# Appraisals for Higher-Priced Mortgage Loans-Supplemental Proposal > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2013-17086 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** August 8, 2013 - **Citation:** 78 FR 48548 ## Text DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 34 [Docket No. OCC-2013-0009] RIN 1557-AD70 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 12 CFR Part 226 [Docket No. R-1443] RIN 7100-AD90 BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 [Docket No. CFPB-2013-0020] RIN 3170-AA11 Appraisals for Higher-Priced Mortgage Loans—Supplemental Proposal AGENCIES: Board of Governors of the Federal Reserve System (Board); Bureau of Consumer Financial Protection (Bureau); Federal Deposit Insurance Corporation (FDIC); Federal Housing Finance Agency (FHFA); National Credit Union Administration (NCUA); and Office of the Comptroller of the Currency, Treasury (OCC). ACTION: Proposed rule; request for public comment. SUMMARY: The Board, Bureau, FDIC, FHFA, NCUA, and OCC (collectively, the Agencies) are proposing to amend Regulation Z, which implements the Truth in Lending Act (TILA), and the official interpretation to the regulation. This proposal relates to a final rule issued by the Agencies on January 18, 2013 (2013 Interagency Appraisals Final Rule or Final Rule), which goes into effect on January 18, 2014. The Final Rule implements a provision added to TILA by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act or Act) requiring appraisals for “higher-risk mortgages.” For certain mortgages with an annual percentage rate that exceeds the average prime offer rate by a specified percentage, the Final Rule requires creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used. The Agencies are proposing amendments to the Final Rule implementing these requirements; specifically, the Agencies are proposing exemptions from the rules for: transactions secured by existing manufactured homes and not land; certain “streamlined” refinancings; and transactions of $25,000 or less. DATES: Comments must be received on or before September 9, 2013, except that comments on the Paperwork Reduction Act analysis in part VIII of the Supplementary Information must be received on or before October 7, 2013. ADDRESSES: Interested parties are encouraged to submit written comments jointly to all of the Agencies. Commenters are encouraged to use the title “Appraisals for Higher-Priced Mortgage Loans—Supplemental Proposal” to facilitate the organization and distribution of comments among the Agencies. Commenters also are encouraged to identify the number of the specific question for comment to which they are responding. Interested parties are invited to submit written comments to: Board: You may submit comments, identified by Docket No. R-1443 or RIN 7100-AD90, by any of the following methods: • Agency Web site: http://www.federalreserve.gov. Follow the instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm. • Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. • Email: regs.comments@federalreserve.gov. Include the docket number in the subject line of the message. • Fax: (202) 452-3819 or (202) 452-3102. • Mail: Address to Robert deV. Frierson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. All public comments will be made available on the Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons. Accordingly, comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper in Room MP-500 of the Board's Martin Building (20th and C Streets NW., Washington, DC 20551) between 9:00 a.m. and 5:00 p.m. on weekdays. Bureau: You may submit comments, identified by Docket No. CFPB-2013-0020 or RIN 3170-AA11, by any of the following methods: • Electronic: http://www.regulations.gov. Follow the instructions for submitting comments. • Mail: Monica Jackson, Office of the Executive Secretary, Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20552. • Hand Delivery/Courier in Lieu of Mail: Monica Jackson, Office of the Executive Secretary, Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20552. All submissions must include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. In general, all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public inspection and copying at 1700 G Street NW., Washington, DC 20552, on official business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect the documents by telephoning (202) 435-7275. All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or social security numbers, should not be included. Comments will not be edited to remove any identifying or contact information. FDIC: You may submit comments by any of the following methods: • Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. • Agency Web site: http://www.FDIC.gov/regulations/laws/federal/propose.html. • Mail: Robert E. Feldman, Executive