FEDS: No Appraisal Required?
Published On: August 27, 2019 Posted by: Jeremy Peterson
In a surprising new rule that will shake up the way homebuyers and lenders work together during home purchases, Federal banking regulatory agencies are moving forward with a new rule that will eliminate the need for an appraisal for non-government backed mortgages made on homes and multi-unit property under $400,000.
The last time this rule was changed was in 1994, which is before living memory for most Realtors in the business (Hint: I was a junior in high school).
The last remaining entity to sign off on this rule before it becomes law is the Federal Reserve. Once it obtains their blessing, which is highly likely, the rule will go into effect within a week.
The impact on this rule in Utah will be significant. Banks will be able to use broker price opinions (i.e. BPOs) or other evaluative methods to determine value of collateral. But, the often cumbersome and time consuming process of obtaining an appraisal will be eliminated from the process for many buyers. This will speed up transactions.
While lending institutions may take on additional risk due to the lack of a fine tuned valuation of their collateral, lenders (or at least those who wish to stay in business) will still be prudent in their lending standards.