Federal Agencies Announce Threshold for Smaller Loan Exemption

The Consumer Financial Protection Bureau, the Federal Reserve Board, and the Office of the Comptroller of the Currency today announced that the 2023 threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $28,500 to $31,000.

Each agency released statements about the new change. According to each press release, the threshold amount will be effective January 1, 2023, and is based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as of June 1, 2022.

The Dodd–Frank Wall Street Reform and Consumer Protection Act added special appraisal requirements for higher-priced mortgage loans, including that creditors must obtain a written appraisal based on a physical visit to the interior of the home before making a higher-priced mortgage loan. 

The rules implementing these requirements contain an exemption for loans of $25,000 or less, adjusted annually to reflect CPI-W increases.

An addendum to the Fed’s release states that if there is no annual percentage increase in the CPI-W, the agencies will not adjust this exemption threshold from the prior year. 

Additionally, in years following a year where the exemption threshold was not adjusted due to a decrease in the CPI-W, the threshold would be calculated by applying the annual percentage increase in the CPI-W to the dollar amount that would have ensued, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account.