The Consumer Financial Protection Bureau ( CFPB ) has issued the much-anticipated final rules that implement residential mortgage reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank ). In a series of reports, PYA is analyzing the impact of each of these new rules, this week looking at the amendment to the Truth-in-Lending Act ( TILA ) that adds new appraisal provisions for higher-priced mortgage loans ( HPMLs ).
The Rule is effective January 18, 2014, and allows financial institutions to extend a HPML only if the following conditions are met:
- A written appraisal is obtained.
- The appraisal is performed by a certified or licensed appraiser.
- The appraiser conducts a physical property visit of the interior of the property.
Financial institutions are also required to provide applicants with a disclosure that states the purpose of the appraisal, that a copy of the appraisal will be provided, that the applicant can be charged by the creditor for the appraisal and that the applicant is permitted to have a separate appraisal conducted at the applicant s expense within three business days after receiving a HPML application or three days after a mortgage loan is determined to be a HPML. The financial institution must also provide the applicant with a copy of the appraisal at least three business days before the loan is consummated or within 30 days from the date the creditor determines that the loan will not be consummated.
The Rule also requires a creditor to obtain a second written appraisal, at no cost to the borrower, for a HPML when:
- The seller acquired the dwelling within 180 days prior to the date of the borrower s purchase agreement.
- The borrower is acquiring the home for a price that exceeds the seller s acquisition price by 10% (if the seller acquired the property within the past 90 days) or 20% (if the seller acquired the property between 91 and 180 days).
The Dodd-Frank Act specifically exempts the following from the requirements of the Rule:
- Qualified mortgages
- Reverse mortgages
- Loans for initial construction of a dwelling
- Bridge loans (for 12 months or less)
- Loans secured by manufactured and mobile homes, boats, or trailers
View the final rule amending appraisal requirements of HPML under TILA. To discuss the impact of the new mortgage rules on your institution, please contact the expert listed below at PYA, (800) 270-9629.
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