Board of Governors of the Federal Reserve System (Board); Bureau of Consumer Financial Protection (Bureau); Federal Deposit Insurance Corporation (FDIC); Federal Housing Finance Agency (FHFA); National Credit Union Administration (NCUA); and Office of the Comptroller of the Currency, Treasury (OCC).
Proposed rule; request for public comment.
The Board, Bureau, FDIC, FHFA, NCUA, and OCC (collectively, the Agencies) are proposing to amend Regulation Z, which implements the Truth in Lending Act (TILA), and the official interpretation to the regulation. This proposal relates to a final rule issued by the Agencies on January 18, 2013 (2013 Interagency Appraisals Final Rule or Final Rule), which goes into effect on January 18, 2014. The Final Rule implements a provision added to TILA by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act or Act) requiring appraisals for “higher-risk mortgages.” For certain mortgages with an annual percentage rate that exceeds the average prime offer rate by a specified percentage, the Final Rule requires creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used. The Agencies are proposing amendments to the Final Rule implementing these requirements; specifically, the Agencies are proposing exemptions from the rules for: transactions secured by existing manufactured homes and not land; certain “streamlined” refinancings; and transactions of $25,000 or less.
Comments must be received on or before September 9, 2013, except that comments on the Paperwork Reduction Act analysis in part VIII of the Supplementary Information must be received on or before October 7, 2013.
Interested parties are encouraged to submit written comments jointly to all of the Agencies. Commenters are encouraged to use the title “Appraisals for Higher-Priced Mortgage Loans—Supplemental Proposal” to facilitate the organization and distribution of comments among the Agencies. Commenters also are encouraged to identify the number of the specific question for comment to which they are responding. Interested parties are invited to submit written comments to:
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All public comments will be made available on the Board's Web site at
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All submissions must include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. In general, all comments received will be posted without change to
All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or social security numbers, should not be included. Comments will not be edited to remove any identifying or contact information.
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Comments submitted must include “FDIC” and “Truth in Lending Act (Regulation Z).” Comments received will be posted without change to
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Copies of all comments will be posted without change, including any personal information you provide, such as your name, address, email address, and phone number, on the FHFA Internet Web site at
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You can view all public comments on NCUA's Web site at
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• Click on the “Help” tab on the Regulations.gov home page to get information on using Regulations.gov, including instructions for submitting public comments.
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You may review comments and other related materials that pertain to this rulemaking action by any of the following methods:
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Docket: You may also view or request available background documents and project summaries using the methods described above.
As discussed in detail under part II of this Supplementary Information, section 1471 of the Dodd-Frank Act created new TILA section 129H, which establishes special appraisal requirements for “higher-risk mortgages.” 15 U.S.C. 1639h. The Agencies adopted the 2013 Interagency Appraisals Final Rule to implement these requirements (adopting the term “higher-priced mortgage loans” (HPMLs) instead of “higher-risk mortgages”). The Agencies believe that several additional exemptions from the new appraisal rules may be appropriate. Specifically, the Agencies are proposing an exemption for transactions secured by an existing manufactured home and not land, certain types of refinancings, and transactions of $25,000 or less (indexed for inflation). The Agencies solicit comment on these proposed exemptions. In addition, the Agencies are proposing a different definition of “business day” than the definition used in the Final Rule, as well as a few non-substantive technical corrections.
The Agencies propose to exempt transactions secured solely by an existing (used) manufactured home and not land from the HPML appraisal requirements, but seek comment on whether an alternative valuation type should be required.
The Agencies propose to retain coverage of loans secured by existing manufactured homes and land. The Agencies also propose to retain the exemption for transactions secured by new manufactured homes, but are seeking further comment on the scope of this exemption and whether certain conditions on the exemption might be appropriate.
The Agencies are also proposing to exempt from the HPML appraisal rules certain types of refinancings with characteristics common to refinance products often referred to as “streamlined” refinances. Specifically, the Agencies propose to exempt an extension of credit that is a refinancing where the owner or guarantor of the refinance loan is the current owner or guarantor of the existing obligation. In addition, the periodic payments under the refinance loan must not result in negative amortization, cover only interest on the loan, or result in a balloon payment. Finally, the proceeds from the refinance loan may only be used to pay off the outstanding principal balance on the existing obligation and to pay closing or settlement charges.
Finally, the Agencies are also proposing an exemption from the HPML appraisal rules for extensions of credit of $25,000 or less, indexed every year for inflation.
The Agencies intend that exemptions adopted as a result of this supplemental proposal will be effective on January 18, 2014, the same date on which the Final Rule will become effective. In the section-by-section analysis below, the Agencies request comment on a number of conditions that might be appropriate to require creditors to meet to qualify for the proposed exemptions. If the Agencies adopt any conditions on an exemption, the Agencies will consider establishing a later effective date for those conditions, to allow creditors sufficient time to adjust their compliance systems, if necessary.
In general, the Truth in Lending Act (TILA), 15 U.S.C. 1601
For most types of creditors and most provisions of the TILA, TILA is implemented by the Bureau's Regulation Z.
The Dodd-Frank Act
• Obtaining a written appraisal performed by a certified or licensed appraiser who conducts an appraisal that includes a physical inspection of the interior of the property and is performed in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) and title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), and the regulations prescribed thereunder.
• Obtaining an additional appraisal from a different certified or licensed appraiser if the “higher-risk mortgage” finances the purchase or acquisition of a property from a seller at a higher price than the seller paid, within 180 days of the seller's purchase or acquisition. The additional appraisal must include an analysis of the difference in sale prices, changes in market conditions, and any improvements made to the property between the date of the previous sale and the current sale.
• Provide the applicant, at the time of the initial mortgage application, with a statement that any appraisal prepared for the mortgage is for the sole use of the creditor, and that the applicant may choose to have a separate appraisal conducted at the applicant's expense.
• Provide the applicant with one copy of each appraisal conducted in accordance with TILA section 129H without charge, at least three days prior to the transaction closing date.
New TILA section 129H(f) defines a “higher-risk mortgage” with reference to the annual percentage rate (APR) for the transaction. A “higher-risk mortgage” is a “residential mortgage loan”
• By 1.5 or more percentage points, for a first lien residential mortgage loan with an original principal obligation amount that does not exceed the amount for “jumbo” loans (
• By 2.5 or more percentage points, for a first lien residential mortgage “jumbo” loan (
• By 3.5 or more percentage points, for a subordinate lien residential mortgage loan.
The definition of “higher-risk mortgage” expressly excludes “qualified mortgages,” as defined in TILA section 129C, and “reverse mortgage loans that are qualified mortgages,” as defined in TILA section 129C. 15 U.S.C. 1639c.
The Agencies published proposed regulations for public comment on September 5, 2012, that would implement these higher-risk mortgage appraisal provisions (2012 Interagency Appraisals Proposed Rule or 2012 Proposed Rule). 77 FR 54722 (Sept. 5, 2012). The Agencies issued the 2013 Interagency Appraisals Final Rule on January 18, 2013. The Final Rule was published in the
To implement the statutory definition of “higher-risk mortgage,” the Final Rule used the term “higher-priced mortgage loan” or HPML, a term already in use under the Bureau's Regulation Z with a meaning substantially similar to the meaning of “higher-risk mortgage” in the Dodd-Frank Act. In response to commenters, the Agencies used the term HPML to refer generally to the loans that could be subject to the Final Rule because they are closed-end credit and meet the statutory rate triggers, but the Agencies separately exempted several types of HPML transactions from the rule. The term “higher-risk mortgage” encompasses a closed-end consumer credit transaction secured by a principal dwelling with an APR exceeding certain statutory thresholds. These rate thresholds are substantially similar to rate triggers that have been in use under Regulation Z for HPMLs.
Consistent with TILA, the Final Rule exempts “qualified mortgages” from the requirements of the rule. Qualified mortgages are defined in § 1026.43(e) of the Bureau's final rule implementing the Dodd-Frank Act's ability-to-repay requirements in TILA section 129C (2013 ATR Final Rule).
In addition, the Interagency Appraisals Final Rule excludes from its coverage the following classes of loans:
(1) Transactions secured by a new manufactured home;
(2) transactions secured by a mobile home, boat, or trailer;
(3) transactions to finance the initial construction of a dwelling;
(4) loans with maturities of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling; and
(5) reverse mortgage loans.
Consistent with TILA, the Final Rule allows a creditor to originate an HPML that is not exempt from the Final Rule only if the following conditions are met:
• The creditor obtains a written appraisal;
• The appraisal is performed by a certified or licensed appraiser; and
• The appraiser conducts a physical property visit of the interior of the property.
Also consistent with TILA, the following requirements also apply with respect to HPMLs subject to the Final Rule:
• At application, the consumer must be provided with a statement regarding the purpose of the appraisal, that the
• The consumer must be provided with a free copy of any written appraisals obtained for the transaction at least three business days before consummation.
In addition, the Final Rule implements the Act's requirement that the creditor of a “higher-risk mortgage” obtain an additional written appraisal, at no cost to the borrower, when the loan will finance the purchase of the consumer's principal dwelling and there has been an increase in the purchase price from a prior acquisition that took place within 180 days of the current purchase. TILA section 129H(b)(2)(A), 15 U.S.C. 1639h(b)(2)(A). In the Final Rule, using their exemption authority, the Agencies set thresholds for the increase that will trigger an additional appraisal. An additional appraisal will be required for an HPML (that is not otherwise exempt) if either:
• The seller is reselling the property within 90 days of acquiring it and the resale price exceeds the seller's acquisition price by more than 10 percent; or
• The seller is reselling the property within 91 to 180 days of acquiring it and the resale price exceeds the seller's acquisition price by more than 20 percent.
The additional written appraisal, from a different licensed or certified appraiser, generally must include the following information: an analysis of the difference in sale prices (
Finally, in the Final Rule the Agencies expressed their intention to publish a supplemental proposal to request comment on possible exemptions for “streamlined” refinance programs and smaller dollar loans, as well as loans secured by certain other property types, such as existing manufactured homes.
TILA section 129H(b)(4)(A), added by the Dodd-Frank Act, authorizes the Agencies jointly to prescribe regulations implementing section 129H. 15 U.S.C. 1639h(b)(4)(A). In addition, TILA section 129H(b)(4)(B) grants the Agencies the authority jointly to exempt, by rule, a class of loans from the requirements of TILA section 129H(a) or section 129H(b) if the Agencies determine that the exemption is in the public interest and promotes the safety and soundness of creditors. 15 U.S.C. 1639h(b)(4)(B).
For ease of reference, unless otherwise noted, the Supplementary Information refers to the section numbers of the proposed provisions that would be published in the Bureau's Regulation Z at 12 CFR 1026.35(c). As explained in the Final Rule, separate versions of the regulations and accompanying commentary were issued as part of the Final Rule by the OCC, the Board, and the Bureau, respectively. 78 FR 10367, 10415 (Feb. 13, 2013). No substantive difference among the three sets of rules was intended. The NCUA and FHFA adopted the rules as published in the Bureau's Regulation Z at 12 CFR 1026.35(a) and (c), by cross-referencing these rules in 12 CFR 722.3 and 12 CFR Part 1222, respectively. The FDIC adopted the rules as published in the Bureau's Regulation Z at 12 CFR 1026.35(a) and (c), but did not cross-reference the Bureau's Regulation Z.
Accordingly, in this
The term “business day” is used with respect to two requirements in the Final Rule. First, the Final Rule requires the creditor to provide the consumer with a disclosure that “shall be delivered or placed in the mail not later than the third business day after the creditor receives the consumer's application for a higher-priced mortgage loan” subject to § 1026.35(c). § 1026.35(c)(5)(i) and (ii). Second, the Final Rule requires the creditor to provide to the consumer a copy of each written appraisal obtained under the Final Rule “[n]o later than three business days prior to consummation of the loan.” § 1026.35(6)(i) and (ii).
The Agencies propose to define “business day” in the Final Rule to mean “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.” § 1026.2(a)(6). The Agencies propose this definition for consistency with disclosure timing requirements under both the existing Regulation Z mortgage disclosure timing requirements and the Bureau's proposed rules for combined mortgages disclosures under TILA and the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2601
Under existing Regulation Z, early disclosures must be delivered or placed in the mail not later than the seventh business day before consummation of the transaction; if the disclosures need to be corrected, the consumer must receive corrected disclosures no later than three business days before consummation (the consumer is deemed to have received the corrected disclosures three business days after they are mailed or delivered).
