The Department has taken another step in on-going efforts to protect homebuyers from predatory lending practices. On Monday, HUD published a proposed "lending accountability" rule that makes lenders accountable for appraisals on mortgages insured by the Federal Housing Administration. The rule will be published in the Federal Register.

Predatory lending results when home purchasers become unwitting victims of unscrupulous lenders, sellers and appraisers, often working together. The unsuspecting homebuyers either purchase homes with sales prices far in excess of the fair market value, or are substantially overcharged for costs associated with obtaining a mortgage.

"The Bush Administration is doing everything we can to protect homebuyers, particularly minorities, from unscrupulous predatory lending practices," said Secretary Martinez. "Predatory lending has no place in the FHA market, sub prime market, or any real estate transaction."

The proposed rule, "FR-4722 Lender Accountability for Appraisals," makes lenders accountable for the quality of FHA appraisals performed by appraisers hired by the lender. This rule seeks to strengthen HUD's regulations concerning the responsibilities of lenders in the selection of appraisers to perform appraisal on properties that will be security for FHA insured mortgages.

The rule makes lenders strictly accountable for the quality of the appraisals and specifies that lenders that submit appraisals to HUD that do not meet FHA requirements are subject to the imposition of sanctions by HUD's Mortgagee Review Board.

The rule will help assure that homebuyers will receive accurate statements of appraised values on homes they purchase using FHA mortgage insurance. The proposed rule will be revised after the consideration of public comments into final form for implementation.

Read the full Lender Appraisal Accountability news release.