Updated with comments from Pepper Hamilton attorney Frank Mayer.
NEW YORK (TheStreet) -- Home flippers beware: Federal bank regulators are getting tough on appraisal requirements for properties that are quickly resold.
As required under the Dodd-Frank banking reform legislation, federal regulators -- including the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the National Credit Union Administration, and the Consumer Financial Protection Bureau -- proposed a strict set of appraisal requirements for "higher-risk" mortgages.
The "higher-risk mortgages" subject to the new appraisal rules are loans with rates that are:
- 1.5 or more percentage points higher than "the average prime offer rate (APOR) for a comparable transaction as of the date the interest rate is set," for a first-lien loans with balances not exceeding 80% of the home's value, for a one-to-four family dwelling, with some exceptions.
- 2.5 or more percentage points higher than the APOR for a first-lien loans with balances exceeding 80% of the home's value.
- 3.5 or more percentage points higher than the APOR for a second-lien mortgage loan, or for a reverse mortgage.
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