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CFPB and NCUA Adopt Supplemental Rule on Appraisals for "Higher-Priced Mortgage Loans"

The Consumer Financial Protection Bureau (CFPB), National Credit Union Administration (NCUA), and other federal financial regulators adopted a supplemental rule that amends Reg Z-changes made by a January 2013 final rule* regarding appraisals for “higher-priced mortgage loans” (HPML)— formerly referred to as “higher-risk mortgages.” For certain mortgages with an APR that exceeds the average prime offer rate by a specified percentage, beginning January 18, 2014, the January 2013 final rule requires creditors to obtain an appraisal meeting certain standards, provide applicants with a notification regarding the use of the appraisal, and give applicants a copy of the written appraisal. The Missouri Credit Union Association's (MCUA) comment letter is generally supportive of the changes that are adopted by the supplemental rule.

The supplemental rule provides some relief from the January 2013 final rule by exempting the following types of transactions from the HPML appraisal requirements:

  1. Extensions of credit of $25,000 or less. – Certain types of refinancings and transactions of $25,000 or less (indexed for inflation). This provision is unchanged from the proposal.
  2. Certain refinancings. – This includes certain types of refinancings with characteristics common to refinance products often referred to as streamlined refinances. Consistent with the proposal, the final rule exempts a refinancing where the holder of the credit risk of the existing obligation remains the same on the refinancing.
  3. Transactions secured by a manufactured home. – The supplemental rule provides a temporary, 18-month exemption (until July 18, 2015) for all loans secured in whole or in part by a manufactured home. Starting on July 18, 2015, transactions secured by a new manufactured home and land will be exempt from the requirement that the appraisal include a physical inspection of the interior of the property; transactions secured by an existing (used) manufactured home and land will not be exempt from the rules; and transactions 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.

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