Secretary, Attention: Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th Street NW., Washington, DC 20429. • Hand Delivered/Courier: The guard station at the rear of the 550 17th Street Building (located on F Street), on business days between 7:00 a.m. and 5:00 p.m. • Email: comments@FDIC.gov. Comments submitted must include “FDIC” and “Truth in Lending Act (Regulation Z).” Comments received will be posted without change to http://www.FDIC.gov/regulations/laws/federal/propose.html, including any personal information provided. FHFA: You may submit your comments, identified by regulatory information number (RIN) 2590-AA58, by any of the following methods: • Email: Comments to Alfred M. Pollard, General Counsel, may be sent by email to RegComments@fhfa.gov. Please include “RIN 2590-AA58” in the subject line of the message. • Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. If you submit your comment to the Federal eRulemaking Portal, please also send it by email to FHFA at RegComments@fhfa.gov to ensure timely receipt by the Agency. Please include “RIN 2590-AA58” in the subject line of the message. • Hand Delivered/Courier: The hand delivery address is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA58, Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., Washington, DC 20024. The package should be logged in at the Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m. • U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service: The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA58, Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., Washington, DC 20024. Copies of all comments will be posted without change, including any personal information you provide, such as your name, address, email address, and phone number, on the FHFA Internet Web site at http://www.fhfa.gov. In addition, copies of all comments received will be available for examination by the public on business days between the hours of 10 a.m. and 3 p.m., Eastern Time, at the Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., Washington, DC 20024. To make an appointment to inspect comments, please call the Office of General Counsel at (202) 649-3804. NCUA: You may submit comments, identified by RIN 3133-AE21, by any of the following methods (Please send comments by one method only): • Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. • NCUA Web site: http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx . Follow the instructions for submitting comments. • Email: Address to regcomments@ncua.gov. Include “[Your name] Comments on Appraisals for Higher-Priced Mortgage Loans—Supplemental Proposal” in the email subject line. • Fax: (703) 518-6319. Use the subject line described above for email. • Mail: Address to Mary Rupp, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. • Hand Delivery/Courier in Lieu of Mail: Same as mail address. You can view all public comments on NCUA's Web site at http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as submitted, except for those we cannot post for technical reasons. NCUA will not edit or remove any identifying or contact information from the public comments submitted. You may inspect paper copies of comments in NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by appointment weekdays between 9:00 a.m. and 3:00 p.m. To make an appointment, call (703) 518-6546 or send an email to OGCMail@ncua.gov. OCC: Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by the Federal eRulemaking Portal or email, if possible. Please use the title “Appraisals for Higher-Priced Mortgage Loans—Supplemental Proposal” to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods: • Federal eRulemaking Portal—“regulations.gov”: Go to http://www.regulations.gov. Enter “Docket ID OCC-2013-0009” in the Search Box and click “Search”. Results can be filtered using the filtering tools on the left side of the screen. Click on “Comment Now” to submit public comments. • Click on the “Help” tab on the Regulations.gov home page to get information on using Regulations.gov, including instructions for submitting public comments. • Email: regs.comments@occ.treas.gov. • Mail: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219. • Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219. • Fax: (571) 465-4326. Instructions: You must include “OCC” as the agency name and “Docket ID OCC-2013-0009” in your comment. In general, OCC will enter all comments received into the docket and publish them on the Regulations.gov Web site without change, including any business or personal information that you provide such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials that pertain to this rulemaking action by any of the following methods: • Viewing Comments Electronically: Go to http://www.regulations.gov. Enter “Docket ID OCC-2013-0009” in the Search box and