Agencies Issue Final Rule to Exempt Subset of Higher-Priced Mortgage Loans from Appraisal Requirements

WASHINGTON, D.C. – December 13, 2013 – (RealEstateRama) — Six federal financial regulatory agencies today issued a final rule that creates exemptions from certain appraisal requirements for a subset of higher-priced mortgage loans.  The exemptions are intended to save borrowers time and money while still ensuring that the loans are financially sound.

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The appraisal requirements for higher-priced mortgages were established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  Under the Dodd-Frank Act, closed-end mortgage loans are considered to be higher-priced if they are secured by a consumer’s home and have interest rates above a certain threshold.  The Dodd-Frank Act requires creditors to obtain a written appraisal based on a physical visit of the home’s interior before making these loans.

The final rule provides that loans of $25,000 or less and certain “streamlined” refinancings are exempt from the Dodd-Frank Act appraisal requirements, which go into effect on January 18, 2014.

In addition, the final rule contains special provisions for manufactured homes, which can present unique issues in determining the appropriate valuation method.  To ensure that access to affordable housing options is not hindered while creditors make the necessary adjustments, the requirements for manufactured home loans will not become effective for 18 months.  Starting on July 18, 2015, loans secured by an existing manufactured home and land will be subject to the Dodd-Frank Act’s appraisal requirements.  Loans secured by a new manufactured home and land will be exempt only from the requirement that the appraiser visit the home’s interior.  For loans secured by manufactured homes without land, creditors will be allowed to use other valuation methods without an appraisal, such as using third-party valuation services or “book values.”

In January 2013, a final rule implementing the new Dodd-Frank Act appraisal requirements was issued by the Federal Reserve Board, 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.  Compliance with the January 2013 final rule will become mandatory on January 18, 2014.  These same agencies are jointly issuing today’s final rule to provide additional exemptions in response to public comments.

The Federal Register notice is attached.

Attachment:

Federal Register – PDF (PDF Help)

 

Media Contacts:

Federal Reserve Board Susan Stawick (202) 452-2955
CFPB Sam Gilford (202) 435-7673
FDIC Greg Hernandez (202) 898-6984
FHFA Stefanie Johnson (202) 649-3030
NCUA Ben Hardaway (703) 518-6333
OCC Stephanie Collins (202) 649-6870

FDIC: PR-116-2013

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Congress created the Federal Deposit Insurance Corporation (FDIC) in 1933 to restore public confidence in the nation’s banking system. The FDIC insures deposits at the nation’s 8,246 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

Contact:

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Media
Jay Rosenstein
Phone: (202) 898-7303

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