The proposed definition of “business day” is also intended to align with the definition of “business day” for the timing requirements of mortgage disclosures under the 2012 TILA–RESPA Proposal.
If the Bureau adopts this aspect of the 2012 TILA–RESPA Proposal, then using the proposed definition of “business day” in the Final Rule would ensure that the HPML appraisal notice and the early mortgage disclosures have to be provided at the same time (no later than three “business days” after the creditor receives the consumer's application). This would also ensure that the copy of the HPML appraisal and the final mortgage disclosures have to be provided at the same time (no later than three “business days” before consummation). The Agencies believe that this alignment will facilitate compliance and reduce consumer confusion by reducing the number of disclosures that consumers might receive at different times.
By statute, qualified mortgages “as defined in [TILA] section 129C” are exempt from the special appraisal rules for “higher-risk mortgages.” 15 U.S.C. 1639c; TILA section 129H(f)(1), 15 U.S.C. 1639h(f)(1). The Agencies implemented this exemption in the Interagency Appraisals Final Rule by cross-referencing § 1026.43(e), the definition of qualified mortgage issued by the Bureau in its 2013 ATR Final Rule.
To align the regulation with the statute, the Agencies propose to revise the cross-referenced definition of qualified mortgage to include all qualified mortgages “as defined pursuant to TILA section 129C.” 15 U.S.C. 1639c. In addition to authority granted to the Bureau, TILA section 129C grants authority to the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA), and the Rural Housing Service (RHS), which is a part of USDA, to define the types of loans “insure[d], guarantee[d], or administer[ed]” by those agencies, respectively, that are qualified mortgages. TILA section 129H(b)(3)(B)(ii), 15 U.S.C. 1639h(b)(3)(B)(ii). The Agencies recognize that HUD, VA, USDA, and RHS may issue rules defining qualified mortgages pursuant to their TILA section 129C authority. Therefore, the Agencies propose to expand the definition of qualified mortgages that are exempt from the HPML appraisal rules to cover qualified mortgages as defined by HUD, VA, USDA, and RHS. 15 U.S.C. 1639c.
In the Final Rule, the Agencies exempted several classes of loans from the HPML appraisal rules, including transactions secured by a “new manufactured home.”
The Agencies propose to retain the exemption for transactions secured by new manufactured homes in re-numbered § 1026.35(c)(2)(ii)(A), but are seeking further comment on the scope of this exemption and whether certain conditions on the exemption might be appropriate. The Agencies further propose to re-number and revise comment 35(c)(2)(ii)–1 as proposed comment 35(c)(2)(ii)(A)–1. The proposed revisions to this comment are for clarity only; no substantive change is intended.
Since the Final Rule was issued, consumer advocates have expressed concerns that some transactions in the lending channel for new home-only (chattel) transactions can result in consumers owing more than the manufactured home is worth. For this type of loan, consumer and affordable housing advocates assert that networks of manufacturers, broker/dealers, and lenders are common, and that these parties can coordinate sales prices and loan terms to increase manufacturer, dealer, and lender profits, even where this leads to loan amounts that exceed the collateral value. Advocates have raised concerns that, where the original loan amount exceeds the collateral value and the consumer is unaware of this fact, the consumer is often unprepared for difficulties that can arise when seeking to refinance or sell the home at a later date. They have also noted that that chattel manufactured home loan transactions tend to have much higher rates than conventional mortgage loans.
Based on input from lenders and manufactured home valuation providers, the Agencies understand that in new home-only transactions, third-party cost services are not typically used to value the property. Instead, many creditors use the manufacturer's invoice, or wholesale unit price, and lend a percentage of that amount, which might exceed 100 percent to reflect, for example, a dealer mark-up and siting costs. As discussed in the Supplementary Information to the Proposed Rule, outreach participants have indicated that this practice—similar to that sometimes used for automobiles—is longstanding in new manufactured home transactions.
Appraisers and state appraiser boards consulted in outreach efforts confirmed that USPAP-compliant real property appraisals with interior inspections are possible and conducted with at least some regularity in these transactions.
In addition, USPAP-compliant real property appraisals are regularly conducted for all transactions under federal government agency and government-sponsored enterprise (GSE) manufactured home loan programs.
A representative of manufactured home appraisers and a manufactured home community development financial institution (CDFI) representative stated that they conduct appraisals for loans secured by a new manufactured home and land before the home is sited based on plans and specifications for the new home. An interior property inspection occurs once the home is sited (although the CDFI representative indicated that it did not always use a state-certified or -licensed appraiser for the final inspection). These outreach participants suggested that, in their experience, qualified certified- or -licensed appraisers are not unduly
In commenting on the Proposed Rule and in outreach, lenders have raised concerns that comparable sales (“comparables”) of other manufactured homes can be particularly difficult to find. The Agencies understand that this can be a barrier to obtaining a manufactured home appraisal, especially in certain loan programs that require appraisals of manufactured homes to use a certain number of manufactured home comparables and have other restrictions on the comparables that may be used.
At the same time, the Agencies believe that questions remain about the impact on the industry and consumers of requiring USPAP-compliant real property appraisals with interior inspections in transactions secured by a new manufactured home and land for which these types of appraisals are not already required. For example, manufactured home lenders commented on the Proposed Rule and shared in subsequent outreach that they typically do not conduct an interior inspection appraisal of a new manufactured home, but use other methods, such as relying on the manufacturer's invoice for the new home and conducting a separate, USPAP-compliant appraisal of the land.
In new § 1026.35(c)(2)(ii)(B), the Agencies propose to exempt transactions secured solely by an existing (used) manufactured home and not land from the HPML appraisal requirements. Proposed comment 35(c)(2)(ii)(B)-1 would clarify that an HPML secured by a manufactured home and not land would not be subject to the appraisal requirements of § 1026.35(c), regardless of whether the home is titled as realty by operation of state law. The Agencies recognize that in certain states residential structures such as manufactured homes may be deemed real property, even though they are not titled together with the land.
The Agencies also considered an exemption for loans secured by both an existing manufactured home and land, but are not proposing an exemption for these HPMLs. A discussion of the proposed treatment of both types of loans (secured solely by an existing manufactured home and secured by an existing manufactured home plus land) is below.
In addition, lender commenters on the Proposed Rule raised concerns about the availability of data on comparable sales that may be used by appraisers for loans secured by an existing manufactured home and not land. They indicated that data from used manufactured home sales not involving land (usually titled as personal property) are not currently recorded in multiple listing services of most states, for example, so an appraiser's ability to obtain information on comparable manufactured homes without land is more limited than in real estate transactions. A provider of manufactured home valuation services subsequently confirmed to the Agencies that manufactured home sales information is generally not available through standard real estate data sources. The Agencies also understand that, in many states, appraisers are not currently required to be licensed or certified in order to perform personal property appraisals.
Accordingly, the Agencies believe that an exemption for these transactions from the HPML appraisal rules would be in the public interest because it would facilitate continued consumer access to HPML financing for existing manufactured homes, which are an important source of affordable housing.
At the same time, consumer and affordable housing advocates have raised concerns about consumers borrowing more money than the home is worth in these transactions, which, as noted, also tend to have much higher rates than conventional loans secured by site-built homes.
The Agencies believe that an exemption conditioned in this way may be in keeping with the intent behind TILA section 129H to ensure that consumers have access to information about the value of the home that would secure the loan before entering into an HPML.
As noted, the Agencies are aware that HUD has property valuation standards for HUD-insured loans secured by an existing manufactured home and not land.
USPAP Standards 7 and 8 for personal property provide guidance for appraising personal property based on several approaches—the sales comparison approach, cost approach, and income approach—which are to be used as the appraiser determines necessary to produce a credible appraisal.
For these reasons, the Agencies are not proposing to exempt loans secured by an existing manufactured home and land from the HPML appraisal requirements. The Agencies note that some commenters on the Proposed Rule recommended that the Agencies exempt these types of “land/home” transactions.
The Agencies are also proposing to exempt from the HPML appraisal rules certain types of refinancings with characteristics common to refinance products often referred to as “streamlined” refinances. Specifically, the Agencies propose to exempt an extension of credit that is a refinancing where the owner or guarantor of the refinance loan is the current owner or guarantor of the existing obligation. In addition, the regular periodic payments under the refinance loan must not result in negative amortization, cover only interest on the loan, or result in a balloon payment. Finally, the proceeds from the refinance loan may be used solely to pay off the outstanding principal balance on the existing obligation and to pay closing or settlement charges.
As discussed more fully below, the Agencies believe that this exemption would be in the public interest and promote the safety and soundness of creditors. The following discussion of this proposed exemption includes a description of “streamlined” refinancing programs; a summary of the comments regarding an exemption for refinancings received on the 2012 Interagency Appraisals Proposed Rule; and an explanation of the requirements of, and conditions on, the proposed exemption.
In an environment of historically low interest rates, the federal government has supported “streamlined” refinance programs as a way to promote the ongoing recovery of the consumer mortgage market. Notably, the Home Affordable Refinance Program (HARP) was introduced by the U.S. Treasury Department in 2009 to provide refinance relief options to consumers following the steep decline in housing prices as a result of the financial crisis. The HARP program was expanded in 2011 and is currently set to expire in 2015.
Federal government agencies—HUD, VA, and USDA—as well as the GSEs have developed “streamlined” refinance programs to address consumer, creditor and investor risks.
For “streamlined” refinances where the LTV exceeds or nearly exceeds 100 percent, the principal concern is not whether the creditor or investor could in the near term recoup the mortgage amount by foreclosing upon and selling the securing property. The immediate goals for these loans are to secure payment relief for the borrower and thereby avoid default and foreclosure; to allow the borrower to take advantage of lower interest rates; or to restructure their mortgage obligation to build equity more quickly—all of which reduce risk for creditors and investors and benefit consumers.
However, a valuation—usually through an automated valuation model (AVM)—may be obtained to estimate LTV for determining the appropriate securitization pool for the loan. LTV as determined by this valuation can also affect the terms offered to the consumer. Sometimes an appraisal is required when the property is not standardized, or the current holder of the loan does not have what it deems to be sufficient information about the property in its databases.
Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac each have “streamlined” refinance programs: Fannie Mae DU (“Desktop Underwriter®”) Refi Plus and Refi Plus® and Freddie Mac Relief Refinance-Same Servicer/Open Access®. Under these programs, Fannie Mae must hold both the old and new loan, as must Freddie Mac under its program. An appraisal is not required when the GSEs are confident in an estimate of value, which is then provided to lenders originating loans under these programs.
HUD/FHA. The HUD “Streamline” Refinance program administered by the Federal Housing Administration (FHA) permits but generally does not require a creditor to obtain an appraisal.
VA and USDA. VA and USDA programs do not require appraisals. The FHA, VA, and USDA streamline refinance programs also do not require an alternative valuation type for transactions that do not have appraisals.
Private “streamlined” refinance programs. The Agencies also believe that private creditors may offer “streamlined” refinance programs for borrowers meeting certain eligibility requirements.
A number of commenters on the 2012 Proposed Rule—a trade association representing community banks, a credit union association, a bank, and GSEs—recommended that the Agencies exempt refinancings. Some of these commenters expressed a view that the Dodd-Frank Act's “higher-risk mortgage” appraisal rules were not appropriate for refinancings designed to move a borrower into a more stable mortgage product with affordable payments. These types of refinancings often involve an abbreviated or “streamlined” underwriting process to facilitate the reduction of risks that the existing loan may pose for the consumer, the primary market creditor, and secondary market investors. Commenters pointed out, among other things, that these types of refinancings can be important credit risk management tools in the primary and secondary markets, and can reduce foreclosures, stabilize communities, and stimulate the economy. GSE commenters indicated that in many cases loans originated under federal government “streamlined” refinance programs do not require appraisals and asserted that doing so would interfere with these programs.
Consumer advocates did not comment on the 2012 Proposed Rule, but in subsequent informal outreach with the Agencies for this proposal, expressed concerns about not requiring appraisals in HPML “streamlined” refinance programs. They expressed the view that a quality appraisal that is also required to be made available to the consumer can be a tool to prevent fraud in refinance transactions. They also pointed out instances in which an appraisal on a refinance transaction revealed appraisal fraud on the original purchase transaction.
