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Tuesday, October 16, 2012

ABA on Higher-Risk Mortgage Proposed Rule

ABA has filed a comment letter with the Federal Reserve, CFPB, FDIC, FHFA, and the OCC on a proposed rule regarding appraisals for higher risk mortgage loans, which would implement amendments to the Truth in Lending Act (TILA) pertaining to appraisal requirements applicable to “higher-risk mortgages.” These changes are required under Section 1471 of Dodd-Frank Act.

ABA comments are summarized as follows:
  • ABA supports the specific references to the Uniform Standards of Professional Appraisal Practice when defining “certified or licensed appraiser” under these regulations—such reference will add clarity and order.
  • ABA urges that the Agencies craft the proposed “higher-risk mortgage” triggers so that they match and duplicate, as much as practicable, the Higher Priced Mortgage Loan rules (HPML) formulas under TILA—uniformity in definitions will greatly decrease regulatory burdens.
  • ABA opposes the move to an “All-In” finance charge calculation method. This change would greatly complicate implementation, be of great cost to banks, and offer little benefit to consumer understanding.
  • ABA recommends that the Agencies adopt a general exclusion for temporary loans, such as construction and bridge loans.
  • ABA recommends additional exemptions to the second appraisal requirement in certain circumstances.
  • Agencies should adopt rules that generally mirror FHA’s anti-flipping provision where two appraisals will be required.
  • ABA has important concerns with the new disclosure that the consumer may order their own appraisal, and recommend simple changes to ensure the consumer is better informed about the particular requirements under this law.

Read the proposed rule.

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