From the Archives: January 2014
CFPB HPML Appraisal Requirements
Effective Jan. 18, credit unions will be required to follow the Higher-Priced Mortgage Loan Appraisal Rule, which applies to higher-priced, first-lien or subordinate-lien closed-end loans secured by a member’s principal dwelling. Credit unions originating a covered HPML will be required to do the following:
- Disclose to consumer within three business days after receiving their application that they are entitled to a free copy of any appraisal the credit union orders and they can also hire their own appraiser at their own expense.
- Obtain a written appraisal performed by a certified or licensed appraiser.
- Have the appraiser visit the interior of the property and provide a written report.
- Deliver copies of appraisals to applicants no later than three business days before consummation.
This final rule provides an exemption from these requirements for certain types of refinancing and transactions of $25,000 or less. The specific exemptions are listed below.
Extensions of credit of $25,000 or less (indexed every year for inflation).
- A refinancing where the holder of the credit risk of the existing obligation remains the same on the refinancing. The periodic payment must not result in negative amortization, cover only interest on the loan or result in a balloon payment. The proceeds from the refinance may only be used to pay off the existing obligation and pay closing or settlement charges.
- Loans secured in whole or in part by a manufactured home will be exempt from the rules for 18 months, until July 18, 2015. After 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, but will be subject to other HPML appraisal requirements.
- Transactions secured by an existing used manufactured home and land will not be exempt from the rule.
- Transactions secured solely by a manufactured home and not land will be exempt from the rules if the credit union gives the consumer one of three types of information about the home’s value: the manufacturer’s invoice of the unit cost, an independent cost service unit cost, or a valuation conducted by an individual who has no financial interest in the property or transaction and has training in valuing manufactured homes.
MCUL commented in favor of the additional exemptions. MCUL’s Comment Letter can be found here.