Reg. Z HPML Appraisal Requirements

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    After reading through the new appraisal rules, I have a question concernig the permanent financing that replaces a construction loan.

    Would this permanent financing, if it takes place less than 180 days after the builder acquired the property (construction phase), would this type of loan be considered a “flip” that would require and additional appraisal?

    While this may be unlikely, I do not see an exemption for this in 1026.35(c)(2) or 1026.35(c)(4)(vii). Thanks.


    We don’t see an exemption either. There may be guidance later on that clears this up, but for now we believe the safest interpretation is to apply the rules to these as well.


    Is there any exemption for a bank when complying with the new regulations for HPMLs on Government Insured loans? (Example FHA) Our bank underwrites then sells to an investor.


    The exemptions are listed below. There is nothing that indicates FHA loans would be exempt from these requirements.

    1026.35(c)(2): Exemptions. The requirements in paragraphs (c)(3) through (6) of this section do not apply to the following types of transactions:
    (i) A qualified mortgage as defined in 12 CFR 1026.43(e).
    (ii) A transaction secured by a new manufactured home.
    (iii) A transaction secured by a mobile home, boat, or trailer.
    (iv) A transaction to finance the initial construction of a dwelling.
    (v) A loan with maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer’s principal dwelling.
    (vi) A reverse-mortgage transaction subject to 12 CFR 1026.33(a).

    1026.35(c)(4)(vii): Exemptions from the additional appraisal requirement. The additional appraisal required under paragraph (c)(4)(i) of this section shall not apply to extensions of credit that finance a consumer’s acquisition of property:
    (A) From a local, State or Federal government agency;
    (B) From a person who acquired title to the property through foreclosure, deed-in-lieu of foreclosure, or other similar judicial or non-judicial procedure as a result of the person’s exercise of rights as the holder of a defaulted mortgage loan;
    (C) From a non-profit entity as part of a local, State, or Federal government program under which the non-profit entity is permitted to acquire title to single-family properties for resale from a seller who acquired title to the property through the process of foreclosure, deed-in- lieu of foreclosure, or other similar judicial or non-judicial procedure;
    (D) From a person who acquired title to the property by inheritance or pursuant to a court order of dissolution of marriage, civil union, or domestic partnership, or of partition of joint or marital assets to which the seller was a party;
    (E) From an employer or relocation agency in connection with the relocation of an employee;
    (F) From a servicemember, as defined in 50 U.S.C. Appx. 511(1), who received a deployment or permanent change of station order after the servicemember purchased the property;
    (G) Located in an area designated by the President as a federal disaster area, if and for as long as the Federal financial institutions regulatory agencies, as defined in 12 U.S.C. 3350(6), waive the requirements in title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (12 U.S.C. 3331 et seq.), and any implementing regulations in that area; or
    (H) Located in a rural county, as defined in 12 CFR 1026.35(b)(2)(iv)(A).

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