click “Search.” Comments can be filtered by Agency using the filtering tools on the left side of the screen. • Click on the “Help” tab on the Regulations.gov home page to get information on using Regulations.gov, including instructions for viewing public comments, viewing other supporting and related materials, and viewing the docket after the close of the comment period. • Viewing Comments Personally: You may personally inspect and photocopy comments at the OCC, 400 7th Street SW., Washington, DC. For security reasons, the OCC requires that visitors make an appointment to inspect comments. You may do so by calling (202) 649-6700. Upon arrival, visitors will be required to present valid government-issued photo identification and to submit to security screening in order to inspect and photocopy comments. Docket: You may also view or request available background documents and project summaries using the methods described above. FOR FURTHER INFORMATION CONTACT: Board: Lorna Neill or Mandie Aubrey, Counsels, Division of Consumer and Community Affairs, at (202) 452-3667, Carmen Holly, Supervisory Financial Analyst, Division of Banking Supervision and Regulation, at (202) 973-6122, or Kara Handzlik, Counsel, Legal Division, (202) 452-3852, Board of Governors of the Federal Reserve System, Washington, DC 20551. Bureau: Owen Bonheimer, Counsel, or William W. Matchneer, Senior Counsel, Division of Research, Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20552, at (202) 435-7000. FDIC: Beverlea S. Gardner, Senior Examination Specialist, Risk Management Section, at (202) 898-3640, Sandra S. Barker, Senior Policy Analyst, Division of Consumer Protection, at (202) 898-3615, Mark Mellon, Counsel, Legal Division, at (202) 898-3884, Kimberly Stock, Counsel, Legal Division, at (202) 898-3815, or Benjamin Gibbs, Senior Regional Attorney, at (678) 916-2458, Federal Deposit Insurance Corporation, 550 17th St. NW., Washington, DC 20429. FHFA: Susan Cooper, Senior Policy Analyst, (202) 649-3121, Lori Bowes, Policy Analyst, Office of Housing and Regulatory Policy, (202) 649-3111, Ming-Yuen Meyer-Fong, Assistant General Counsel, Office of General Counsel, (202) 649-3078, Federal Housing Finance Agency, 400 Seventh Street SW., Washington, DC, 20024. NCUA: John Brolin and Pamela Yu, Staff Attorneys, or Frank Kressman, Associate General Counsel, Office of General Counsel, at (703) 518-6540, or Vincent Vieten, Program Officer, Office of Examination and Insurance, at (703) 518-6360, or 1775 Duke Street, Alexandria, Virginia, 22314. OCC: Robert L. Parson, Appraisal Policy Specialist, (202) 649-6423, G. Kevin Lawton, Appraiser (Real Estate Specialist), (202) 649-7152, Carolyn B. Engelhardt, Bank Examiner (Risk Specialist—Credit), (202) 649-6404, Charlotte M. Bahin, Senior Counsel or Mitchell Plave, Special Counsel, Legislative & Regulatory Activities Division, (202) 649-5490, Krista LaBelle, Special Counsel, Community and Consumer Law Division, (202) 649-6350, or 400 Seventh Street SW., Washington DC 20219. SUPPLEMENTARY INFORMATION: I. Summary of the Proposed Rule As discussed in detail under part II of this Supplementary Information, section 1471 of the Dodd-Frank Act created new TILA section 129H, which establishes special appraisal requirements for “higher-risk mortgages.” 15 U.S.C. 1639h. The Agencies adopted the 2013 Interagency Appraisals Final Rule to implement these requirements (adopting the term “higher-priced mortgage loans” (HPMLs) instead of “higher-risk mortgages”). The Agencies believe that several additional exemptions from the new appraisal rules may be appropriate. Specifically, the Agencies are proposing an exemption for transactions secured by an existing manufactured home and not land, certain types of refinancings, and transactions of $25,000 or less (indexed for inflation). The Agencies solicit comment on these proposed exemptions. In addition, the Agencies are proposing a different definition of “business day” than the definition used in the Final Rule, as well as a few non-substantive technical corrections. A. Proposed Exemption for Transactions Secured Solely by an Existing Manufactured Home and Not Land The Agencies propose to exempt transactions secured solely by an existing (used) manufactured home and not land from the HPML appraisal requirements, but seek comment on whether an alternative valuation type should be required. The Agencies propose to retain coverage of loans secured by existing manufactured homes and land. The Agencies also propose to retain the exemption for transactions secured by new manufactured homes, but are seeking further comment on the scope of this exemption and whether certain conditions on the exemption might be appropriate. B. Proposed Exemption for Certain Refinancings The Agencies are also proposing to exempt from the HPML