Starting 2014, Nations Lending Corporation will be required to inform applicants of their right to get a free copy of the appraisal report of their homes; all lenders will.1 The rule, established as part of the Dodd Frank Reform and Protection Act, is intended to “make it easier for loan applicants to make informed decisions.” Although I am in favor of empowering consumers, I believe this rule will not have a significant impact on the decisions consumers make. The home appraisal process follows standardized and regulated guidelines, and I believe that property valuation does not vary greatly from one appraiser to another. Furthermore, we as lenders follow our own industry guidelines to make underwriting decisions, which cover home valuation assessment. I think the new valuation disclosure rule will not have a significantly visible and immediate impact, but rather a gradual long-term effect on borrowers and lenders.
Right now, if the consumer requests it, we are required to provide copies of the appraisal, but we are not required to inform mortgage applicants that they can get a copy of the appraisal.
The new rule will require us to inform mortgage applicants of their right to receive a copy of all appraisals within three days from the time of application. And if a borrower requested this, we will be required to provide these copies no later than three days before the closing.2
The real difference is that consumers will be informed about their right to a free copy of the appraisals used by the lender to make a decision on their application.
As I mentioned before, I believe that informing consumers of their right to get a copy of the property’s appraisal will not make a significant difference to the decisions they make. I think factors like interest rates, overlays, and points and fees have more weight in a borrower's decision when closing time comes. Rather, I think lenders are to benefit from this new rule. Now that borrowers can be informed about how their property was valuated, hopefully they will be less suspicious of wrongly undervalued properties or rejected applications. I think that most borrowers misunderstand the purpose of the lender’s home appraisal and often mistake this with the imposition of a property’s price, when, in reality, we appraise to ensure there is enough value in the property for us to take the risk. In the long run, I think the rule will result in expectations of a well-informed and responsible borrowers; and for us lenders, and as the Dodd Frank intended, the ever more closely monitoring of discriminatory lending practices.
Have you had more than one appraiser value a property for you or a potential client? Did you see a significant difference from one valuation to another? If you did, what variables influenced the difference between the valuations?
How do you think consumers will benefit from knowing they have a right to a free copy of the valuation report? Have you observed discriminatory lending practices first hand?
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