The Agencies decline to propose an exemption for all refinance loans, as a few commenters suggested. The appraisal rules in TILA Section 129H apply to “residential mortgage loans” that are higher-priced and secured by the consumer's principal dwelling. TILA section 129H(f), 15 U.S.C. 1639h(f). The term “residential mortgage loan” includes refinance loans.
The Agencies do, however, believe that a narrower exemption for certain types of HPML refinance loans, generally consistent with the program criteria for “streamlined” refinances under GSE and federal government agency programs, would be in the public interest and promote the safety and soundness of creditors. The Agencies recognize that, by reducing the risk of foreclosures and helping borrowers better afford their mortgages, “streamlined” refinancing programs can contribute to stabilizing communities and the economy, both now and in the future. “Streamlined” HPML refinances can help borrowers who are at risk of default in the near future, as well as those who might not default in the near term, but could significantly benefit by refinancing into a lower rate mortgage for considerable cost savings over time. The Agencies also recognize that “streamlined” refinancing programs assist creditors and secondary market investors in managing credit risks. Originating HPML refinances that are beneficial to consumers can be important to creditors to ensure the continuing performance of loans on their books and to strengthen customer relations. For investors holding these loans, the “streamlined” refinances can reduce financial risks associated with potential defaults and foreclosures.
The Agencies believe that an exemption from the HPML appraisal rules for certain HPML refinances would ensure that the time and cost generated by new appraisal requirements are not introduced into HPML transactions that are not qualified mortgages but that are part of programs to help consumers avoid defaults and improve their financial positions, and help creditors and investors avoid losses and mitigate credit risk.
As discussed previously, the Agencies understand that, under the “streamlined” underwriting standards for several government and GSE refinancing programs, a full interior inspection appraisal is often not required. One reason for this is that the current value of the property securing the existing and refinance obligations generally is not considered to determine borrower eligibility for the refinance. The owner or guarantor of the existing loan retains the credit risk, and the “streamlined” refinance does not change the collateral component of that risk.
In a “streamlined refinance,” the principal concern is not valuing the collateral to determine whether the creditor or investor could in the near term recoup the mortgage amount by foreclosing upon and selling the securing property if necessary. Goals for these loan programs include securing payment relief for the borrower and thereby avoid default and foreclosure; allowing the borrower to take advantage of lower interest rates; and enabling the borrower to restructure his or her mortgage obligation to build equity more quickly—all of which reduce risk of default and thereby promote the safety and soundness of creditors and investors and benefit consumers.
However, the Agencies believe that the separate exemption for certain refinances from the HPML appraisal requirement proposed in § 1026.35(c)(2)(vii) may be needed. First, the 2013 ATR Final Rule limits the qualified mortgage status of loans purchased or guaranteed by Fannie Mae and Freddie Mac under the special rules of § 1026.43(e)(4). However, these loans will not be eligible to be qualified mortgages if consummated on or after January 10, 2021, unless they meet the general definition of a qualified mortgage in § 1026.43(e)(2).
Second, the Agencies believe that many private “streamlined” mortgage programs are likely to have similar benefits to consumers, creditors, and credit markets as those under GSE and government agency programs. However, not all private “streamlined” refinances that are HPMLs will be qualified mortgages because some could exceed the 43 percent debt-to-income ratio cap or fail to meet other qualified mortgage conditions.
The Agencies considered limiting an exemption from the HPML appraisal rules for private “streamlined” refinances to refinances of non-standard to standard mortgages that would qualify for an exemption from the ability-to-repay rules under new § 1026.43(d) of the 2013 ATR Final
The proposed rule uses the terms “owner or guarantor” rather than the term “holder” to clarify that the proposed regulation refers to the entity that either owns the credit risk because the loan is held in its portfolio or that guarantees the credit risk on a loan held in an asset-backed securitization. For example, assume Fannie Mae holds an existing obligation in its portfolio, which is then refinanced under one of Fannie Mae's “streamlined” refinance programs into a loan with a better rate and lower payments for the consumer. Fannie Mae might then decide to place the new refinance loan into a pool of loans guaranteed by Fannie Mae; in this case, Fannie Mae would technically be the guarantor, not the “owner.” However, under the proposal, the refinance would meet the condition of proposed § 1026.35(c)(2)(vii)(A)(
This comment would further clarify that “owner” does not refer to an investor in a mortgage-backed security. This proposed clarification is intended to ensure that creditors do not have to look to the individual owners of mortgage-backed securities to determine the same-owner status. The rationale for the same-owner requirement is not based upon the pooled mortgage situation where more than one investor holds an indirect interest in a loan through ownership of a mortgage-backed security. Accordingly, this comment also clarifies that the term “guarantor” in proposed § 1026.35(c)(2)(vii)(A)(
The Agencies believe that conditioning the exemption on the owner or guarantor remaining the same helps to promote the safety and soundness of creditors. This includes situations in which the refinancing creditor either owns the existing loan or has arranged to transfer the loan to a GSE or other entity that owns the existing loan. In these cases, the owner or guarantor of the refinance already holds the credit risk. In addition, the owner or guarantor of the existing obligation may have familiarity with the property or relevant market conditions as a result of having evaluated property value documents when taking on the original credit risk, as well as ongoing portfolio monitoring. By contrast, when the owner or guarantor of the “streamlined” refinance is not also the owner or guarantor of the existing loan, then the “streamlined” refinance involves new risk to the owner or guarantor of the “streamlined” refinance, whose safety and soundness would therefore be better served by a USPAP-compliant appraisal with an interior inspection.
The Agencies generally believe that the “same owner or guarantor” criterion for the proposed exemption makes it unnecessary to require that the creditor (which is not necessarily the owner of the loan) also be the same for both the existing obligation and the refinance loan. If consumers can shop for a “streamlined” refinancing among multiple creditors without having to obtain an appraisal, they may be able to obtain better rates and terms.
As a general matter, the purpose of the exemption for certain refinance transactions is to facilitate transactions that can be beneficial to borrowers even though they are higher-priced loans. When the consumer is not obtaining additional funds to increase the amount of the debt, and the entity that will own or guaranty the refinance loan is already the credit risk holder on the existing loan, there may be insufficient benefit from obtaining a new appraisal to warrant the additional cost.
Questions have been raised, however, about whether safety and soundness issues might arise in some situations that would warrant an appraisal, even when the risk holder will remain the same. Specifically, in some private refinance transactions, the originating creditor for the refinance loan may be assuming “put-back” risk. This risk may be lessened if the holder or guarantor is a federal agency or GSE that operates under guidelines that limit the put-back risk for the originator.
Proposed comment 35(c)(2)(vii)(B)–1 would state that, under § 1026.35(c)(2)(vii)(D), a refinancing must provide for regular periodic payments that do not: result in an increase of the principal balance (negative amortization), allow the consumer to defer repayment of principal (
The information provided by a USPAP-compliant real property appraisal with an interior property inspection may be particularly important for creditors and consumer where these features are present. For example, additional equity may be needed to support a loan with negative amortization, and the risk of default might be higher for loans with interest-only and balloon payment features.
The Agencies recognize that consumers who need immediate relief from payments that they cannot afford might benefit in the near term by refinancing into a loan that allows interest-only payments for a period of time. However, the Agencies believe that a reliable valuation of the collateral is important when the consumer will not be building any equity for a period of time. In that situation, the consumer and credit risk holder may be more vulnerable should the property decline in value than they would be if the consumer were paying some principal as well.
The Agencies also recognize that, in most cases, balloon payment mortgages are originated with the expectation that a consumer will be able to refinance the loan when the balloon payment comes due. These loans are made for a number of reasons, such as to control interest rate risk for the creditor or as a wealth management tool, usually for higher-asset consumers. Regardless of why a balloon mortgage is made, however, there is always risk that a consumer will not be able to either independently make the balloon payment or refinance, with significant consequences if something unexpected happens and the consumer cannot do so. To protect the creditor's safety and soundness, the creditor should have a firm understanding of the value of the collateral and the trajectory of property values in the area in making a balloon mortgage. This can help the creditor adjust loan and payment terms to mitigate default risk, which benefits both the creditor and the consumer.
The Agencies note that the GSE and government “streamlined” refinance programs described above do not allow these features, in part because helping a consumer pay off debt more quickly is one of the goals of these programs.
In sum, the Agencies are concerned that negative amortization, interest-only payments, and balloon payments are loan features that may increase a loan's risk to consumers as well as to primary and secondary mortgage markets.
Proposed comment 35(c)(2)(vii)(C)–1 would state that the exemption for a refinancing under § 1026.35(c)(2)(vii) is available only if the proceeds from the refinancing are used exclusively for two purposes: paying off the consumer's existing first-lien mortgage obligation and paying for closing costs, including paying escrow amounts required at or before closing. According to this comment, if the proceeds of a refinancing are used for other purposes, such as to pay off other liens or to provide additional cash to the consumer for discretionary spending, the transaction does not qualify for the refinancing exemption from the HPML appraisal rules under § 1026.35(c)(2)(vii).
The Agencies also view the proposed limitation on the use of the refinance loan's proceeds as necessary to ensure that the principal balance of the loan does not increase, or increases only minimally. This in turn helps ensure that the consumer is not losing significant additional equity and that the holder of the credit risk is not taking on significant new risk, in which case a full interior inspection appraisal to assess the change in risk could be beneficial to both parties.
The Agencies also note that limiting the use of proceeds to allow for no extra cash out for the consumer other than closing costs is consistent with prevailing “streamlined” refinance programs.
A refinanced mortgage loan is a significant financial commitment: For example, the refinance loan can have an extended term, typically as long as 30 or 40 years; the refinance loan can be an adjustable-rate mortgage that creates interest rate risk in the future; the refinance loan may actually have increased payments (for example, if the term of the new loan is shorter); and a “streamlined” refinance transaction has transaction costs.
In addition, as of January 2014, amendments to ECOA, implemented by the Bureau in revised Regulation B, will require all creditors to provide to credit applicants free copies of appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling.
The Agencies recognize, however, that estimates of value might not always be required by federal law or investors. For example, certain non-depositories and depositories are not subject to the appraisal and evaluation requirements that apply to depositories under FIRREA, and might not obtain a valuation on a “no cash out” refinance.
For example, some “streamlined” refinance programs currently require that borrower eligibility criteria be met, such as that the consumer have been current on the existing obligation for a certain period of time.
For the reasons discussed previously, the Agencies believe that an exemption from the HPML appraisal rules for refinances under the proposed conditions would be “in the public interest and promotes the safety and soundness of creditors.” TILA section 129H(b)(4)(B), 15 U.S.C. 1639h(b)(4)(B). The Agencies believe that an exemption from the HPML appraisal rules for these loans would ensure that the time and cost of new appraisal requirements are not introduced into non-qualified mortgage HPML transactions that are part of programs designed to help consumers avoid defaults and improve their financial positions, and help creditors and investors avoid losses and mitigate credit risk. The Agencies further believe that the exemption is appropriately narrow in scope to capture the types of refinancings that Congress has generally expressed an intent to facilitate, without being overbroad by exempting all HPML refinances from the HPML appraisal rules.
The Agencies are also proposing an exemption from the HPML appraisal rules for extensions of credit of $25,000 or less, indexed every year for inflation. In the 2012 Proposed Rule, the Agencies requested comment on exemptions from the final rule that would be appropriate. In response, several commenters recommended an exemption for smaller dollar loans. These commenters generally believed that interior inspection appraisals on these loans would significantly raise total costs as a proportion of the loan and thus potentially be detrimental to consumers.
Commenters on the 2012 Proposed Rule that indicated support for a smaller dollar loan exemption included a state credit union association, representatives of six banks, two manufactured housing trade associations, a national community development organization, and two individuals. No comments received opposed an exemption for smaller dollar loans, though no comments were received from consumers or consumer advocates.
The commenters on this issue shared concerns that requiring an appraisal for smaller dollar residential mortgage loans would result in excessive costs to consumers without sufficient offsetting benefits. Some asserted that applying the HPML appraisal rules to smaller loans might disproportionately burden smaller institutions and potentially reduce access to credit for their consumers.
In outreach since the Final Rule was issued, however, a consumer advocacy group expressed the view that low- to moderate-income (LMI) consumers obtaining or refinancing loans secured by lower-value homes may have a particular need for the protections of the HPML appraisal rules. During informal outreach with the Agencies for this proposal, consumer advocates expressed the view that requiring quality appraisals for smaller dollar loans, and requiring that they be provided to the consumer, can help prevent the kinds of appraisal fraud that can lead to consumers borrowing more money than is supported by the equity in their home or taking out loans that are otherwise not appropriate for them.