appraisal rules certain types of refinancings with characteristics common to refinance products often referred to as “streamlined” refinances. Specifically, the Agencies propose to exempt an extension of credit that is a refinancing where the owner or guarantor of the refinance loan is the current owner or guarantor of the existing obligation. In addition, the periodic payments under the refinance loan must not result in negative amortization, cover only interest on the loan, or result in a balloon payment. Finally, the proceeds from the refinance loan may only be used to pay off the outstanding principal balance on the existing obligation and to pay closing or settlement charges. C. Proposed Exemption for Extensions of Credit of $25,000 or Less Finally, the Agencies are also proposing an exemption from the HPML appraisal rules for extensions of credit of $25,000 or less, indexed every year for inflation. D. Effective Date The Agencies intend that exemptions adopted as a result of this supplemental proposal will be effective on January 18, 2014, the same date on which the Final Rule will become effective. In the section-by-section analysis below, the Agencies request comment on a number of conditions that might be appropriate to require creditors to meet to qualify for the proposed exemptions. If the Agencies adopt any conditions on an exemption, the Agencies will consider establishing a later effective date for those conditions, to allow creditors sufficient time to adjust their compliance systems, if necessary. Question 1: The Agencies request comment on the need for a later effective date for any condition on a proposed exemption discussed in the section-by-section analysis below, and the appropriate effective date for those conditions. II. Background In general, the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq., seeks to promote the informed use of consumer credit by requiring disclosures about its costs and terms, as well as other information. TILA requires additional disclosures for loans secured by consumers' homes and permits consumers to rescind certain transactions that involve their principal dwelling. For most types of creditors, TILA directs the Bureau to prescribe regulations to carry out the purposes of the law and specifically authorizes the Bureau to issue regulations that contain such classifications, differentiations, or other provisions, or that provide for such adjustments and exceptions for any class of transactions, that in the Bureau's judgment are necessary or proper to effectuate the purposes of TILA, or prevent circumvention or evasion of TILA. 1 15 U.S.C. 1604(a). 1 For motor vehicle dealers as defined in section 1029 of the Dodd-Frank Act, TILA directs the Board to prescribe regulations to carry out the purposes of TILA and authorizes the Board to issue regulations. 15 U.S.C. 5519; 15 U.S.C. 1604(i). For most types of creditors and most provisions of the TILA, TILA is implemented by the Bureau's Regulation Z. See 12 CFR part 1026. Official Interpretations provide guidance to creditors in applying the rules to specific transactions and interpret the requirements of the regulation. See 12 CFR part 1026, Supp. I. However, as explained in the Final Rule, the new appraisal section of TILA addressed in the Final Rule (TILA section 129H, 15 U.S.C. 1639h) is implemented not only for all affected creditors by the Bureau's Regulation Z, but also by OCC regulations and the Board's Regulation Z (for creditors overseen by the OCC and the Board, respectively). See 12 CFR parts 34 and 164 (OCC regulations) and part 226 (the Board's Regulation Z); see also § 1026.35(c)(7) and 78 FR 10368, 10415 (Feb. 13, 2013). The Bureau's, the OCC's and the Board's versions of the 2013 Interagency Appraisals Final Rule and corresponding official interpretations are substantively identical. The FDIC, NCUA, and FHFA adopted the Bureau's version of the regulations under the Final Rule. 2 2 See NCUA: 12 CFR 722.3; FHFA: 12 CFR part 1222. The FDIC adopted the Bureau's version of the regulations, but did not adopt a cross-reference to the Bureau's regulations in FDIC regulations. See 78 FR 10368, 10370 (Feb. 13, 2013). The Dodd-Frank Act 3 was signed into law on July 21, 2010. Section 1471 of the Dodd-Frank Act's Title XIV, Subtitle F (Appraisal Activities), added TILA section 129H, 15 U.S.C. 1639h, which establishes appraisal requirements that apply to “higher-risk mortgages.” Specifically, new TILA section 129H prohibits a creditor from extending credit in the form of a “higher-risk mortgage” loan to any consumer without first: 3 Public Law 111-203, 124 Stat. 1376 (Dodd-Frank Act). • Obtaining a written appraisal performed by a certified or licensed appraiser who conducts an appraisal that includes a physical inspection of the interior of the property and