Appraisal Exemptions for Streamline Refis and Low Balance Loans

Both very small mortgages andrnsome “streamlined” refinancings will exempted from certain of thernappraisal requirements for higher-priced mortgages (the agencies use the term “higher-priced” as opposed to the original term “higher risk”) set to go into effect inrnJanuary.  In a joint release six federalrnregulators said that the exemptions are intended to save borrowers time andrnmoney while still ensuring that the loans are financially sound. </p

Under the Dodd-Frank Actrnhigher-priced loans, those with interest rates above a certain threshold, arernrequired have a written appraisal based on a physical inspection of the homes’rninterior.  The new regulations willrnexempt loans, either for refinancing or home purchase, with a principal balancernunder $25,000 from this requirement.  Therndollar amount of this exemption will be indexed each year for inflation.</p

Also exempted from thernappraisal requirement are streamlined refinances as long as the loans do notrnfeature negative amortization or interest only terms and the ‘credit risk holder’ (which can either mean the lender or the insuring agency) remainsrnthe same on the new loan as on the old.</p

The final rulernalso contains special provisions for manufactured homes which will be exemptedrnfrom the appraisal requirements until July 18, 2015.  After that data loans secured by an existingrnmanufactured home and land will be subject to an interior inspection and writtenrnappraisal.  A loan secured by a newrnmanufactured home and land will not require a physical inspection of therninterior of the home and a loan secured only by the manufactured home withoutrnland can be valued by methods other than an appraisal such as by use of a bookrnvalue.  </p

The clarificationrnto the appraisal rule was issued by the Board of Governors of the Federal Reserve System, ConsumerrnFinancial ProtectionrnBureau, Federal Deposit InsurancernCorporation, Federal Housing Finance Agency, National CreditrnUnion Administration, and the Office of the Comptroller of the Currency</p

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