extend financing to creditworthy households and businesses quickly in the wake of the national emergency declared in connection with COVID-19.”

What does this mean for a prospective homeowner? A number of appraisers told Housing Wire last week that they are worried about the rule and its impact on the industry. Chief among those concerns was what would happen if a property’s value dropped in the 120-day appraisal delay window.

Despite these concerns, the appraisal delay rule is now official and will be in place until Dec. 31, 2020.

Contact one of our loan consultants to learn more about this program.