is performed in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) and title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), and the regulations prescribed thereunder. • Obtaining an additional appraisal from a different certified or licensed appraiser if the “higher-risk mortgage” finances the purchase or acquisition of a property from a seller at a higher price than the seller paid, within 180 days of the seller's purchase or acquisition. The additional appraisal must include an analysis of the difference in sale prices, changes in market conditions, and any improvements made to the property between the date of the previous sale and the current sale. A creditor that extends a “higher-risk mortgage” must also: • Provide the applicant, at the time of the initial mortgage application, with a statement that any appraisal prepared for the mortgage is for the sole use of the creditor, and that the applicant may choose to have a separate appraisal conducted at the applicant's expense. • Provide the applicant with one copy of each appraisal conducted in accordance with TILA section 129H without charge, at least three days prior to the transaction closing date. New TILA section 129H(f) defines a “higher-risk mortgage” with reference to the annual percentage rate (APR) for the transaction. A “higher-risk mortgage” is a “residential mortgage loan” 4 secured by a principal dwelling with an APR that exceeds the average prime offer rate (APOR) for a comparable transaction as of the date the interest rate is set— 4 See Dodd-Frank Act section 1401; TILA section 103(cc)(5), 15 U.S.C. 1602(cc)(5) (defining “residential mortgage loan”). New TILA section 103(cc)(5) defines the term “residential mortgage loan” as any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling, other than a consumer credit transaction under an open-end credit plan. 15 U.S.C. 1602(cc)(5). • By 1.5 or more percentage points, for a first lien residential mortgage loan with an original principal obligation amount that does not exceed the amount for “jumbo” loans ( i.e., the maximum limitation on the original principal obligation of a mortgage in effect for a residence of the applicable size, as of the date of the interest rate set, pursuant to the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454)); • By 2.5 or more percentage points, for a first lien residential mortgage “jumbo” loan ( i.e., having an original principal obligation amount that exceeds the amount for the maximum limitation on the original principal obligation of a mortgage in effect for a residence of the applicable size, as of the date of the interest rate set, pursuant to the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454)); or • By 3.5 or more percentage points, for a subordinate lien residential mortgage loan. The definition of “higher-risk mortgage” expressly excludes “qualified mortgages,” as defined in TILA section 129C, and “reverse mortgage loans that are qualified mortgages,” as defined in TILA section 129C. 15 U.S.C. 1639c. The Agencies published proposed regulations for public comment on September 5, 2012, that would implement these higher-risk mortgage appraisal provisions (2012 Interagency Appraisals Proposed Rule or 2012 Proposed Rule). 77 FR 54722 (Sept. 5, 2012). The Agencies issued the 2013 Interagency Appraisals Final Rule on January 18, 2013. The Final Rule was published in the Federal Register on February 13, 2013, and is effective on January 18, 2014. See 78 FR 10368 (Feb. 13, 2013). III. Summary of the 2013 Interagency Appraisals Final Rule A. Loans Covered To implement the statutory definition of “higher-risk mortgage,” the Final Rule used the term “higher-priced mortgage loan” or HPML, a term already in use under the Bureau's Regulation Z with a meaning substantially similar to the meaning of “higher-risk mortgage” in the Dodd-Frank Act. In response to commenters, the Agencies used the term HPML to refer generally to the loans that could be subject to the Final Rule because they are closed-end credit and meet the statutory rate triggers, but the Agencies separately exempted several types of HPML transactions from the rule. The term “higher-risk mortgage” encompasses a closed-end consumer credit transaction secured by a principal dwelling with an APR exceeding certain statutory thresholds. These rate thresholds are substantially similar to rate triggers that have been in use under Regulation Z for HPMLs. 5 Specifically, consistent with TILA section 129H, a loan is an HPML under the Final Rule if the APR exceeds the APOR by 1.5 percentage points for first-lien conventional or conforming loans, 2.5 percentage points for first-lien jumbo loans, and 3.5 percentage points for subordinate-lien loans. 