Agencies increase mortgage appraisal threshold to $26k

An exemption threshold amount for appraisals on mortgages will increase to loans of $26,000 or less (from $25,500 or less), according to a final rule to be published by two federal banking regulators and the Consumer Financial Protection Bureau (CFPB), and effective Jan. 1.

The final rule is scheduled to be published in the Nov. 9 Federal Register.

The rule – finalized jointly by the CFPB, the Federal Reserve and the Office of the Comptroller of the Currency (OCC) – updates rules adopted by the three agencies in 2013. Additionally, in 2013, the Federal Deposit Insurance Corp. (FDIC), National Credit Union Administration (NCUA), and the Federal Housing Finance Administration (FHFA) adopted the CFPB’s version of the regulations as final rules or, in NCUA’s case, as a supplemental final rule. The rules issued by the agencies four years ago were effective Jan. 1, 2014.

The rule applies portions of the Truth in Lending Act (TILA) which establishes special appraisal requirements for “higher-risk mortgages,” termed “higher-priced mortgage loans” or “HPMLs” in the agencies’ regulations.

The agencies’ rules require that the loan threshold amount be adjusted annually based on any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The rule uses a complex approach which states that if there is no annual percentage increase in the CPI-W, the OCC, the Board, and the Bureau will not adjust this exemption threshold from the prior year.

However, in years following a year in which the exemption threshold was not adjusted, the threshold is calculated by applying the annual percentage increase in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account.

Based on the CPI-W in effect as of June 1, 2017, the agencies found, the exemption threshold will increase from $25,500 to $26,000 effective Jan. 1, 2018.

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