For the first time since 1994 the residential appraisal threshold has increased from $250,000 to $400,000. Now that the Federal Reserve has approved the change, you may be wondering what effect this will have on you. As Chief Legal and Compliance Officer at Class Valuation, I’ve compiled what you need to know about the change.
The appraisal threshold increase may not affect many of your appraisal orders
The rule change doesn’t apply to any loans that are wholly or partially insured/guaranteed by, or eligible for sale to a government or government-sponsored agency. So, any loan involving the FHA, Department of Housing and Urban Development, Department of Veteran Affairs, Fannie Mae, or Freddie Mac will still require appraisals as normal. If your company mostly handles loans in this realm, this new rule will likely not affect you much.
The new appraisal threshold accounts for increased housing prices
The federal agencies raised the threshold to reflect housing price appreciation because it hadn’t been changed since 1994. Therefore, this rule change updates the practice of limiting appraisals to protect the housing market and lenders. Also, the real estate market fluctuates over time. Expect this type of rule change to happen again.
You may still want an appraisal, even when it’s not required
Appraisals safeguard borrowers, lenders, and the housing market. Therefore, appraisals and loans should be looked at individually. If you believe it is necessary, this rule change doesn’t stop you from still ordering an appraisal. And unlike in 1994, appraisals are becoming quicker than ever thanks to Class Valuation’s modernization initiatives and technology solutions. Learn more about the GSE’s call for modernization and how we are responding here
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