Tom D
Elite Member
- Joined
- May 22, 2015
- Professional Status
- Certified Residential Appraiser
- State
- Pennsylvania
from Appraise Now magazine:
Bank Capital Proposal Creates Opportunity to Reinforce the Value of Appraisals
Two recent policy developments are shaping the future of mortgage lending—and creating an important opportunity for the appraisal profession to engage.
Federal bank regulators have proposed changes to capital rules that would more directly tie a mortgage’s risk level to its loan-to-value (LTV) ratio. In practical terms, that means the relationship between the loan amount and the market value of the property would play a larger role in how lenders assess risk and allocate capital.
Even small differences in appraised value may shift a loan into a different LTV category, potentially affecting how costly that loan is for a bank to hold. This framework reinforces a core principle long understood by appraisers: Credible, well-supported valuations are essential to sound lending decisions.
At the same time, a recent executive order on housing and mortgage credit calls for reducing the regulatory burden and expanding access to credit, including modernizing appraisal processes. That effort may encourage greater use of appraisal waivers, automated valuation models, and other alternatives in appropriate cases.
Taken together, these developments highlight both change and opportunity.
While some lower-risk, lower-LTV loans may move toward more streamlined valuation approaches, the increased emphasis on LTV in capital rules strengthens the case for accurate, independent appraisals where risk matters most. As lenders become more sensitive to how valuation affects capital and pricing, the need for reliable collateral assessment becomes clearer, not weaker.
Bank Capital Proposal Creates Opportunity to Reinforce the Value of Appraisals
Two recent policy developments are shaping the future of mortgage lending—and creating an important opportunity for the appraisal profession to engage.
Federal bank regulators have proposed changes to capital rules that would more directly tie a mortgage’s risk level to its loan-to-value (LTV) ratio. In practical terms, that means the relationship between the loan amount and the market value of the property would play a larger role in how lenders assess risk and allocate capital.
Even small differences in appraised value may shift a loan into a different LTV category, potentially affecting how costly that loan is for a bank to hold. This framework reinforces a core principle long understood by appraisers: Credible, well-supported valuations are essential to sound lending decisions.
At the same time, a recent executive order on housing and mortgage credit calls for reducing the regulatory burden and expanding access to credit, including modernizing appraisal processes. That effort may encourage greater use of appraisal waivers, automated valuation models, and other alternatives in appropriate cases.
Taken together, these developments highlight both change and opportunity.
While some lower-risk, lower-LTV loans may move toward more streamlined valuation approaches, the increased emphasis on LTV in capital rules strengthens the case for accurate, independent appraisals where risk matters most. As lenders become more sensitive to how valuation affects capital and pricing, the need for reliable collateral assessment becomes clearer, not weaker.