Regarding the appropriate threshold for a smaller loan exemption, the comments varied widely. One individual commenter suggested that a smaller dollar loan amount appropriate for an exemption from the final rule would be $10,000 or less. A comment letter from a community bank indicated that a $25,000 home improvement loan might not be an appropriate transaction type to cover in a final rule; this commenter asserted that to avoid the burden and expense to the consumer of the HPML appraisal rules, a community bank would have to lower its rates on smaller loans to below HPML levels, which could make them unprofitable.
A national manufactured housing trade association asserted that the median price of a manufactured home is $27,000
The Agencies are concerned that the potential burden and expense of imposing the HPML appraisal requirements on HPMLs of $25,000 or less (that are not qualified mortgages) will outweigh potential consumer protection benefits in many cases. The primary concern is the expense to the consumer of an interior inspection appraisal, which could be significant and unduly burdensome to consumers of smaller loans. Thus, an appraisal requirement could hamper consumers' use of smaller home equity loans for home improvements, educational or medical expenses, and debt consolidation.
In addition, the Agencies believe that the proposed exemption can facilitate creditors' ability to meet consumers' smaller dollar credit needs. This could in turn promote the soundness of an institution's operations by supporting profitability and an institution's ability to spread risk over a variety of products. Public comments on the 2012 Proposed Rule suggested that applying the rule to smaller dollar loans might affect smaller institutions in particular, and that for these institutions the reduction in costs and burdens associated with this exemption would be most beneficial.
Finally, the Agencies believe that creditors would generally be better able to absorb losses that might be associated with a loan of $25,000 or less than with, for example, a typical home purchase loan, which is several times larger than a $25,000 loan.
The Agencies recognize that loan types other than home improvement loans would qualify for the proposed exemption and that other data and considerations may be relevant to determining the appropriate threshold.
In comments 35(c)(2)(viii)–1, –2, and –3, the Agencies propose to provide the threshold amount and additional guidance on applying it. Proposed comment 35(c)(2)(viii)–1 sets forth the applicable threshold to be updated every year. This comment states that, for purposes of § 1026.35(c)(2)(viii), the threshold amount in effect during a particular one-year period is the amount stated in comment 35(c)(2)(viii) for that period. The comment states that the threshold amount is adjusted effective January 1 of every year by the percentage increase in the CPI–W that was in effect on the preceding June 1. The comment goes on to state that every year, the comment will be amended to provide the threshold amount for the upcoming one-year period after the annual percentage change in the CPI–W that was in effect on June 1 becomes available. The comment states that any increase in the threshold amount will be rounded to the nearest $100 increment, and provides the following examples: if the percentage increase in the CPI–W would result in a $950 increase in the threshold amount, the threshold amount will be increased by $1,000. However, if the percentage increase in the CPI–W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900. Finally, the comment states that, from January 18, 2014, through December 31, 2014, the threshold amount is $25,000.
Proposed comment 35(c)(2)(viii)–2 states that a transaction meets the condition for an exemption under § 1026.35(c)(2)(viii) if the creditor makes an extension of credit at consummation that is equal to or below the threshold amount in effect at the time of consummation.
Proposed comment 35(c)(2)(viii)–3 clarifies that a transaction does not meet the condition for an exemption under § 1026.35(c)(2)(viii) merely because it is used to satisfy and replace an existing exempt loan, unless the amount of the new extension of credit is equal to or less than the applicable threshold amount. As an example, the comment assumes a closed-end loan that qualified for an exemption under § 1026.35(c)(2)(viii) at consummation in year one is refinanced in year ten and that the new loan amount is greater than the threshold amount in effect in year ten. The comment states that, in these circumstances, the creditor must comply with all of the applicable requirements of § 1026.35(c) with respect to the year ten transaction if the original loan is satisfied and replaced by the new loan, unless another exemption from the requirements of § 1026.35(c) applies. The comment cross-references § 1026.35(c)(2) and § 1026.35(c)(4)(vii) for other exemptions from the HPML appraisal rules.
In particular, the Bureau has concerns that, as a result of borrowing so-called “smaller” dollar home purchase or home equity loans, some consumers may be at risk of high LTVs, including LTVs that lead to going “underwater”—owing more than their home is worth. Data suggest that many existing homes are worth under $25,000 and that many consumers with lower value homes are underwater or nearly underwater.
In the Final Rule, comment 35(c)(6)(ii)–2 provides that, for appraisals prepared by the creditor's internal appraisal staff, the date that a consumer receives a copy of an appraisal as required under § 1026.35(c)(6) is the date on which the appraisal is completed. The Agencies propose to delete this comment as unnecessary, because the relevant timing requirement is based on when the creditor provides the appraisal, not when the consumer receives it.
In developing this supplemental proposal, the Bureau has considered potential benefits, costs, and impacts to consumers and covered persons.
In this supplemental proposal, the Agencies are proposing to exempt three additional classes of HPMLs from the 2013 Interagency Appraisals Final Rule: (1) Certain refinance HPMLs whose proceeds are used exclusively to satisfy an existing first-lien loan and to pay for closing costs; (2) new HPMLs that have a principal amount of $25,000 or less (indexed to inflation); and (3) HPMLs secured by existing manufactured homes but not land. As discussed in the section-by-section analysis, the Agencies also are seeking comment on whether to place conditions on these proposed exemptions that would ensure the consumer receives a copy of a home value estimate in transactions covered by the exemptions.
The Bureau will further consider the benefits, costs and impacts of the proposed provisions and asks interested parties to provide general information, data, research results and other information that may inform the analysis of the benefits, costs, and impacts.
This analysis considers the benefits, costs, and impacts of the key provisions of the Interagency Appraisals Supplemental Proposal relative to the baseline provided by existing law, including the 2013 Interagency Appraisals Final Rule and the Bureau's ATR Rules.
The Bureau has relied on a variety of data sources to analyze the potential benefits, costs and impacts of the proposed rule.
This allows estimation of coefficients in a prohibit model to predict DTI using loan amount, income, and other variables. This model is then used to estimate DTI for loans in HMDA.
The primary source of data used in this analysis is data collected under the Home Mortgage Disclosure Act (HMDA). The empirical analysis generally uses 2011 data, including from the 4th quarter 2011 bank and thrift Call Reports,
Other portions of the analysis rely on property-level data regarding parcels and their related financing from DataQuick
To estimate the number of additional HPMLs that could be exempted by the proposal, it is first necessary to recall the number of HPMLs that are covered by the Final Rule. The 2013 Interagency Appraisal Rule exempts all qualified mortgages under the Bureau's 2013 ATR Final Rule.
The Bureau seeks data from commenters on this point. Accordingly, the Bureau believes that almost all if not all of the loans that would be exempted solely by virtue of the proposed exemptions would be transactions originated by private lenders for their own portfolio, which are not eligible for purchase, insurance, or guarantee by HUD, USDA, VA, or GSEs,
As discussed in the Section 1022(b) analysis in the 2013 Final Interagency Appraisals Rule, the Bureau estimates, based upon 2011 HMDA data, that there were 26,000 HPMLs that would not have been qualified mortgages, 12,000 of which were purchase-money mortgages, 12,000 of which were first-lien transactions that were refinancings, and 2,000 of which were closed-end subordinate lien mortgages that were not part of a purchase transaction. For purposes of this Section 1022(b) analysis, the Bureau refers to these loans as “covered loans.” The impact on creditors and consumers of the proposed exemptions—which at most would exempt some of these estimated 26,000 covered loans annually—is discussed below.
The impact of the proposed exemptions on creditors and consumers generally varies by exemption. It should be noted, however, that there are no mandatory costs imposed on creditors as a result of any of the proposed exemptions. Creditors are not required to utilize an exemption. Therefore, any associated burdens are also optional. Moreover, voluntary compliance costs should be minimal: Creditors complying with the 2013 Interagency Appraisals
The Agencies are proposing to exempt first-lien refinances that satisfy certain restrictions, many of which are commonly referred to as “streamlined refinances.” As discussed in the preceding section-by-section analysis, the Agencies are seeking comment on whether this proposed exemption should be subject to the condition that the creditor obtain an estimate of the value of the dwelling that will secure the refinancing and provide a copy of it to the consumer before consummation.
Before discussing the proposed exemption in detail, it would be useful to first discuss the request for comment on conditioning the exemption on obtaining and providing a home value estimate to the consumer. This condition would apply to any loan that is otherwise eligible for the streamlined refinance exemption and that is not exempt under another provision of the Final Rule, such as the exemption for qualified mortgages, § 1026.35(c)(2)(i). Other types of valuations
In practice, the refinances eligible for the proposed exemption would fall into two categories. The first category is refinances held in the portfolios of private creditors or sold to a private investor that satisfy all of the criteria for an exempt refinance under proposed § 1026.35(c)(2)(vii). The second category is refinances under GSE, FHA, USDA, or VA programs that satisfy the proposed criteria. The Bureau believes that virtually all transactions in the second category (under any public refinance programs) already would be exempted from this rule by virtue of being qualified mortgages under § 1043(e)(4). As discussed in the section-by-section analysis above, however, under the 2013 ATR Final Rule streamlined refinances under GSE programs originated in or after 2021 would not be qualified mortgages if they do not meet all of the general criteria for a qualified mortgage in the 2013 ATR Final Rule, including debt-to-income limits.
Refinances originated by private creditors that are not eligible under public programs still could satisfy the criteria in the proposed exemption. The Bureau believes that the condition in the proposed exemption of no cash-out except for closing costs would be satisfied in most private HPML refinances. In the current market, cash-out refinances have become less common.
As indicated in the section-by-section analysis above, the Agencies are seeking data from commenters on the extent to which creditors obtain appraisals or other valuations in no-cash out portfolio refinances that are not originated under public programs.
The Bureau also believes that conditioning the exemption on obtaining a valuation and providing a copy of it to the consumer would be consistent with existing industry valuation practices for private refinances. The Bureau believes that creditors that do not obtain an appraisal obtain an alternative valuation. For example, private streamlined refinance programs administered by banks, thrifts, or credit unions are subject to FIRREA regulations and the Interagency Appraisal and Evaluation Guidelines. Under these standards, the creditors must obtain “evaluations,” which can include (but not consist solely of) estimates from AVMs, to support streamlined refinances that are kept on their portfolio and are not backed by public programs.
As mentioned above, in the short and medium term, the Bureau believes that no public program refinance loans will be covered loans because they will be exempt as qualified mortgages. Accordingly, the proposed exemption would only affect some of the HPML refinances under GSE programs starting in 2021 (and some HPML refinances under HUD, USDA, and VA programs at that time if those agencies have not already adopted their own qualified mortgage rules)—an impact that is too remote to quantify at this time as the state of the GSEs, the public refinance programs, and the market environment at that time is not possible to predict.
Below, the Bureau analyzes the impact of the proposed exemption for certain refinances on covered persons and consumers.
Any creditors originating refinances that are currently covered loans and which meet the criteria of the proposed exemption could choose to make use of the proposed exemption, which would reduce burden. In particular, these loans would not be subject to the estimated per-loan costs described in the 2013 Interagency Appraisals Final Rule.
The Bureau is requesting that commenters provide data on the rate at which appraisals and other valuations are conducted for private refinances. If the Bureau is able to obtain this additional information, it can better estimate the burden that would be reduced if the proposed exemption is finalized for private refinances.
In addition, the Bureau believes that conditioning the proposed exemption on the creditor obtaining and providing the consumer with an alternative valuation would not significantly decrease the amount of burden relieved by the exemption. Such alternative valuations cost significantly less than full interior appraisals and, in many cases, already are required by regulations or are otherwise obtained under current industry practice and therefore subject to disclosure to the consumer under the Bureau's 2013 ECOA Valuations Rule. According to the data that was provided to the Agencies by the FHFA, in 2012, all GSE streamlined refinance transactions have either an automated valuation estimate (more than 80%) or an appraisal performed (less than 20%). The Bureau also understands that the Agencies' FIRREA regulations also generally mandate alternative valuation methods for streamlined refinances where appraisals are not used and the transaction is not sold to, guaranteed by, or insured by a government agency or GSE.
