Some Higher-Priced Mortgage Loans Exempt From Appraisal Requirements

Mortgages of $25,000 or less and certain ‘streamlined’ refinancings will be exempt from certain appraisal requirements defined under the Dodd-Frank Act, as per a final rule issued by six federal financial regulators on Thursday.

In a joint press release, the six federal regulators say the exemptions are intended to save borrowers time and money while still ensuring that the loans are financially sound.

The new Dodd-Frank Act appraisal requirements, which go into effect on Jan. 18, apply to certain ‘higher-priced’ mortgages. Typically these are loans where the annual percentage rate exceeds the average prime offer rate by a specified percentage. The Dodd-Frank Act requires creditors to obtain a written appraisal based on a physical visit of the home's interior before making these loans.

The final rule also includes special provisions for manufactured homes, which can present unique issues in determining the appropriate valuation method. To ensure that access to affordable housing options is not hindered while creditors make the necessary adjustments, the requirements for manufactured home loans will not become effective until July 18, 2015, the release states.

The six agencies issuing the final rule – which was first presented for public comment in January 2013 – include the Federal Reserve Board, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency.

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