Final Rule on Appraisals for High Priced Mortgage Loans Released.
High Priced Mortgage Loan also called a HPML is a loan that is secured against a borrower’s primary residence and has an interest rate that is higher than the average prime offer rate. The Federal Reserve Board issued the Final Rule on Appraisals for HPML on January 18, 2013 which was mandated by provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).
The Final Rule requires lenders to use a certified or licensed appraiser who prepares a written appraisal report based on a physical inspection of the interior of the property. The rule also requires lenders to provide borrowers with a free copy of the appraisal report and to disclose the purpose of the appraisal report. In an effort to prevent fraudulent property flipping, the rule requires creditors to obtain an additional appraisal at no cost to the borrower if the property has been acquired:
- Within 90 days and the resale price exceeds the seller’s acquisition price by more than 10 percent; or
- Within 91 to 180 days of acquiring it and the resale price exceeds the seller’s acquisition price by more than 20 percent.
The rule is being issued by the Board of Governors of the Federal Reserve System, 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. The rule will become effective on January 18, 2014. The Final Rule on HPML Appraisals is available at: http://www.consumerfinance.gov/regulations/appraisals-for-higher-priced-mortgage-loans/
Certain HPML loans are exempt from the Final Rule including: qualified mortgages (QM), reverse mortgages, loans secured by new manufactured homes and by mobile homes, boats or trailers, new construction loans and bridge loans. The rule also has exemptions from the second appraisal requirement to facilitate loans in rural areas and other transactions.
John R. Thomas
Certified Mortgage Planner – NMLS 38783
Primary Residential Mortgage, Inc.
248 E Chestnut Hill Rd
Newark, DE 19713
302-703-0727 DE Office
410-412-3319 MD Office
610-906-3109 PA Office
Branch Manager / Loan Officer - NMLS 38783