High cost mortgages and the new CFPB appraisal rules

With the new CFPB rules taking effect in January of 2014 all lenders need to be very aware of the rules and make plans now to ensure they remain compliant. One of the new rules involves appraisals when funding a high cost mortgage. Of course before you can prepare for the changes to come you must first have a basic understanding of what makes a loan a high cost mortgage. Let’s examine that and the appraisal requirements when you have a high cost mortgage.

High Cost Mortgages: Applies when the new loan exceeds the Average Prime Offering Rate (APOR) by:

1.5%  –  Conventional 1st Mortgages

2.5%   –  Jumbo 1st Mortgages

3.5%  –  2nd Mortgages

The CFPB appraisal rules only applies when you have a high cost mortgage as defined above and the property is the primary dwelling. There are several restrictions/requirements regarding appraisals when working in the high cost mortgage arena such as:

1). You must use a licensed or certified appraiser who certifies that the appraisal complies with all USPAP and FIRREA guidelines.

2). The appraiser must physically visit the property and view the interior.

3). The lender must provide disclosures to the borrower within 3 business days explaining the consumers rights regarding the appraisal.

4). The lender must provide the borrower with a copy of the appraisal within 3 days of closing

5). A second appraisal must be ordered (at the lenders expense) if the property was recently acquired and the resale price exceeds the previous price by the following thresholds:

A). Over 10% if within 90 days

B). Over 20% from 91 – 180 days

Of course it is never that easy, not when we are dealing with CFPB, compliance and regulations. There are several exceptions to these requirments:

Exceptions to the appraisal requirements

1). Qualified Mortgages

2). Reverse Mortgages

3). Initial construction loans

4). Bride loans (less than 12 months)

5). Manufactured/mobile or live aboard boat loans


We are now within 6 months of these new rules going into effect and as a compliance officer, COO or anybody else involved in mortgage lending time is running short to get your plans in place. The sheer number of rules and regulations that are coming at us and the complexity of them should be a wakeup call to all involved. If you have not already begun to make plans or need further clarification or ideas on how to get ready, reach out to your vendors and resources.  Your third party appraisal management company should have policies and procedures in place to help you navigate your way through the regulation mine field.  Call us today or visit us online to see how we can help!


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