6 5 Added to Regulation Z by the Board pursuant to the Home Ownership and Equity Protection Act of 1994 (HOEPA), the HPML rules address unfair or deceptive practices in connection with subprime mortgages. See 73 FR 44522, July 30, 2008; 12 CFR 1026.35. 6 The existing HPML rules apply the 2.5 percent over APOR trigger for jumbo loans only with respect to a requirement to establish escrow accounts. See 12 CFR 1026.35(b)(3)(v). Consistent with TILA, the Final Rule exempts “qualified mortgages” from the requirements of the rule. Qualified mortgages are defined in § 1026.43(e) of the Bureau's final rule implementing the Dodd-Frank Act's ability-to-repay requirements in TILA section 129C (2013 ATR Final Rule). 7 15 U.S.C. 1639c. 7 78 FR 6408 (Jan. 30, 2013). In addition, the Interagency Appraisals Final Rule excludes from its coverage the following classes of loans: (1) Transactions secured by a new manufactured home; (2) transactions secured by a mobile home, boat, or trailer; (3) transactions to finance the initial construction of a dwelling; (4) loans with maturities of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling; and (5) reverse mortgage loans. B. Requirements That Apply to All Appraisals Performed for Non-Exempt HPMLs Consistent with TILA, the Final Rule allows a creditor to originate an HPML that is not exempt from the Final Rule only if the following conditions are met: • The creditor obtains a written appraisal; • The appraisal is performed by a certified or licensed appraiser; and • The appraiser conducts a physical property visit of the interior of the property. Also consistent with TILA, the following requirements also apply with respect to HPMLs subject to the Final Rule: • At application, the consumer must be provided with a statement regarding the purpose of the appraisal, that the creditor will provide the applicant a copy of any written appraisal, and that the applicant may choose to have a separate appraisal conducted for the applicant's own use at his or her own expense; and • The consumer must be provided with a free copy of any written appraisals obtained for the transaction at least three business days before consummation. C. Requirement To Obtain an Additional Appraisal in Certain HPML Transactions In addition, the Final Rule implements the Act's requirement that the creditor of a “higher-risk mortgage” obtain an additional written appraisal, at no cost to the borrower, when the loan will finance the purchase of the consumer's principal dwelling and there has been an increase in the purchase price from a prior acquisition that took place within 180 days of the current purchase. TILA section 129H(b)(2)(A), 15 U.S.C. 1639h(b)(2)(A). In the Final Rule, using their exemption authority, the Agencies set thresholds for the increase that will trigger an additional appraisal. An additional appraisal will be required for an HPML (that is not otherwise exempt) if either: • The seller is reselling the property within 90 days of acquiring it and the resale price exceeds the seller's acquisition price by more than 10 percent; or • The seller is reselling the property within 91 to 180 days of acquiring it and the resale price exceeds the seller's acquisition price by more than 20 percent. The additional written appraisal, from a different licensed or certified appraiser, generally must include the following information: an analysis of the difference in sale prices ( i.e., the sale price paid by the seller and the acquisition price of the property as set forth in the consumer's purchase agreement), changes in market conditions, and any improvements made to the property between the date of the previous sale and the current sale. Finally, in the Final Rule the Agencies expressed their intention to publish a supplemental proposal to request comment on possible exemptions for “streamlined” refinance programs and smaller dollar loans, as well as loans secured by certain other property types, such as existing manufactured homes. See 78 FR 10368, 10370 (Feb. 13, 2013). Accordingly, the Agencies are publishing this Proposed Rule. IV. Legal Authority TILA section 129H(b)(4)(A), added by the Dodd-Frank Act, authorizes the Agencies jointly to prescribe regulations implementing section 129H. 15 U.S.C. 1639h(b)(4)(A). In addition, TILA section 129H(b)(4)(B) grants the Agencies the authority jointly to exempt, by rule, a class of loans from the requirements of TILA section 129H(a) or section 129H(b) if the Agencies determine that the exemption is in the public interest and promotes the safety and soundness of creditors. 15 U.S.C. 1639h(b)(4)(B). V. Section-by-Section Analysis For ease of reference, unless otherwise noted, the Supplementary Information refers to the section numbers of the proposed provisions that would be published in the Bureau's Regulation Z at 12 CFR 1026.35(c). As explained in the Final Rule, separate versions of the regulations and accompanying commentary were issued as part of the Final Rule by the OCC, the Board, and the Bureau, respectively. 