New Joint Rule on Appraisals for Higher-Priced Mortgages Released

The Office of General Counsel and the Office of Examination and Insurance briefed the National Credit Union Administration (NCUA) board of directors last Thursday on an upcoming interagency final rule on appraisals for higher-priced mortgages being issued jointly by the FDIC, NCUA, Office of the Comptroller of the Currency (OCC), Consumer Financial Protection Bureau (CFPB), Federal Reserve Board (FRB) and Federal Housing Finance Agency (FHFA).

This week, the Federal Deposit Insurance Corporation (FDIC) released the joint final rule, which implements the Dodd-Frank Act requirements for appraisals on ‘higher-risk mortgage’ loans, on its website.

Worth noting is that the final rule does not use the term “higher-risk mortgage,” but instead adds the appraisal requirements to the existing higher-priced mortgage loan (HPML) requirements. This was done to alleviate potential confusion, said David Curtis, director of compliance services for the Northwest Credit Union Association (NWCUA).

The rule will require lenders to perform an appraisal on all HPMLs prior to extending the loan. An HPML, by definition, is a loan secured by a principal dwelling that has an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) for a comparable transaction by:

  • 1.5 or more percentage points for non-jumbo first lien mortgage loans;
  • 2.5 or more percentage points for jumbo first lien mortgage loans; or
  • 3.5 or more percentage points for subordinate liens.

The written appraisal must be performed by a certified or licensed appraiser, and the appraiser must conduct a physical evaluation of the interior of the property.

In addition, a second appraisal must be performed at no cost to the borrower if:

  • The seller acquired the property within 90 days or fewer of the borrower’s agreement to purchase the property and the price is 10 percent or more than what the seller acquired it for; or
  • The seller acquired the property within 91 to 180 days of the borrower’s agreement to purchase the property and the price is 20 percent more than what the seller acquired it for.

The NWCUA will soon provide a Compliance Bulletin that contains more detailed information about the HPML appraisal requirement.

 

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance, Federal.