Appraisal exemption amount for smaller, higher-priced mortgages rises in 2019

Mortgage loans that are “higher-priced” under federal mortgage rules and that don’t exceed $26,700 will be exempt from federal appraisal requirements in 2019, federal banking and consumer protection agencies said in an announcement Wednesday.

The agencies – the Federal Reserve Board, Office of the Comptroller of the Currency (OCC), and Bureau of Consumer Financial Protection (BCFP, formerly known as CFPB) – approved an increase of $700 in the appraisal threshold amount for smaller, higher-priced loans for the coming year. The threshold in effect currently, and through year-end, is $26,000.

The $26,700 threshold amount will be effective January 1, 2019, and is based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as of June 1, 2018, the agencies said.

The change was approved as final amendments to the agencies’ official interpretations for their regulations implementing section 129H of the Truth in Lending Act (TILA). Section 129H of TILA establishes special appraisal requirements for “higher-risk mortgages,” termed “higher-priced mortgage loans” or “HPMLs” in the rules. Among these is a requirement that creditors obtain a written appraisal based on a physical visit to the home’s interior before making a higher-priced mortgage loan.

The special rules for HPMLs were promulgated under Dodd-Frank Wall Street Reform and Consumer Protection Act amendments to TILA.

The rules contain an exemption for loans of $25,000 or less, with this threshold to be adjusted annually to reflect increases in the CPI-W. If there is no annual percentage increase in the CPI-W, the agencies will not adjust the threshold from the prior year. But in years following one in which the exemption threshold was not adjusted, they note, the threshold is calculated by applying the annual percentage change in 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.

A notice is slated for publication Friday in the Federal Register.

Appraisals for Higher-Priced Mortgage Loans Exemption Threshold