Six federal financial regulatory agencies have jointly issued a proposed rule to establish new appraisal requirements for what they deem "higher-risk mortgage loans" and combat the once frequent practice, during the housing market boom, of so-called “drive-by” appraisals that were conducted without an interior inspection of the property.

The proposed rule would implement amendments to the Truth in Lending Act enacted by the Dodd-Frank Act. Under the legislation, mortgage loans are categorized as higher-risk if they are secured by a consumer's home and have interest rates above a set threshold.

For these loans, the proposed rule would require creditors to use a licensed or certified appraiser that would prepare a written report based on a physical inspection of the interior of the property. The proposed rule would also require creditors to provide consumers with a free copy of any appraisal report.

Creditors would have to obtain an additional appraisal at no cost to the consumer for a home-purchase higher-risk mortgage loan if the seller acquired the property for a lower price during the previous six months. This requirement would address fraudulent property flipping by seeking to ensure that the value of the property being used as collateral for the loan legitimately increased.

The proposed rule is issued by the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency.

The public will have 60 days to comment once the rule is published in the Federal Register.