Changes Proposed to Calculation of HPML Appraisal Requirement Threshold

The Consumer Financial Protection Bureau, Office of Comptroller of the Currency (OCC), and the Federal Reserve are proposing technical changes to the method in which the financial threshold for "higher-priced mortgages" are adjusted annually.  The change, published in the Federal Register on Thursday, affects section 129H 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 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) amended TILA to add special appraisal requirements for "higher-risk mortgages" Subsequent revisions exempted transactions below a threshold (set at $25,000 in 2013) from the new HPML appraisal rules. 

The threshold for the HPML exemption is to be adjusted annually for inflation based on any annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).  Without a change in this index, the exemption threshold remains at the previous year's level.  Any increase in the threshold amount is to be rounded to the nearest $100 or $1,000 increment.

The proposed rule changes the calculation of the threshold amount to result in an actual amount and a baseline amount.  The actual amount for the upcoming year cannot be less than that of the previous year.  The baseline amount would be used to calculate a threshold for the upcoming year when the current year is one in which the actual calculation would have caused the threshold to decrease.

Comments on the changes will be received by the Fed, OCC and CFPB until September 6.  A link to the entire rule can be found at https://www.federalregister.gov/articles/2016/08/04/2016-18058/appraisals-for-higher-priced-mortgage-loans-exemption-threshold.