Appraisals and Valuations

Federal agencies raise threshold for smaller loan exemption from appraisal requirements

Threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will jump to $31,000 from $28,500

The Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the Federal Reserve Board on Thursday announced that the 2023 threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will jump to $31,000 from $28,500.

The threshold amount will be effective Jan. 1, 2023, and is based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1.

In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act added special appraisal requirements for higher-priced mortgage loans, including that creditors must obtain a written appraisal based on a physical visit to the interior of the home before making a higher-priced mortgage loan. 

In December 2013, the rules were amended to contain an exemption for loans of $25,000 or less, adjusted annually to reflect CPI-W increases. The Fed noted that if there is no annual percentage increase in the CPI-W, the agencies will not adjust this exemption threshold from the prior year. 

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

In March 2022, the Federal Housing Finance Agency (FHFA) made hybrid appraisals a permanent fixture. Both Fannie Mae and Freddie Mac now allow appraisals to be conducted remotely, using public records such as listings and tax appraisals, for purchase loans.

Why is now the time for lenders to modernize their appraisal processes

HousingWire recently spoke with Erin Reen, Vice president of originations, valuations and operations at ServiceLink about approaching appraisal modernization in an innovative way while addressing logistical challenges along the way. 

Presented by: ServiceLink

Effective July 17, Freddie Mac began to accept some mortgages with hybrid appraisals. Fannie Mae also plans to use hybrid appraisals more often in 2022, as part of its equity plan.

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