For those consumers whose HPML streamlined refinance would not have been a qualified mortgage (such as those HPMLs not associated with public programs and not otherwise meeting the general definition of qualified mortgage), the proposed exemption would ensure the rule—including its appraisal requirement—does not apply to their loan. This can result in several types of cost savings to consumers of these loans. First, as discussed in the in the 2013 Interagency Appraisals Final Rule, the Bureau believes the cost of appraisals—$350 on average—is generally passed on to consumers.
The Bureau is uncertain, however, whether the proposed exemption would make it more likely that the transaction is consummated for these consumers. As noted above, when an appraisal is not conducted, an evaluation is generally required under FIRREA regulations for depository institutions. The Bureau does not believe, and had not identified any data indicating, that an appraisal is any more or less likely than an evaluation to cause a transaction to fail (for example because the valuation exceeds the price, or causes the loan to exceed any LTV limits). Accordingly, the Bureau requests data from commenters on whether the exemption would increase the likelihood of consummation for refinances eligible for the exemption. If the exemption made consummation of the transaction more likely for these consumers, the Bureau believes this would provide a benefit to these consumers whenever the refinance transaction is beneficial for the consumer.
As discussed in the Bureau's analysis under Section 1022 in the 2013 Interagency Appraisals Final Rule, in general, consumers who are borrowing HPMLs that are covered loans and who would not otherwise have appraisals conducted for the transaction could benefit from an appraisal being conducted.
• Remaining in the home with the existing loan;
• Refinancing through a different program at a better rate or other improved terms (such as not requiring mortgage insurance);
• Seeking a modification;
• Selling the home; or
• Negotiating with the servicer to provide the deed-in-lieu without defaulting, among others.
Of course, in a refinance transaction, a consumer having better home value information through an appraisal will not affect the consumer's decision of whether to buy the home in the first place. Nonetheless, when considering a refinance loan, the appraisal can inform the consumer with respect to options to pursue such as those listed above, which could be more beneficial or appropriate for the consumer than refinancing the loan.
For example, if the appraisal establishes that the value of the dwelling is higher than otherwise estimated, the consumer's cost of credit could decrease and the consumer might even be able to borrow at rates below HPML thresholds. On the other hand, if an appraisal establishes that the value of the dwelling is lower than otherwise estimated, the consumer might be better positioned to consider alternative options discussed above. The new appraisal also may alert the consumer, in some cases, to flaws or even to an inflated valuation in the original appraisal used to purchase the home.
The cost to consumers of the proposed exemption therefore would be the loss of these potential benefits for the number of covered loans that would be newly-exempted by the proposed exemption and which would not have otherwise included an appraisal. As noted above, the Bureau estimates this would be very few transactions.
Nonetheless, to mitigate the loss of potential benefits to consumers arising from not having an appraisal in an exempt refinance transaction, the Agencies are seeking comment on whether to condition the proposed exemption on the creditor obtaining and providing to the consumer an alternative valuation as a condition of the loan being eligible for the proposed streamlined refinance exemption. The Bureau believes that, in general, a consumer's receipt of a home value estimate other than an appraisal can mitigate the information disadvantage when an appraisal is not obtained. More specifically, the Bureau believes that the cost of getting an AVM estimate is minimal and that it is already done as a standard business practice in many cases. Also, the Bureau believes that the cost of a broker price opinion (BPO) or any other reasonable valuation method that would be permitted under applicable law is well below the cost of a USPAP-compliant appraisal. The Bureau seeks comment on these assumptions.
As discussed in the section-by-section analysis above, the Agencies also are requesting comment on whether consumers would benefit from a condition on the exemption relating to the amount of transaction costs that can be charged. One of the principal reasons why an appraisal may be less important to a consumer in a streamlined refinance transaction is that, except for closing costs that may be financed by the loan, the consumer is not losing equity. This rationale appears to be strongest if the exemption cannot be used in refinance transactions that also finance high transaction costs, especially given that consumers can engage in serial refinancing. Serial refinancing at high points and fees that are financed can reduce a consumer's equity as much if not more than a cash-out refinance.
As discussed in the section-by-section analysis above, the Agencies are proposing to exempt HPMLs secured by new loans with principal amounts of $25,000 or less (indexed to inflation) from the HPML appraisal rules, while seeking comment on whether the threshold for the exemption should be different. The Agencies also are seeking comment on whether to condition this exemption on the creditor providing the consumer with a copy of a valuation, as described in more detail in the section-by-section analysis above. The Bureau estimates the number of transactions potentially eligible for this exemption as follows: HMDA data for 2011 indicates there were approximately 25,000 HPMLs at or below $25,000 that were not insured or guaranteed by government agencies or purchased by the GSEs (so, not qualified mortgages on that basis). Of these, the Bureau estimates that 4,800 were HPMLs with debt-to-income above 43 percent (so they would not meet the more general definition of a qualified mortgage). Accordingly, the Bureau estimates that approximately 4,800 covered loans are originated annually in an amount up to $25,000.
Creditors originating smaller dollar covered loans would experience some reduced burden as a result of the proposed exemption for HPMLs of $25,000 or less. If the proposed exemption were adopted, these loans would not be subject to the estimated per-loan costs described in the 2013 Interagency Appraisals Finale Rule.
Even if the proposed exemption reduces the number of interior inspection appraisals conducted for smaller dollar HPMLs, the overall impact of this proposed exemption on creditors is likely minimal for most creditors given that only 4,800 such loans were made among 12,000 creditors.
Finally, the Bureau does not estimate that the burden reduced by the exemption would be significantly lowered by conditioning the exemption on the creditor providing the consumer a copy of a valuation that the creditor relied on in extending credit. As noted above, for depository institutions and credit unions, FIRREA regulations generally require evaluations when an appraisal is not obtained because the transaction amount is below $250,000; thus, the Bureau estimates that most transactions of $25,000 involve a home estimate of some type. In first lien transactions, providing copies of valuations is already required under the 2013 ECOA Valuations Rule, so the condition would impose no added burden.
For consumers who seek to borrow smaller dollar loans, such as home improvement loans and other subordinate lien transactions, and who are not able to obtain a qualified mortgage, the proposed exemption for smaller dollar HPMLs (at or less than $25,000) would provide some benefits. Industry practice prior to implementation of the 2013 Final Rule suggests that appraisals are not otherwise frequently done for home improvement and subordinate lien transactions.
Under the proposed exemption, consumers in smaller dollar HPMLs (that are not otherwise exempt) would lose the benefits of the Final Rule, however. As discussed in the Bureau's analysis under Section 1022 in the Final Rule, in general, consumers who are borrowing HPMLs could benefit from an appraisal. For HPMLs that are not purchase transactions, the general benefits discussed above may be relatively less valuable to the consumer in some cases, given the lower size of the loan and also the likelihood that the consumer already would have had an appraisal in the original purchase transaction. Nonetheless, having an appraisal could provide a particularly significant benefit to those consumers who are informed by the appraisal that they have significantly less equity in their home than they realize. A smaller dollar mortgage could push these consumers even further into negative equity, without the consumers realizing it. This effect is even more pronounced for consumers whose homes have lower value. All else equal, a $25,000 loan will pose greater risk to a consumer whose home is worth $20,000, than to a consumer whose house is worth $200,000. According to a periodic government survey, as of 2011 more than 2.75 million homes were worth less than $20,000, including a greater proportion of homes whose owners were below the poverty level or elderly.
Therefore, smaller dollar loans of $25,000 or less could still pose significant risks to consumers who own these lower-value homes or other homes that are highly leveraged, consuming most or all of any remaining equity. In some of those cases, knowledge of the current value of the home could prevent consumers from unwittingly using up too much equity in their homes or going underwater or going further underwater, which could make it more difficult for them to sell or refinance in the future. The Bureau therefore seeks comment on the extent to which smaller dollar loans of $25,000 or less are nonetheless higher LTV loans, for example resulting in combined loan-to-value of 90 percent or more.
In summary, the cost of the proposed exemption to consumers would be the loss of benefits generally associated with appraisals for the number of covered loans that would be newly-exempted by the proposed exemption for smaller dollar loans—that is, for an estimated 4,800 loans annually, assuming that none of these loans currently get full interior appraisals. This cost could be mitigated by conditioning the exemption in a manner that reduces the risk the consumer would unwitting borrow an amount that consumes available equity in the home.
As discussed in the section-by-section analysis above, the market for manufactured home loans can be classified according to collateral type: New home only, new home and land, existing home only, and existing home and land. The proposal seeks comment on whether changes are warranted to the exemption adopted 2013 Interagency Appraisals Final Rules regarding transactions secured by new homes. Such changes may include narrowing the exemption to apply only to transactions secured by a new manufactured home but not land. The proposal also seeks comment on conditioning the exemption for transactions secured by new manufactured homes on obtaining and providing the consumer with a home value estimate other than a USPAP- and FIRREA-compliant appraisal with an interior inspection prior to consummation. (The types of estimates that might satisfy such a condition are discussed in the section-by-section analysis above.) As also discussed in the section-by-section analysis above, the Agencies are proposing to exempt HPMLs secured by existing manufactured homes, and are seeking comment on conditioning this proposed exemption on obtaining and providing a home value estimate to the consumer. The Agencies' proposed exemption for existing manufactured homes would not apply when land provides security; as indicated in the section-by-section analysis above, the Agencies believe that USPAP-compliant appraisals are feasible and commonly performed for these transactions.
To assess the impact of the proposal's provisions concerning manufactured housing, it is necessary to estimate the volume of transactions potentially affected, by collateral type. The Bureau's analysis of 2011 HMDA data, matched with the historic loan performance (HLP) data from the FHFA, indicates that roughly eight percent of all manufactured home purchases were covered loans: HPMLs that were not qualified mortgages because the debt-to-income ratio exceeded 43 percent and the loan was not insured, guaranteed, or purchased by a federal government agency or GSE.
The proposal seeks comment on narrowing the exemption adopted in the Final Rule to cover only transactions secured solely by a new manufactured home but not land. The proposal also seeks comment on conditioning the exemption for those transactions on providing to the consumer an estimate of the replacement cost of the new manufactured home, including any appropriate adjustments, using a third-party published cost service such as the NADAGuides.com Value Report
If the exemption were narrowed to no longer cover HPMLs secured by both a new manufactured home and land, the creditor would need to obtain USPAP- and FIRREA-compliant appraisal with an interior inspection in these transactions. The Bureau believes the cost of this appraisal is not likely to be significantly higher than the cost of current valuation practices in these transactions. As discussed in the section-by-section analysis above, the Bureau understands that GSE, HUD Title II, USDA, and VA manufactured housing finance programs all require USPAP-compliant appraisals on standard GSE forms for transactions secured by manufactured homes and land, and that thousands of these transactions occur each year in these programs, some at HPML rates. Even if a creditor's appraisal does not meet the appraisal standards for these programs (for example, GSE requirements mandating a minimum number of manufactured homes be used as comparables), it still may comply with USPAP.
If the exemption were conditioned on obtaining an estimate of the value of the new manufactured home from a published cost service (such as a NADA Guide Valuation Report or a report from the Marshall & Swift Cost Estimator) and providing this to the consumer, the costs likely would be minimal. The Bureau has received information in outreach indicating that annual subscriptions to the NADA Guide may cost between $100 and $200 for an unlimited number of value reports, while similar unlimited-use subscriptions to the Marshall & Swift service may cost approximately $1,200.
Finally, the proposal requests comment on whether any condition on the exemption also should call for the consumer to receive a copy of the valuation obtained before consummation. The Bureau does not believe this aspect of any condition on an exemption would add significant
Creditors originating covered transactions secured by existing manufactured homes but not land that would be covered loans would experience some reduced burden as a result of the proposed exemption. In particular, these loans would not be subject to the estimated per-loan costs for a USPAP-complaint appraisal described in the 2013 Interagency Appraisals Final Rule.
USPAP-complaint appraisals may currently be conducted for transactions secured by existing manufactured homes but not land much less frequently than in connection with HPMLs overall. For example, the Bureau believes that USPAP is a set of standards typically followed by appraisers who are state-certified or licensed, and that state laws generally do not require certifications or licenses to appraise personal property. Therefore, even though USPAP includes standards for the appraisal of personal property, it is unclear that these standards are applied when individuals who are not state-licensed or state-certified value manufactured homes. Indeed, the Bureau believes that currently, in some transactions, lenders may simply prepare their own estimates of the value of the home without engaging a licensed or certified appraiser.
