Proposed Rule Issued to Exempt Higher-Priced Loans From the Dodd-Frank Appraisal Requirements

Six federal financial regulatory agencies have issued a proposed rule that would create exemptions from certain appraisal requirements for a subset of higher-priced mortgage loans. The proposed exemptions are intended to save borrowers time and money and to promote the safety and soundness of creditors. The appraisal requirements for higher-priced mortgages were imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Under the Dodd-Frank Act, mortgage loans are considered to be higher-priced if they are secured by a consumer's home and have interest rates above a certain threshold. The proposed rule would provide that the following three types of higher-priced mortgage loans would be exempt from the Dodd-Frank Act appraisal requirements: Loans of $25,000 or less; certain "streamlined" refinancings; and certain loans secured by manufactured housing. In January 2013, a final rule implementing the new Dodd-Frank Act appraisal requirements was issued by the Federal Reserve Board, the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC). Compliance with the final rule will become mandatory on Jan. 18, 2014. These same agencies are jointly issuing the proposed rule on additional exemptions in response to public comments previously received.