Regulators are proposing to exempt three types of loans from some of the appraisal requirements for so-called higher priced mortgages. The requirements are mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act for mortgages loans which are considered to be higher priced if they are secured by the borrower's home and have interest rates above a certain threshhold.
The proposed exemptions do not affect the majority of residential loans covered under the regulation which goes into affect on January 18, 2014. Proposed for exemption from the appraisal requirements are:
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Transactions secured solely by an existing manufactured home and not land. The agencies propose to retain the appraisal requirement for loans secured by new manufactured homes but are seeking further comments on the scope of the exemption, whether certain conditions on the exemption might be appropriate, and if an alternative valuation should be required.
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Certain types of refinancings with characteristics common to what are commonly called "streamlined" refinances. Specifically the agencies propose to exempt a loan where the borrower or guarantor of the new loan is also the borrower or guarantor of the loan being refinanced. The new loan must not result in negative amortization, be an interest only loan, or result in a balloon papyment. Finally, the refinancing must not result in "cash-out" to the borrower or guarantor.
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Extensions of credit of $25,000 or less with that amount indexed every year for inflation.
The six regulatory agencies, the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, National Credit Union Administration, and the Office of Comptroller of the Currency, are inviting public comment on the proposed exemptions. The deadline for those comment is September 9, 2013.
In announcing the proposed exemption the agencies state they are intended to save borrowers time and money and to promote the safety and soundness of creditors and are being issued in response to public comments previously received. The exemptions are proposed to go into effect at the same time as the governing rule, however the agencies say that if they should adopt any conditions affecting the exemptions they will consider establishing a later date for the conditions to allow creditors time to plan their compliance.
