Regulatory changes attempt to protect consumers by prohibiting creditors from misrepresenting the value of property: An analysis by Arkansas residential appraiser, Ferstl Valuation Services.
Refinancing mortgages has become increasingly popular to take advantage of record-low mortgage rates, but higher-priced and higher-risk loans face greater scrutiny from government regulators to curtail abuses by lenders and real estate speculators. As a skilled and certified Arkansas residential appraiser, Ferstl Valuation Services, helps to prevent these kinds of unethical practices by providing heightened scrutiny of higher-interest loans. These higher-priced loans do not include reverse mortgages, home equity lines of credit, temporary or bridge loans, and construction financing for new homes.
The recent regulatory changes attempt to protect consumers by prohibiting creditors from misrepresenting the values of property, banning prepayment penalties during the first four years, prohibiting lenders from relying on unverified assets or incomes, and requiring that creditors make good-faith efforts to determine borrowers’ abilities to repay loans.
Higher-Priced Mortgage Loan Regulations
The new amendments to the Truth-in-Lending laws establish a new category of mortgages called Higher-Priced Mortgage Loans. These loans are defined as mortgages with interest rates that run 1.5 percent or higher than the Freddie Mac Primary Mortgage Market Survey rates for first liens and 3.5 percent or higher for subordinate or secondary liens. The new federal regulations attempt to prevent biased parties from exerting undue influences on appraisals and consumers from taking out loans for larger amounts than properties are really worth.
- Lenders must furnish borrowers with copies of appraisals three days or more before closing dates.
- Loans companies and owners must not try to influence appraisal objectivity.
- Lenders can use qualified in-house appraisers, but these employees must work independently of sales staffs.
- Appraisal misconduct must be reported to state regulatory agencies.
- Creditors must verify higher-priced loan applicants’ incomes, credit ratings and other pertinent details of mortgage applications.
Evidence of Market Recovery in Response to New Regulations
The new regulations appear to work as intended, generating a new wave of refinance mortgages to take advantage of low rates and correct abuses of the past. Recently, mortgage rates for 30-year loans have dropped from 3.54 percent to 3.43 percent, and 15-year loans have fallen from 2.74 percent to 2.65 percent. Refinance applications rose 6.3 percent in the week of April 5, 2013. Record-low interest rates, reliable appraisals and the desire to start fresh with accurate market information have certainly contributed to the recovery trend.
Appraisals Vary According to External Influences
Property appraisals can vary significantly from sales prices, but statistics issued by the Appraisal Institute show that one-third of property appraisals hit the mark exactly. Mortgage appraisals of single-family homes conducted between January and May of 2012 were more than 3 percent higher than sales prices 24 percent of the time, and between 8 and 9 percent of appraisals undervalued residential property values during the period.
“… recent regulatory changes attempt to protect consumers by prohibiting creditors from misrepresenting the values of property…”
Second appraisals by an Arkansas certified residential appraiser could prove valuable for Arkansas clients, and customers can choose whether to order basic, middle-of-the-road or comprehensive studies. In Arkansas, buyers and sellers, as well as insurance companies, lenders and litigants, can receive major economic benefits by commissioning detailed appraisals that focus on their specific needs and value perspectives. Ferstl Valuation Services, the largest appraisal firm in Arkansas, has worked with buyers, sellers, bankers, accountants, attorneys and insurance companies for more than 45 years and established an enviable reputation for accuracy and integrity among its influential clients.
Ferstl Valuation Services Enjoys an Impeccable Reputation Among Clients and Peers
Regardless of the purpose for ordering an appraisal, Ferstl Valuation Services has the experience, reputation and skill to conduct accurate evaluations and appraisals based on its clients’ needs. “Trust but verify” makes a good strategy to follow in business and real estate transactions, and new federal regulations have made this caveat a legal requirement for mortgage lenders. Appraisal customers can follow the same routine by investigating appraisal company reputations. Clients can download the Ferstl Valuation Services customer references to get word-of-mouth verifications from the company’s many satisfied clients. Contact Ferstl Valuation for more information or speak to one of our appraisers at (501) 313-0641.