Six federal agencies—including the Federal Reserve Board, CFPB, FDIC, FHFA, NCUA, and OCC—recently issued a final rule that has created exemptions from certain appraisal requirements for a subset of higher-priced mortgage loans. According to a press release issued by the FHFA, these exemptions are intended to save borrowers time and money, while still ensuring that loans are financially sound.
All mortgages secured by manufactured homes will be exempt from Dodd-Frank’s appraisal requirements for higher-priced mortgage loans until July 18, 2015 to help ensure that access to affordable housing options is not hindered while creditors make their necessary adjustments to remain compliant with the new rules. Once this exemption ends however, the following changes will take effect:
1) Transactions secured by a new manufactured home and land will only be exempt from the appraisal requirement stipulating that the appraisal include a physical visit to the interior of the property, but will otherwise be subject to all other higher-priced mortgage loan appraisal requirements.
2) Transactions secured by an existing manufactured home and land will not be exempt from the higher-priced loan appraisal requirements
3) Transactions that are secured solely by a manufactured home and land will be exempt from the higher-priced mortgage loan appraisal requirements if the creditor gives the consumer one of three types of information about the home’s value:
- The manufacturer’s invoice of the unit cost
- A third-party cost service unit cost
- A valuation conducted by an individual who has no financial interest in the property or credit transaction, and that has training in valuing manufactured homes
In addition, mortgages of $25,000 or less that are indexed annually for inflation and secured by the borrower’s principal dwelling will now be exempt from certain higher-priced mortgage loan appraisal requirements. The six federal agencies rejected calls to raise the $25,000 threshold, because they determined that doing so would exempt too many higher-priced mortgage loans from Dodd-Frank’s requirements.
They also exempted certain “streamlined” refinancings as well, where the holder of the credit risk of the existing obligation remains the same on the refinancing. Additionally, the periodic payments under the refinanced loan must not result in negative amortization, cover only the interest on the loan, or result in a balloon payment. Lastly, the proceeds from the refinanced loan may only be used to pay off the existing obligation and to pay closing or settlement charges.
The final rule will become officially effective on January 18, 2014, with the exception of the provisions regarding manufactured homes (July 18, 2015).
For more information on both the appraisal requirements for higher-priced mortgage loans and their exemptions, please click here.