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Regulators Issue Final Rule For Higher-Priced Mortgage Appraisals

The OCC, Federal Reserve, CFPB, FDIC, FHFA, and NCUA recently issued notice of a Final Rule establishing new appraisal requirements for “higher-priced mortgage loans” (HPMLs).  The Final Rule is being implemented under the Federal Truth in Lending Act and was required under Dodd-Frank.   We discussed an earlier proposed version of the rule last November.  Whether a consumer mortgage loan is an HPML generally depends on if the interest rate exceeds 1.5% or 2.5% over prime (depending on principal amount) for a first-lien residential mortgage, or 3.5% over prime for a subordinate-lien residential mortgages. There are a number of significant exclusions from requirements under the Final Rule, for example, for property located in “rural counties” and for property acquired from servicemembers. 

The new requirements generally prohibit the making of HPMLs to consumers without first (i) obtaining a written appraisal from a certified or licensed appraiser who has physically inspected the interior of the property; (ii) providing the consumer a free copy of the appraisal; (iii) disclosing information regarding the purpose of the appraisal; and (iv) under certain circumstances, obtaining a second appraisal from a different certified or licensed appraiser at no cost to the consumer.  The Final Rule takes effect on January 18, 2014.

The notice also includes links to a number of resources for keeping up on mortgage-related rulemakings and CFPB rules applicable to FDIC-insured institutions.

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