High-Price Appraisal Rule; 17 Months and Counting

In conjunction with the story on TMHA board action, we thought it important to remind our membership about the HPML Appraisal Rule.  With so many new regulations which are currently live now, like the Loan Originator Compensation and Ability to Repay rules, the coming HPML Appraisal rule might not have received the attention it should have by some of our members.

The rule was published on Dec 12, 2013: www.federalregister.gov/articles/2013/12/26/2013-30108/appraisals-for-higher-priced-mortgage-loans 

The industry was given an 18-month window before the rule becomes effective on July 18, 2015.

The rule applies to what are called “high-priced mortgage loans” (HPML).  These are loans where the APR is above 1.5% of APOR.  APOR rates come out weekly and vary on terms of the loan.  However, it is commonly thought that nearly all MH loans will be HPMLs due to the interest rate space lenders currently live in. 

The rule provides a couple of exclusions.  First, any home under $25,000 does not have to get the appraisal.  The $25,000 amount is indexed for inflation each year.  Second, any loan that is a qualified mortgage is similarly excluded.

For all other loans the rule breaks down the treatment of MH loans into three categories: 1) used with land, 2) new with land, and 3) new or used home only (chattel).

1. Used with land – must get a full USPAP appraisal
2. New with land – full USPAP appraisal, but no actual physical interior inspection is required
3. New and Used home only – three options:
   a. Manufacturer invoice
   b. An independent cost service unit cost
   c. Third party person with no interest in the property or credit transaction that has training in valuing MH

From the Rule:

“All loans secured in whole or in part by a manufactured home will be exempt from the HPML appraisal rules for 18 months, until July 18, 2015. For loan applications received on or July 18, 2015, the following changes will apply:

Transactions secured by a new manufactured home and land will be exempt from the requirement that the appraisal include a physical inspection of the interior of the property, but will be subject to all other HPML appraisal requirements.

Transactions secured by an existing (used) manufactured home and land will not be exempt from the rules.

Transactions secured solely by a manufactured home and not land will be exempt from the rules if the creditor gives the consumer one of three types of information about the home's value:

• The manufacturer's invoice of the unit cost (for a transaction secured by a new manufactured home).
• An independent cost service unit cost.
• A valuation conducted by an individual who has no financial interest in the property or credit transaction, and has training in valuing manufactured homes. [1] An example would be an appraisal conducted according to procedures approved by the U.S. Department of Housing and Urban Development (HUD) for existing (used) home-only transactions.”