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 for this rule will become mandatory on January 18, 2014. In the middle of December, these agencies issued a final rule giving additional exemptions to the requirements.
1. The agencies adopted an exemption from these requirements for extensions of credit of $25,000 or less, indexed every year for inflation.
2. Certain “streamlined refinancings” are exempt from these requirements. Conditions must be met in order be exempt for a “streamlined refinancing:”
- The rule exempts a refinancing where the holder of the credit risk of the existing obligation remains the same on the refinancing.
- The periodic payments under the refinance loan must not result in negative amortization, cover only interest on the loan, or result in a balloon payment.
- The proceeds from the refinance loan may only be used to pay off the existing obligation and to pay closing or settlement charges.
3. All loans secured by a manufactured home will be exempt from the HPML appraisal rules until July 18, 2015. After this date,
- Loans secured by an existing manufactured home and land will be subject to the HPML 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.
- Loans secured solely by a manufactured home and not land will be exempt from the rules if the creditor gives the consumer one of three types of information about the home’s value: 1) the manufacturer’s invoice of the unit cost (for a transaction secured by a new manufactured home); 2) an independent cost service unit cost; or 3) a valuation conducted by an individual who has no financial interest in the property or credit transaction, and has training in valuing manufactured homes. A valuation is an estimate of the value of the consumer’s principal dwelling in written or electronic form, other than one produced solely by an automated model or system.
These rules were published in the Federal Register on December 26th. With the effective date for the new mortgage rules steadily approaching, take the time to read through this final rule.