The Federal Reserve released a new interim rule on home appraisals that helps to clarify the home appraisal process, announced the National Association of Home Builders (NAHB) in a press release on its website. The NAHB will work with the Federal Reserve over the coming months to create a final rule that will increase transparency in home appraisal.
The interim rule was announced Oct. 18, and will take effect 60 days after the release. During the 60-day period, the Federal Reserve is accepting comments on the rule. Compliance with the new rule will remain voluntary until April 1, 2011.
The interim rule includes several important updates. Under the guidelines, home builders may ask appraisers to consider additional information about the property being appraised, including information about comparable properties. “That’s critical to our members because in far too many cases we’re seeing appraisals based on inappropriate comparables,” said Joe Robson, NAHB’s Immediate Past Chairman, in the release.
The rule also includes guidelines on conflict of interest, which indicate that loan officers and mortgage brokers may not select appraisers. It also requires the reporting of negligent appraisals and misconduct by appraisers. Other requirements help protect appraisers, by mandating appropriate compensation based on standards of the geographic region and the difficulty of a particular appraisal job.
“Builders, developers, lenders, appraisers and other stakeholders need a better understanding of what they can and cannot do,” said Robson in the release. “This interim rule offers much-needed clarity, and NAHB will be offering comments in an effort to make sure the final rule provides guidance that recognizes all of the issues involved in appraisals of new homes and restores confidence in the appraisal process.”