As a result, for purposes of analyzing the benefits of the proposed exemption, the Bureau assumes that very few, if any, transactions secured by existing manufactured homes but not land include USPAP-compliant appraisals.
The Bureau believes that consumers using HPMLs that are not qualified mortgages in an amount over $25,000 to purchase, improve, or refinance any manufactured home generally would benefit as much as any other type of homeowner from an estimate of the value of the home, including an appraisal, in the ways discussed in the Bureau's analysis under Section 1022 in the 2013 Interagency Appraisals Final Rule. In some cases, this benefit could be even greater; some recent data suggests the risk of negative equity may be as much as two times greater for owners of manufactured homes than for owners of other types of housing. One reason that negative equity may be a more acute risk in manufactured home transactions is that, according to research and outreach conducted by the Agencies, the loan amount can frequently exceed the collateral value from the outset of the transaction without the consumer's knowledge.
For HPMLs secured by new manufactured homes, as discussed in the section-by-section analysis above, the Agencies are seeking comment on options for ensuring the consumer is informed of the value of the dwelling serving as collateral—whether via narrowing or placing conditions on the exemption. If the exemption were narrowed to exclude transactions secured by both manufactured homes and land so that an appraisal is required and consumers receive an appraisal report copy, then, as noted above, information obtained in outreach suggests that the cost of the valuation (which typically is passed on to the consumer) would not necessarily increase relative to existing practice. Similarly, valuation costs would not necessarily increase if the exemption were conditioned on following an alternative practice, such as adding the appraised value of the land alone to the estimated value of the home using a cost approach, because that practice appears to be common currently.
Finally, for transactions secured by a new manufactured home but not land, published cost estimates are not likely to add a significant expense, as discussed above. Any of these options also would ensure that consumers are informed of an estimate of the value of the manufactured home. Otherwise, the manufacturer's invoice may be the only document relating to the value of the home, and the consumer would not have a right to receive a copy of that document under the ECOA Valuations Rule.
For consumers seeking refinances or home improvement loans secured by existing manufactured homes, seeking to sell existing manufactured homes, or seeking to buy existing manufactured homes without using land as collateral for the transaction, the proposed exemption for transactions secured by existing manufactured homes but not land could provide a significant benefit if it would be difficult for a significant number of these transactions to be consummated without an exemption. The Bureau does not have information indicating that USPAP-complaint appraisals by state-certified or state-licensed appraisers for these transactions are common industry practice. In the section-by-section analysis above, the Agencies also have requested comment on how often state-certified or state-licensed appraisers are available to service these transactions. If such appraisers are not consistently available in these transactions, then without the exemption, buyers using HPMLs to purchase, and owners using HPMLs to refinance, existing manufactured homes without offering land as security could be faced with a significant barrier. Consumers selling their homes could be similarly affected because the Bureau believes that many buyers of these properties use HPMLs that are not qualified mortgages, which would make it difficult to find a buyer who could close the loan using an available valuation method.
As discussed in the Bureau's analysis under Section 1022 in the 2013 Interagency Appraisals Final Rule, in general, consumers who are borrowing HPMLs that are covered by the rule nonetheless could benefit if an appraisal can be conducted. If the proposed exemption is for transactions secured by existing manufactured homes and not land is adopted, these benefits could be lost if creditors do not obtain a reliable home estimate in the transaction.
As noted in the section-by-section analysis, consumer advocates in outreach raised questions about the accuracy of estimates derived from a published cost service such as the NADA Guide value report in part because this method of estimating home values does not analyze the market value of the home in the particular location based upon comparables. The Bureau notes, however, that one cost method—the NADAGuide.com Value Report—provides for adjustments based upon region and land-ease community which can take into account location factors. In addition, comparable-based estimates for existing manufactured homes can cost nearly $300 according to outreach to one provider, which the Bureau believes would be significantly more costly than an estimate based upon a published cost service. If such a valuation for a new manufactured home would be similarly priced, then it would be significantly more expensive than the cost estimate noted above (which can be used for new manufactured homes as well as existing manufactured homes). The Bureau believes that a lower-cost method would result in less cost passed along to the consumer. In any event, for both new and existing manufactured homes, the Bureau requests data from commenters on the cost and accuracy of valuations developed from local market comparables, and valuations based upon published cost services that provide for adjustments such as those noted above.
Finally, as noted above, the Bureau does not believe that continuing to require USPAP-compliant appraisals for transactions secured by existing manufactured homes and land would pose any significant impediment to these transactions, as the cost of the appraisal is on par with that of other homes and the process used of selecting and adjustment comparables also is standard.
The proposed rule includes only exemptions. Exempting loans from the requirements of the HPML Appraisal Rule will not reduce access to credit. While the Agencies are seeking comment on whether to include certain conditions on these proposed exemptions as discussed in the section-by-section analysis, these conditions would not reduce access to credit. The cost of complying with any conditions, if adopted, would not exceed the cost of complying with the HPML Appraisal Rule (which in turn could increase the cost of credit) because any exemptions are optional and thus cost or burdens of exemptions also are optional. In addition, as discussed above, the Agencies are seeking comment on whether to narrow the exemption for new manufactured homes and/or to include conditions on this exemption. The Bureau does not believe that requiring a USPAP- and FIRREA-compliant appraisal with an interior inspection for transactions secured by a new manufactured home and land or conditioning these or other new manufactured home transactions on the alternative valuation methods described above would reduce access to credit in these transactions. Such valuation methods at most would entail only slightly increased costs where different from existing methods, such that they do not carry the potential to impede access to credit.
Small depository banks and credit unions may originate loans of $25,000 or less more often, relative to their overall origination business, than other depository institutions (DIs) and credit unions. Therefore, relative to their overall origination business, these small depository banks and credit unions may experience relatively benefits from the proposed exemption for smaller dollar loans. These benefits would not be high in absolute dollar terms, however, because the number of transactions that would be uniquely exempted by the proposed small loan exemption is still relatively low—less than 5,000, as discussed above.
Otherwise, the Bureau does not believe that the impact of the proposal would be substantially different for the DIs and credit unions with total assets below $10 billion than for larger DIs and credit unions. The Bureau has not identified data indicating that small depository institutions or small credit unions disproportionately engage in lending secured by manufactured homes. Finally, the Bureau has not identified data indicating that these institutions engage in streamlined refinances that would be newly-exempted by the proposed exemption at any greater rate than other financial institutions. The Bureau requests relevant data on the impact of the proposed rule on DIs and credit unions with total assets below $10 billion.
The Bureau understands that a significantly greater proportion of existing manufactured homes are located in rural areas compared to other single-family homes.
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601
The Board requests public comment on all aspects of this analysis.
This proposal relates to the 2013 Interagency Appraisals Final Rule, issued jointly by the Agencies on January 18, 2013, which goes into effect on January 18, 2014.
The Agencies are now proposing amendments to the Final Rule to exempt the following transactions: (1) Transactions secured by existing manufactured homes and not land; (2) certain “streamlined” refinancings; and (3) transactions of $25,000 or less. The Agencies are also proposing to revise the Final Rule's definition of “business day.”
As discussed above, section 1471 of the Dodd-Frank Act created new TILA section 129H, which establishes special appraisal requirements for “higher-risk mortgages.” 15 U.S.C. 1639h. The Final Rule implements these requirements and includes certain exemptions from the Rule's requirements. The Agencies believe that several additional exemptions from the new appraisal rules may be appropriate. Specifically, the Agencies are proposing an exemption for transactions secured by an existing manufactured home (and not land), certain types of refinancings, and transactions of $25,000 or less (indexed for inflation). In addition, the Agencies are proposing to revise the Final Rule's definition of “business day” for consistency with disclosure timing requirements under existing Regulation Z mortgage disclosure timing requirements and the Bureau's proposed
The legal basis for the proposed rule is TILA section 129H(b)(4). 15 U.S.C. 1639h(b)(4). TILA section 129H(b)(4)(A), added by the Dodd-Frank Act, authorizes the Agencies jointly to prescribe regulations implementing section 129H. 15 U.S.C. 1639h(b)(4)(A). In addition, TILA section 129H(b)(4)(B) grants the Agencies the authority jointly to exempt, by rule, a class of loans from the requirements of TILA section 129H(a) or section 129H(b) if the Agencies determine that the exemption is in the public interest and promotes the safety and soundness of creditors. 15 U.S.C. 1639h(b)(4)(B).
The proposed rule applies to creditors that make HPMLs subject to 12 CFR 1026.35(c) (published by the Board in 12 CFR 226.43). In the Board's Regulatory Flexibility Analysis for the Final Rule, the Board relied primarily on data provided by the Bureau to estimate the number of small entities that would be subject to the requirements of the rule.
Data currently available to the Board are not sufficient to estimate how many small entities that extend mortgages will be subject to 12 CFR 1026.35(c) (published by the Board in 12 CFR 226.43), given the range of exemptions provided in the Final Rule, including the exemption for qualified mortgages. Further, the number of these small entities that will make HPMLs that would qualify for the proposed exemptions is unknown.
The proposed rule does not impose any new recordkeeping, reporting, or compliance requirements on small entities. The proposed rule would reduce the number of transactions that are subject to the requirements of the Final Rule. The Final Rule generally applies to creditors that make HPMLs subject to 12 CFR 1026.35(c) (published by the Board in 12 CFR 226.43), which are generally mortgages with an APR that exceeds the APOR by a specified percentage, subject to certain exemptions. The proposal would exempt three additional classes of HPMLs from the Final Rule: HPMLs secured by existing manufactured loans (but not land); certain refinance HPMLs whose proceeds are used exclusively to satisfy an existing first-lien loan and to pay for closing costs; and new HPMLs that have a principal amount of $25,000 or less (indexed to inflation). Accordingly, the proposal would decrease the burden on creditors by reducing the number of loan transactions that are subject to the Final Rule.
The Board has not identified any Federal statutes or regulations that would duplicate, overlap, or conflict with the proposed revisions.
The Board is not aware of any significant alternatives that would further minimize the economic impact of the proposed rule on small entities. The proposed rule would exempt three additional classes of HPMLs from the Final Rule and not impose any new recordkeeping, reporting, or compliance requirements on small entities.
The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements.
An IRFA is not required for this proposal because if adopted it would not have a significant economic impact on a substantial number of small entities.
The analysis below evaluates the potential economic impact of the proposed rule on small entities as defined by the RFA. The analysis generally examines the regulatory impact of the provisions of the proposed rule against the baseline of the Final Rule the Agencies issued on January 18, 2013.
The proposed rule would apply to all creditors that extend closed-end credit secured by a consumer's principal dwelling. All small entities that extend these loans are potentially subject to at least some aspects of the proposal. This proposal may impact small businesses, small nonprofit organizations, and small government jurisdictions. A “small business” is determined by application of SBA regulations and reference to the North American Industry Classification System (NAICS) classifications and size standards.
The Bureau can identify through data under HMDA, Reports of Condition and Income (Call Reports), and data from the National Mortgage Licensing System (NMLS) the approximate numbers of small depository institutions that would be subject to the final rule. Origination data is available for entities that report in HMDA, NMLS or the credit union
The following table provides the Bureau's estimate of the number and types of entities to which the proposed rule would apply:
The provisions of the proposed rule all provide or modify exemptions from the HPML appraisal requirements. Measured against the baseline of the burdens imposed by the 2013 Interagency Appraisals Final Rule, the Bureau believes that these proposed provisions impose either no or insignificant additional burdens on small entities. The Bureau believes that these proposed provisions would reduce the burdens associated with implementation costs, additional valuation costs, and compliance costs stemming from the HPML appraisal requirements. The Bureau also notes that creditors voluntarily choose whether to avail themselves of the exemptions.
The proposed rule would exempt from the HPML appraisal requirements a transaction secured by an existing manufactured home and not land. This provision would remove certain burdens imposed by the Final Rule on small entities extending HPMLs covered by the final rule when they are secured solely by existing manufactured homes, whether for refinance, home improvement, purchase transactions, or other purposes. The burdens removed would be those of providing a consumer notice, determining the applicability of the second appraisal requirement in purchase transactions, and obtaining, reviewing, and disclosing to consumers USPAP- and FIRREA-compliant appraisals. As discussed in the section-by-section analysis above, the Agencies are seeking comment on whether, to be eligible for this burden-reducing exemption, the creditor should be required to obtain an estimate of the value of the home based upon a published cost service method, a method required under HUD Title I programs, or an otherwise USPAP-complaint method, and provide a copy to the consumer no later than three business days before closing.
