Regulators Exempt Some Higher-Priced Loans from New Appraisal Rules

The new appraisal rules for the mortgage industry set to take effect in January will include exemptions for some higher-priced mortgage loans, according to a press release from six federal financial agencies.

The Consumer Financial Protection Bureau released rules regarding appraisals in January 2013, and they are set to take effect January 18, 2014.

The rules—part of the reforms outlined in the Dodd-Frank Act—require lenders to provide borrowers with a copy of an appraisal prior to closing on a home loan.

Lenders must use a licensed, certified appraiser who makes a physical visit to the property for all higher-priced loans.

As per Dodd-Frank, higher-priced loans “have interest rates above a certain threshold,” according to the agencies.

The rule and its revisions were jointly filed by the CFPB, 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 agencies believe that several additional exemptions from the new appraisal rules are appropriate,” the agencies stated in their new rule revisions.

Thursday’s revisions include exemptions for loans less than $25,000 and for streamlined refinance loans.

The revisions also address manufactured housing with distinctions for mortgage loans that cover a manufactured house and land as opposed to a loan secured by only a manufactured house.

A mortgage loan secured by a manufactured home and land does not have to meet the requirement that an appraiser be physically present inside the home.

Mortgages for manufactured houses without accompanying property carry further exemptions, allowing for appraisal alternatives such as third-party valuation services.

Furthermore, the agencies are allowing for an 18-month extension of the new rules for manufactured housing such that loans for manufactured housing to not have to meet new appraisal requirements until July 18, 2015.

“The exemptions are intended to save borrowers time and money while ensuring that the loans are financially sound,” the agencies stated in releasing the rule update.

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