Agencies Finalize Exemptions To Higher-Priced Mortgage Loan Appraisal Requirements

FDIC CFPB Federal Reserve OCC NCUA FHFA Appraisal

On December 12, the Federal Reserve Board, the CFPB, the FDIC, the FHFA, the NCUA, and the OCC, issued a final rule supplementing their January 2013 interagency appraisal rule. As described in detail in our Special Alert, the January 2013 rule amended Regulation Z to require creditors to obtain appraisals for a subset of loans called Higher-Priced Mortgage Loans (HPMLs) and to notify consumers who apply for these loans of their right to a copy of the appraisal. Those new requirements take effect January 18, 2014.

The supplemental final rule, which takes effect on the same date, exempts certain transactions from the HPML appraisal requirements. First, all loans secured in whole or in part by a manufactured home are fully exempt until July 18, 2015. After that date: (i) transactions secured by a new manufactured home and land are exempt only from the requirement that the appraisal include a physical review of the interior of the property; (ii) transactions secured by an existing manufactured home and land are not exempt from any HPML appraisal requirements; and (iii) transactions secured by a manufactured home but not land are exempt from all HPML appraisal requirements, provided the creditor provides the consumer with certain specified information about the home’s value. Second, the supplemental final rule exempts streamlined refinances—i.e. refinancing transactions where the holder of the successor credit risk also held the credit risk of the original credit obligation—so long as the consumer does not take any cash out and the new loan does have negative amortization, interest only, or balloon payments. Third, the supplemental final rule exempts “small dollar” transactions of $25,000 or less, indexed annually for inflation.