Higher-risk mortgages are back on the agenda as six regulatory agencies look over a proposed rule that establishes new appraisal requirements for these loans.

The proposed rule would implement amendments to the Truth in Lending Act enacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, according to a press release issued by the Board of Governors of the Federal Reserve System.

The six regulatory agencies  include the Fed, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp., the Federal Housing Finance Agency, the National Credit Union Administration and the Office of the Comptroller of the Currency.

Under the Dodd-Frank Act, mortgage loans are considered higher-risk if they are secured by a consumer's home and have interest rates above a certain threshold.

For higher-risk mortgage loans, the proposed rule would require creditors to use a licensed or certified appraiser who prepares a written report based on a physical inspection of the interior of the property. The proposed rule also would require creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report.

Creditors would have to obtain an additional appraisal at no cost to the consumer for a home-purchase higher-risk mortgage loan if the seller acquired the property for a lower price during the past six months. This requirement would address fraudulent property flipping by seeking to ensure that the value of the property being used as collateral for the loan legitimately increased.

The agencies are seeking comments from the public on all aspects of the proposal. The public will have until Oct. 15 to review and comment on most of the proposal.  

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