The requirement of obtaining an alternative valuation to qualify for the exemption might result in relatively less regulatory burden reduction. However, the Bureau understands from outreach that at least a cost estimate is often obtained in these transactions and, in any event, even if such a condition were adopted in the Final Rule, the decision to obtain an alternative estimate would be voluntary under this rule and the Bureau presumes that a small entity would not do so unless the exemption provided a net burden reduction versus obtaining a USPAP appraisal. Thus, the Bureau believes that the creditors would still experience a significant benefit from the exemption, even with this additional requirement. The Bureau requests comment on the impact of this proposed exemption on small entities. The Bureau also requests comment on how the impact would change, if at all, if the Agencies included a condition that the creditor obtain an estimate of the value of the home and provide this to the consumer.
As also discussed in the Bureau's Section 1022(b) analysis and in the section-by-section analysis, the Agencies are seeking comment on whether to narrow the scope of the exemption for new manufactured homes, and thereby subject transactions secured by both a new manufactured home and land to the HPML appraisal rules in the Final Rule, or to a condition that another type of valuation be obtained. If so narrowed or conditioned, the exemption adopted in the 2013 Final Rule would no longer relieve as much burden in these transactions.
Finally, as discussed in the Bureau's Section 1022(b) analysis and in the section-by-section analysis, the Agencies are seeking comment on whether to require the creditor to provide the consumer with a cost estimate of the value of the new manufactured home in transactions that are secured by a new manufactured home but not land. If adopted, this condition would not significantly change the amount of burden reduced by the existing exemption in these transactions, which comprise the significant majority of transactions involving new manufactured homes. The Bureau believes that the cost of obtaining an estimate of the value of the new manufactured home using a third-party cost source, and making appropriate adjustments, would be significantly less than the cost of obtaining a USPAP-complaint appraisal.
The proposed rule would provide an exemption for any transaction that is a refinancing satisfying certain conditions. In brief, the proceeds of the loan may only be used to pay off an existing first lien loan and to pay closing or settlement charges is exempt from the HPML appraisal requirements, provided the new loan has the same owner or guarantor as the existing loan, and provided further that the new loan provides for periodic payments that do not cause the principal balance to increase, allow for deferment in payment of principal, or result in a balloon payment.
This provision would remove the burden to small entities extending any HPMLs covered by the Final Rule under “streamlined” refinance programs of providing a consumer notice and obtaining, reviewing, and disclosing to consumers USPAP- and FIRREA-compliant appraisals. Under an alternative discussed in the section-by-section analysis above, to be eligible for this burden-reducing exemption, the creditor would need to obtain a valuation—which need not be a USPAP- and FIRREA-compliant appraisal—and provide it to the consumer no later than three business days before closing.
The regulatory burden reduction might be lower since a creditor would have to determine whether the refinancing loan is of the type that meets the exemption requirements. However, the Bureau believes that little if any additional time would be needed to make these determinations, as they depend upon basic information relating to the transaction that is typically already known to the creditor. Regulatory burden reduction might also be lower due to any additional condition the Agencies could adopt such as the condition of obtaining a valuation and providing it to the consumer, if one is not otherwise obtained through the normal creditor process as required by FIRREA regulations for some creditors and disclosed to the consumer as already required by the 2013 ECOA Valuations Rule. In either case, however, the decision to ensure eligibility for the exemption is voluntary and the Bureau presumes that a small entity would not do so unless the exemption provided a net burden reduction. The Bureau requests comment on the impact of this proposed exemption on small entities.
The proposed rule would exempt from the HPML appraisal requirements loans equal to or less than $25,000, adjusted annually for inflation. This provision would remove burden imposed by the final rule on small entities extending any HPMLs covered by the final rule up to $25,000.
Regulatory burden reduction might also be lower due to any additional condition the Agencies could adopt such as the condition of obtaining a valuation and/or providing the consumer with a copy of any valuation the creditor has obtained in connection with the application. However, the decision to ensure eligibility for the exemption is voluntary and the Bureau presumes that a small entity would not do so unless the proposed exemption provided a net burden reduction. The Bureau requests comment on the impact of this proposed exemption on small entities.
Each element of this proposal would reduce economic burden for small entities. The proposed exemption for HPMLs secured by existing manufactured homes and not land would lessen any economic impact resulting from the HPML appraisal requirements. The proposed exemption for “streamlined” refinance HPMLs also would lessen any economic impact on small entities extending credit pursuant to those programs, particularly those relating to the refinancing of existing loans held on portfolio. The proposed exemption for smaller-dollar HPMLs similarly would lessen burden on small entities extending credit in the form of HPMLs up to the threshold amount.
These impacts would be reduced to the extent the transactions are not already exempt from the Final Rule as qualified mortgages. While all of these proposed exemptions may entail additional recordkeeping costs, the Bureau believes that these costs are minimal and outweighed by the cost reductions resulting from the proposal. Small entities for which such cost reductions are outweighed by additional record keeping costs may choose not to utilize the proposed exemptions.
Accordingly, the undersigned certifies that if adopted this proposal would not have a significant economic impact on a substantial number of small entities. The Bureau requests comment on the analysis above and requests any relevant data.
The RFA generally requires that, in connection with a notice of proposed rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of a proposed rule on small entities.
As of March 31, 2013, there were approximately 3,711 small FDIC-supervised banks, which include 2,275 state nonmember banks and 158 state-chartered savings banks. The FDIC analyzed the 2011 HMDA
The proposed rule relates to the 2013 Interagency Appraisals Final Rule, issued by the Agencies on January 18, 2013, which goes into effect on January 18, 2014. The 2013 Interagency Appraisals Final Rule requires that creditors satisfy the following requirements for each HPML they originate that is not exempt from the Final Rule:
• The creditor must obtain a written appraisal; the appraisal must be performed by a certified or licensed appraiser; and the appraiser must conduct a physical property visit of the interior of the property.
• At application, the consumer must be provided with a statement regarding the purpose of the appraisal, that the creditor will provide the applicant a copy of any written appraisal, and that the applicant may choose to have a separate appraisal conducted for the applicant's own use at his or her own expense.
• The consumer must be provided with a free copy of any written appraisals obtained for the transaction at least three (3) business days before consummation.
• The creditor of an HPML must obtain an additional written appraisal, at no cost to the borrower, when the loan will finance the purchase of a consumer's principal dwelling and there has been an increase in the purchase price from a prior acquisition that took place within 180 days of the current purchase.
The Agencies are now proposing to amend the 2013 Interagency Appraisals Final Rule to provide the following changes and exemptions to requirements of the Final Rule:
• To provide a different definition of “business day” than the definition used in the Final Rule, as well as a few non-substantive technical corrections.
• To exempt transactions secured solely by an existing (used) manufactured home and not land.
• To exempt certain types of refinancings with characteristics common to refinance products often referred to as “streamlined” refinances.
• To exempt extensions of credit of $25,000 or less, indexed every year for inflation.
The proposed rule would exempt certain transactions that qualify as HPMLs under the 2013 Interagency Appraisals Final Rule from the appraisal requirements of the Final Rule, resulting in reduced regulatory burden to FDIC-supervised institutions that would have otherwise been required to obtain an appraisal and comply with the requirements for such HPML transactions.
It is the opinion of the FDIC that the proposed rule will not have a significant economic impact on a substantial number of small entities that it regulates in light of the fact that: (1) The proposed rule would reduce regulatory burden on small institutions by exempting certain transactions from the requirements of the 2013 Interagency Appraisals Final Rule; and (2) the FDIC previously certified that the 2013 Interagency Appraisals Final Rule would not have a significant economic impact on a substantial number of small entities. Accordingly, the FDIC certifies that the proposed rule, if adopted in final form, would not have a significant economic impact on a substantial number of small entities. Therefore, a regulatory flexibility analysis is not required.
Nonetheless, the FDIC seeks comment on whether the proposed rule, if adopted in final form, would impose undue burden on, or have unintended consequences for, small FDIC-supervised institutions and whether there are ways such potential burden or consequences could be minimized in a manner consistent with section 129H of TILA.
The supplemental proposal to amend the 2013 Interagency Appraisals Final Rule applies only to institutions in the primary mortgage market that originate mortgage loans. FHFA's regulated entities—Fannie Mae, Freddie Mac, and the Federal Home Loan Banks—operate in the secondary mortgage markets. In addition, these entities do not come within the meaning of small entities as defined in the RFA.
The RFA generally requires that, in connection with a notice of proposed rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities.
However, for purposes of the 2013 Interagency Appraisals Final Rule and for consistency with the Agencies, NCUA reviewed the dataset for FICUs that met the small entity standard for banking organizations under the SBA's regulations. As of March 31, 2012, there were approximately 6,060, FICUs with total assets of $175 million or less. Of the FICUs which reported 2010 HMDA data, 452 reported at least one HPML. The data reflects that only three FICUs originated at least 100 HPMLs, with no FICUs originating more than 500 HPMLs, and eighty-eight percent of reporting FICUs originating 10 HPMLs or less. Further, FICUs that met the SBA's definition of a small entity originated an average of 4 HPML loans each in 2010.
The 2013 Interagency Appraisals Final Rule requires that creditors satisfy the following requirements for each HPML they originate that is not exempt from the Final Rule:
• The creditor must obtain a written appraisal; the appraisal must be
• At application, the consumer must be provided with a statement regarding the purpose of the appraisal, that the creditor will provide the applicant a copy of any written appraisal, and that the applicant may choose to have a separate appraisal conducted for the applicant's own use at his or her own expense.
• The consumer must be provided with a free copy of any written appraisals obtained for the transaction at least three (3) business days before consummation.
• The creditor of an HPML must obtain an additional written appraisal, at no cost to the borrower, when the loan will finance the purchase of a consumer's principal dwelling and there has been an increase in the purchase price from a prior acquisition that took place within 180 days of the current purchase.
The Agencies are now proposing to amend the 2013 Interagency Appraisals Final Rule to provide the following changes and exemptions to requirements of the Final Rule:
• To provide a different definition of “business day” than the definition used in the Final Rule, as well as a few non-substantive technical corrections.
• To exempt transactions secured solely by an existing (used) manufactured home and not land from the HPML appraisal requirements.
• To exempt from the HPML appraisal rules certain types of refinancings with characteristics common to refinance products often referred to as “streamlined” refinances.
• To exempt from the HPML appraisal rules extensions of credit of $25,000 or less, indexed every year for inflation.
As previously explained, the proposed rule would align the definition of “business day” under the Final Rule with the definition of “business day” for the required disclosures to, among other things, improve streamlining and consistency in Regulation Z disclosures by avoiding the creditor having to provide the copy of the appraisal under the HPML rules and corrected Regulation Z disclosures at different times (because different definitions of “business day” would apply). In addition, the proposed rule would exempt certain transactions that qualify as HPMLs under the 2013 Interagency Appraisal Final Rule from the requirements of the Final Rule, resulting in reduced regulatory burden to FICUs that would have otherwise been required to obtain an appraisal and comply with the requirements for such HPML transactions. NCUA believes these proposed changes will only serve to lessen regulatory burdens imposed by the Final Rule.
In light of the fact that few loans made by FICUs would qualify as HPMLs, the fact that the NCUA certified that the 2013 Interagency Appraisal Final Rule would not have a significant economic impact on a substantial number of small entities, and that the proposal would only further reduce any regulatory burdens imposed on small credit unions by the Final Rule, NCUA believes the proposed rule will not have a significant economic impact on small FICUs.
For the reasons provided above, NCUA certifies that the proposed rule will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required.
Pursuant to section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility analysis otherwise required under section 603 of the RFA is not required if the agency certifies that the proposed rule will not, if promulgated, have a significant economic impact on a substantial number of small entities (defined for purposes of the RFA to include banks, savings institutions and other depository credit intermediaries with assets less than or equal to $500 million and trust companies with total assets of $35.5 million or less
As described previously in this preamble, section 1471 of the Dodd-Frank Act establishes a new TILA section 129H, which sets forth appraisal requirements applicable to higher-risk mortgages (termed “higher-priced mortgage loans” or HPMLs in the 2013 Interagency Appraisals Final Rule). The statute expressly excludes from these appraisal requirements coverage of “qualified mortgages,” the terms of which have been established by the CFPB as an exemption from its new TILA mortgage “ability to repay” underwriting requirements rule. In addition, the Agencies may jointly exempt a class of loans from the requirements of the statute if the Agencies determine that the exemption is in the public interest and promotes the safety and soundness of creditors.
