The CFPB, Fed, FDIC, FHFA, NCUA, and OCC have finalized a supplemental rule creating several exemptions to the appraisal requirements for higher-priced mortgage loans (HPML). Those requirements are contained in the final rule adopted jointly by the agencies in January 2013 to implement Dodd-Frank provisions mandating appraisals for HPMLs.
The final rule creates the following two exemptions that take effect on January 18, 2014 (which is the same date that the rule adopted in January 2013 becomes effective):
- An exemption for certain refinances with characteristics common to “streamlined” refinances. To be exempt from the appraisal rules: (1) the person retaining the credit risk of the refinancing must be the same person that held the credit risk of the existing obligation or the refinancing must be insured or guaranteed by the same federal agency that insured or guaranteed the existing obligation; (2) the regular periodic payments under the refinance loan cannot cause the principal balance to increase, permit the consumer to defer repayment of principal, or result in a balloon payment; and (3) the proceeds from the refinancing must be used solely to satisfy the existing obligation and pay amounts attributed solely to the costs of the refinancing.
- An exemption for extensions of credit in the amount of $25,000 or less, indexed annually for inflation.
The final rule also creates certain exemptions for manufactured homes. Effective
January 18, 2014 through July 17, 2015, all loans secured in whole or part by a manufactured home will be fully exempt from all HPML appraisal requirements. For loan applications received on or after July 18, 2015: (1) loans secured by a new manufactured home and land will be exempt from the HPML requirement that the appraisal include a physical inspection of the property interior; (2) loans secured by an existing (used) manufactured home and land will be fully subject to HPML appraisal requirements; and (3) loans secured only by a new or existing manufactured home and not land will be fully exempt from the HPML appraisal requirements if the creditor gives the consumer one of three types of information about the home’s value. The three types of information are: (i) for a transaction secured by a new manufactured home, the manufacturer’s invoice for the home; (ii) a cost estimate of the value of the manufactured home from an independent cost service provider; or (iii) a valuation conducted by an individual who has no financial interest in the property or credit transaction, and has training in valuing manufactured homes.
The final rule also revises the exemption from HPML appraisal requirements for qualified mortgages to cover the various types of loans that are defined as qualified mortgages for purposes of the ability to repay rule.