Rep. Blaine Luetkemeyer, R-Mo., recently introduced the Access to Affordable Mortgages Act (H.R.5148), which aims to exempt certain higher-risk loans from property appraisal requirements under the Truth in Lending Act (TILA).
The proposed bill, which was introduced in July, would amend (in fact, reverse) the section of TILA pertaining to due diligence on appraisals by adding a new subsection that states that those rules ‘shall not apply to a higher-risk mortgage loan of $250,000 or less if such loan appears on the balance sheet of the creditor of such loan for a period of not less than three years.’
In effect, the bill would make it so that lenders no longer need to perform due diligence on appraisals for lower-cost properties, providing they hold the loan on their books for three years. The goal of the bill is to help free up more mortgage credit for lower-income borrowers by eliminating the need for due diligence on appraisals, which, in theory, should help reduce closing costs for borrowers.
The bill has been referred to the House Committee on Financial Services.
In a statement, Bill Hampel, president and CEO of the Credit Union National Association (CUNA), says the bill ‘would provide both regulatory relief to mortgage lenders, as well as increase access to mortgage credit availability for borrowers purchasing lower cost dwellings.’
It would also ‘amend the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to exempt this same category of higher-risk mortgages from the standards prescribed by the federal interagency appraisal requirements, as long as such mortgage loans are held on a lender's portfolio for at least three years.’
That means ‘credit unions that offer mortgage loans secured by covered properties [would be better able to] serve their middle- to lower-income members,’ Hampel wrote in a letter dated July 22.
To view a copy of the proposed legislation, click here.