WASHINGTON—With Regulation Z identifying additional compliance requirements associated with loan transactions that are considered higher-priced, CUNA has broken down these requirements and identified the updated higher-priced mortgage loan (HPML) appraisal exemption threshold for 2018.
An HPML is a closed-end consumer credit transaction secured by the borrower's principal dwelling with an annual percentage rate that exceeds the average prime offer rate by:
- 1.5% or more for non-jumbo (<$424,100) 1st lien loans
- 2.5% or more for jumbo (>$424,100) 1st lien loans
- 3.5% or more for subordinate lien loans
The following additional compliance requirements apply to a loan transaction that is higher-priced:
- The credit union must escrow for property taxes and insurance premiums in connection with a first lien HPML for a minimum of five years (or until the loan is paid off if payoff occurs earlier)
- The credit union must obtain two appraisals in connection with an HPML secured by a "flipped" property
- The credit union must obtain a written appraisal of the property securing the HPML
CUNA added that there are several exceptions to the mandatory appraisal requirement for an HPML. The credit union may instead rely upon an alternative method of valuation for:
- HPML's that are also classified as a qualified mortgage under the ability-to-repay rule
- Loans secured by a mobile home, boat or trailer
- Construction loans
- Bridge loans with a term of 12 months or less
- Reverse mortgages
- Loans for an amount equal to or less than a threshold established annually by the Consumer Financial Protection Bureau
This appraisal exemption threshold was $25,500 for 2017, CUNA noted. The CFPB published a final rule in the Federal Register earlier this month which increases this amount to $26,000 for calendar year 2018.