Recently the Board of Governors of the Federal Reserve System; Bureau of Consumer Financial Protection; Federal Deposit Insurance Corporation; Federal Housing Finance Agency; National Credit Union Administration; and Office of the Comptroller of the Currency (collectively, the Agencies). proposed additional changes to the Higher-Priced Mortgage Loan appraisal rules that were published January 18, 2013. The comment period for the proposal ends on September 9, 2013.
The January Rule requires creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used. The Agencies are proposing amendments to the January Rule to create exemptions from the rules for: (1) transactions secured by existing manufactured homes and not land; (2) certain “streamlined” refinancings; and (3) transactions of $25,000 or less. The Agencies are also proposing a different definition of “business day” than the definition used in the January Rule, as well as a few non-substantive technical corrections.
Manufactured Home – The Agencies propose to:
- Exempt transactions secured solely by an existing (used) manufactured home and not land from the HPML appraisal requirements.
- Retain coverage of loans secured by existing manufactured homes and land.
- Retain the exemption for transactions secured by new manufactured homes.
Streamlined Refinancings – The Agencies are also proposing to exempt from the HPML appraisal rules certain types of refinancings with characteristics common to refinance products often referred to as “streamlined” refinances. A ‘streamlined” refinance is a refinancing where:
- The owner of the refinance loan is the current owner of the existing obligation.
- The periodic payments under the refinance loan must not result in negative amortization, cover only interest on the loan, or result in a balloon payment.
- The proceeds from the refinance loan may only be used to pay off the outstanding principal balance on the existing obligation and to pay closing or settlement charges.
Credit of $25,000 or less – The Agencies are also proposing an exemption from the HPML appraisal rules for extensions of credit of $25,000 or less, indexed every year for inflation.
Business Day – The term “business day” is used with respect to two requirements in the January Rule.
- First, the January Rule requires the creditor to provide the consumer with a disclosure that “shall be delivered or placed in the mail not later than the third business day after the creditor receives the consumer’s application for a higher-priced mortgage loan” subject to § 1026.35(c). § 1026.35(c)(5)(i) and (ii).
- Second, the January Rule requires the creditor to provide to the consumer a copy of each written appraisal obtained under the January Rule “[n]o later than three business days prior to consummation of the loan.” § 1026.35(6)(i) and (ii).
The Agencies propose to define “business day” in the January Rule to mean “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year’s Day, the Birthday of Martin Luther King, Jr., Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.” § 1026.2(a)(6). The Agencies propose this definition for consistency with disclosure timing requirements under both the existing Regulation Z mortgage disclosure timing requirements and the Bureau’s proposed rules for combined mortgages disclosures under TILA and the Real Estate Settlement Procedures Act (RESPA).
Effective Date – The Agencies intend that exemptions adopted as a result of this proposal will be effective on January 18, 2014, the same date on which the January Rule will become effective.