U.S. financial regulators issued a final rule on Thursday that exempts certain appraisal requirements for higher-priced mortgages—a move aimed at ensuring the soundness of loans while reducing the financial burden for borrowers.
Under the 2010 Dodd-Frank Act, mortgages are considered higher-priced if they’re secured by a borrower’s home and have interest rates above a certain threshold. Creditors are required to obtain a written appraisal after a physical visit of the home before making the loans.
The final rule—issued in response to public comments on the final rule issued by the Federal Reserve, CFPB, FDIC, Federal Housing Finance Agency, OCC and National Credit Union Administration in January—exempts loans of $25,000 or less and certain “streamlined” refinancings from the appraisal requirements, which take effect on Jan. 18.
Additionally, the final rule contains provisions for manufactured homes that are designed to ensure access to affordable housing while creditors make necessary adjustments to their evaluation—manufactured homes can present different challenges in determining the necessary evaluation method.
Loans secured by an existing manufactured home and land will not be subject to the appraisal requirements until July 18, 2015. Loans secured by a new manufactured home and land are only exempt from the home visit requirement.
Creditors will be permitted to use other valuation methods without an appraisal for loans secured by manufactured homes without land.