The Agencies issued the Final Rule on January 18, 2013, which will be effective on January 18, 2014. Pursuant to the general exemption authority in the statute, the Final Rule exempts from coverage of the HPML appraisal rules the following transactions: Transactions secured by new manufactured homes; transactions secured by mobile homes, boats, or trailers; transactions to finance the initial construction of a dwelling; temporary or “bridge” loans with a term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months; and reverse mortgage loans. The Agencies are issuing this supplemental proposed rule to include three additional exemptions from the HPML appraisal requirements of section 129H of TILA: Transactions secured solely by an existing manufactured home and not land; certain “streamlined” refinancings; and extensions of credit of $25,000 or less, indexed every year for inflation.
The OCC currently supervises 1,842 banks (1,204 commercial banks, 63 trust companies, 527 federal savings associations, and 48 branches or agencies of foreign banks). We estimate that less than 1,291 of the banks supervised by the OCC are currently originating one- to four-family residential mortgage loans that could be HPMLs. Approximately 867 OCC supervised banks are small entities based on the SBA's definition of small entities for RFA purposes. Of these, the OCC estimates that 428 banks originate mortgages and therefore may be impacted by the proposed rule.
The OCC classifies the economic impact of total costs on a bank as significant if the total costs in a single year are greater than 5 percent of total salaries and benefits, or greater than 2.5 percent of total non-interest expense. The OCC estimates that the average cost per small bank, if the proposed rule is promulgated, will be zero. The proposal does not impose new requirements on banks or include new mandates. The OCC assumes any costs (e.g., alternative valuations) or requirements that may be associated with the proposed exemptions will be less than the cost of
Therefore, we believe the proposed rule will not have a significant economic impact on a substantial number of small entities. The OCC certifies that the proposed rule would not, if promulgated, have a significant economic impact on a substantial number of small entities.
Certain provisions of the 2013 Interagency Appraisals Final Rule contain “collection of information” requirements within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501
The collection of information requirements in the 2013 Final Rule are found in paragraphs (c)(3)(i), (c)(3)(ii), (c)(4), (c)(5), and (c)(6) of 12 CFR 1026.35.
A creditor is required to obtain an additional appraisal (Additional Written Appraisal) for a HPML that is subject to 12 CFR 1026.35(c) if (1) the seller acquired the property securing the loan 90 or fewer days prior to the date of the consumer's agreement to acquire the property and the resale price exceeds the seller's acquisition price by more than 10 percent; or (2) the seller acquired the property securing the loan 91 to 180 days prior to the date of the consumer's agreement to acquire the property and the resale price exceeds the seller's acquisition price by more than 20 percent.
The requirements provided in the 2013 Final Rule were described in the PRA section of that rule.
As explained in the 2013 Final Rule, for the Initial Appraisal Disclosure, the creditor is required to provide a short, written disclosure within three days of application. Because the disclosure is classified as a warning label supplied by the Federal government, the Agencies have assigned it no burden for purposes of this PRA analysis.
The estimated burden for the Written Appraisal requirements includes the creditor's burden of reviewing the Written Appraisal in order to satisfy the safe harbor criteria set forth in the rule and providing a copy of the Written Appraisal to the consumer. Additionally, as discussed above, an Additional Written Appraisal containing additional analyses is required in certain circumstances. The
The Agencies continue to estimate that respondents will take, on average, 15 minutes for each HPML that is subject to 12 CFR 1026.35(c) to review the Written Appraisal and to provide a copy of the Written Appraisal. The Agencies further continue to estimate that respondents will take, on average, 15 minutes for each HPML that is subject to 12 CFR 1026.35(c) to investigate and verify the need for an Additional Written Appraisal and, where necessary, an additional 15 minutes to review the Additional Written Appraisal and to provide a copy of the Additional Written Appraisal. For the small fraction of loans requiring an Additional Written Appraisal, the burden is similar to that of the Written Appraisal.
The Agencies use the estimated burden from the PRA section of the 2013 Final Rule as the starting baseline for analyzing the impact the three exemptions in the proposal would have on PRA burden if adopted. The estimated number of appraisals per respondent for the FDIC, Board, OCC, and NCUA respondents has been updated to account for the exemption for qualified mortgages adopted in the 2013 Final Rule, which had not been accounted for in the table published at that time, as discussed in the PRA section of the Final Rule.
First, the Agencies find that, currently, only a small minority of refinances involves cash out beyond the levels eligible for this proposed exemption, and as a result most refinance loans may qualify for this exemption. The Agencies therefore assume that the proposed exemption for certain refinances affects all the refinance loans discussed in the analysis under Section 1022(b)(2) of the 2013 Final Rule, and thus would eliminate all of the approximately 1,200 new appraisals that had been estimated to result from these refinances as a result of Final Rule (out of the 3,800 total new Written Appraisals estimated to occur in the Final Rule, or roughly 32%).
Second, based on the HMDA 2011 data, the Agencies find that 12 percent of all HPMLs are under $25,000. The Agencies believe that this implies that there will be, proportionately, 12 percent fewer appraisals based on the exemption for small dollar loans.
Third, the Agencies find that many of the transactions secured by existing manufactured homes and not land involve either refinances (all of which are conservatively assumed to be covered by the proposed exemption for certain refinances), or smaller dollar loans (which cover many types of manufactured housing transactions).
The numbers above affect only the first panel in the Table 3 of the PRA section of the Final Rule. Refinances are not subject to the requirement to obtain an Additional Written Appraisal under the 2013 Final Rule, and it is conservatively assumed that none of the smaller dollar loans or the loans secured by manufactured homes sited on leased land were used to purchase homes being resold within 180 days with the requisite price increases to trigger that requirement (and thus the proposed exemptions for those loans will not reduce any burden associated with that requirement). Accordingly, only the first panel in Table 3 from the 2013 Final Rule is being updated and the estimates in the second and third panels remain the same. The updated table is reproduced below. The one-time costs are also not affected.
The following table summarizes the resulting burden estimates.
Finally, as explained in the PRA section of the 2013 Final Rule, respondents must also review the instructions and legal guidance associated with the Final Rule and train loan officers regarding the requirements of the Final Rule. The Agencies continue to estimate that these one-time costs are as follows: Bureau: 36,383 hours; FDIC: 10,284 hours; Board 3,344 hours; OCC: 19,586 hours; NCUA: 7,311 hours.
The Agencies have a continuing interest in the public opinion of our collections of information. At any time, comments regarding the burden
The 2013 Final Rule and this proposal do not contain any collections of information applicable to the FHFA, requiring review by OMB under the PRA. Therefore, FHFA has not submitted any materials to OMB for review.
Certain conventions have been used to highlight the Federal Reserve System's proposed revisions. New language is shown inside ▸bold-faced arrows◂, while language that would be deleted is shown inside [bold-faced brackets].
Appraisal, Appraiser, Banks, Banking, Consumer protection, Credit, Mortgages, National banks, Reporting and recordkeeping requirements, Savings associations, Truth in lending.
Advertising, Appraisal, Appraiser, Consumer protection, Credit, Federal Reserve System, Mortgages, Reporting and recordkeeping requirements, Truth in lending.
Advertising, Appraisal, Appraiser, Banking, Banks, Consumer protection, Credit, Credit unions, Mortgages, National banks, Reporting and recordkeeping requirements, Savings associations, Truth in lending.
For the reasons set forth in the preamble, the OCC proposes to amend 12 CFR Part 34, as previously amended at 78 FR 10368, 10432 (Feb. 13, 2013), effective January 18, 2014, as follows:
12 U.S.C. 1
(a) Business day has the same meaning as in 12 CFR 1026.2(a)(6).
(b)
(1) A qualified mortgage pursuant to 15 U.S.C. 1639c;
(2) A transaction:
(i) Secured by a new manufactured home; or
(ii) Secured solely by an existing manufactured home and not land.
(5) A loan with a maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling.
(7) An extension of credit that is a refinancing, as defined under 12 CFR 1026.20(a) except that the creditor need not be the original creditor or a holder or servicer of the original obligation, and that meets the following criteria:
(i) The owner or guarantor of the refinance loan is the current owner or guarantor of the existing obligation;
(ii) The regular periodic payments under the refinance loan do not:
(A) Cause the principal balance to increase;
(B) Allow the consumer to defer repayment of principal; or
(C) Result in a balloon payment, as defined in 12 CFR 1026.18(s)(5)(i); and
(iii) The proceeds from the refinance loan are used solely for the following purposes:
(A) To pay off the outstanding principal balance on the existing obligation; and
(B) To pay closing or settlement charges required to be disclosed under the Real Estate Settlement Procedures Act, 12 U.S.C. 2601
(8) An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in Appendix C to Subpart G—OCC Interpretations,
The revisions read as follows:
1.
1.
1.
1.
1.
1.
i. From January 18, 2014, through December 31, 2014, the threshold amount is $25,000.
2.
3.
For the reasons stated above, the Board of Governors of the Federal Reserve System proposes to amend Regulation Z, 12 CFR Part 226, as previously amended at 78 FR 10368, 10437 (Feb. 13, 2013), effective January 18, 2014, as follows:
12 U.S.C. 3806; 15 U.S.C. 1604, 1637(c)(5), 1639(l), and 1639h; Pub. L. 111–24 section 2, 123 Stat. 1734; Pub. L. 111–203, 124 Stat. 1376.
(a)
(6)
(b)
(1) A qualified mortgage as defined [in 12 CFR 1026.43(e)]▸pursuant to 15 U.S.C. 1639c◂;
(2) A transaction▸:
(i) S◂[s]ecured by a new manufactured home;▸ or
(ii) Secured solely by an existing manufactured home and not land.◂
(5) A loan with ▸a◂ maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling.
▸(7) An extension of credit that is a refinancing, as defined under 12 CFR 1026.20(a), except that the creditor need not be the original creditor or a holder or servicer of the original obligation, and that meets the following criteria:
(i) The owner or guarantor of the refinance loan is the current owner or guarantor of the existing obligation;
(ii) The regular periodic payments under the refinance loan do not:
(A) Cause the principal balance to increase;
(B) Allow the consumer to defer repayment of principal; or
(C) Result in a balloon payment, as defined in 12 CFR 1026.18(s)(5)(i); and
(iii) The proceeds from the refinance loan are used solely for the following purposes:
(A) To pay off the outstanding principal balance on the existing obligation; and
(B) To pay closing or settlement charges required to be disclosed under the Real Estate Settlement Procedures Act, 12 U.S.C. 2601
(8) An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in the official staff commentary to this paragraph (b)(8).◂
The revisions read as follows:
43(b) Exemptions.
1.
▸
1.
▸
1.
P
1.
1.
1.
i. From January 18, 2014, through December 31, 2014, the threshold amount is $25,000.
2.
3.
[2.
▸2◂[3].
For the reasons stated above, the Bureau proposes to amend Regulation Z, 12 CFR part 1026, as previously amended, including on February 13, 2013 (78 FR 10368, 10442 (Feb. 13, 2013)), effective January 18, 2014, as follows:
12 U.S.C. 2601, 2603–2605, 2607, 2609, 2617, 5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.
(a)
(6)
(c)
(2)
(i) A qualified mortgage as defined pursuant to 15 U.S.C. 1639c;
(ii) A transaction:
(A) Secured by a new manufactured home; or
(B) Secured solely by an existing manufactured home and not land.
(v) A loan with a maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling.
(vii) An extension of credit that is a refinancing, as defined under § 1026.20(a) except that the creditor need not be the original creditor or a holder or servicer of the original obligation, and that meets the following criteria:
(A) The owner or guarantor of the refinance loan is the current owner or guarantor of the existing obligation;
(B) The regular periodic payments under the refinance loan do not:
(
(
(
(C) The proceeds from the refinance loan are used solely for the following purposes:
(
(
(viii) An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in the official staff commentary to this paragraph (c)(2)(viii).
The revisions read as follows:
1.
1.
1.
1.
1.
1.
i. From January 18, 2014, through December 31, 2014, the threshold amount is $25,000.
2.
3.
By order of the Board of Directors.