78 FR 10367, 10415 (Feb. 13, 2013). No substantive difference among the three sets of rules was intended. The NCUA and FHFA adopted the rules as published in the Bureau's Regulation Z at 12 CFR 1026.35(a) and (c), by cross-referencing these rules in 12 CFR 722.3 and 12 CFR Part 1222, respectively. The FDIC adopted the rules as published in the Bureau's Regulation Z at 12 CFR 1026.35(a) and (c), but did not cross-reference the Bureau's Regulation Z. Accordingly, in this Federal Register notice, the proposed provisions are separately published in the HPML appraisal regulations of the OCC, the Board, and the Bureau. No substantive difference among the three sets of proposed rules is intended. Section 1026.2 Definitions and Rules of Construction 2(a) Definitions 2(a)(6) Business Day The term “business day” is used with respect to two requirements in the Final Rule. First, the Final Rule requires the creditor to provide the consumer with a disclosure that “shall be delivered or placed in the mail not later than the third business day after the creditor receives the consumer's application for a higher-priced mortgage loan” subject to § 1026.35(c). § 1026.35(c)(5)(i) and (ii). Second, the Final Rule requires the creditor to provide to the consumer a copy of each written appraisal obtained under the Final Rule “[n]o later than three business days prior to consummation of the loan.” § 1026.35(6)(i) and (ii). The Agencies propose to define “business day” in the Final Rule to mean “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.” § 1026.2(a)(6). The Agencies propose this definition for consistency with disclosure timing requirements under both the existing Regulation Z mortgage disclosure timing requirements and the Bureau's proposed rules for combined mortgages disclosures under TILA and the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2601 et seq. (2012 TILA-RESPA Proposed Rule). See § 1026.19(a)(1)(ii) and (a)(2); see also 77 FR 51116 (Aug. 23, 2012) ( e.g., proposed § 1026.19(e)(1)(iii) (early mortgage disclosures) and (f)(1)(ii) (final mortgage disclosures). Under existing Regulation Z, early disclosures must be delivered or placed in the mail not later than the seventh business day before consummation of the transaction; if the disclosures need to be corrected, the consumer must receive corrected disclosures no later than three business days before consummation (the consumer is deemed to have received the corrected disclosures three business days after they are mailed or delivered). See § 1026.19(a)(2)(i)-(ii). For these purposes, “business day” is defined as quoted previously. One reason that the Agencies propose to align the definition of “business day” under the Final Rule with the definition of “business day” for these disclosures is to avoid the creditor having to provide the copy of the appraisal under the HPML rules and corrected Regulation Z disclosures at different times (because different definitions of “business day” would apply). 8 8 If the Agencies do not adopt the proposed definition of “business day,” the definition that would apply would be “a day on which the creditor's offices are open to the public for carrying on substantially all of its business functions.” § 1026.2(a)(6). The proposed definition of “business day” is also intended to align with the definition of “business day” for the timing requirements of mortgage disclosures under the 2012 TILA-RESPA Proposal. See proposed § 1026.2(a)(6). The 2012 TILA-RESPA Proposal would require the creditor to deliver the early mortgage disclosures “not later than the third business day after the creditor receives the consumer's application.” Proposed § 1026.19(e)(1)(iii). The 2012 TILA-RESPA Proposal would require the final mortgage disclosures “not later than three business days before consummation.” Proposed § 1026.19(f)(1)(ii). For these purposes, “business day” would be defined as the Agencies propose to define “business day” in the Final Rule. If the Bureau adopts this aspect of the 2012 TILA-RESPA Proposal, then using the proposed definition of “business day” in the Final Rule would ensure that the HPML appraisal notice and the early mortgage disclosures have to be provided at the same time (no later than three “business days” after the creditor receives the consumer's application). This would also ensure that the copy of the HPML appraisal and the final mortgage disclosures have to be provided at the same time (no later than three “business days” before consummation). The Agencies believe that this alignment will facilitate compliance and reduce consumer confusion by reducing the number of disclosures that consumers might receive at different times. Section 1026.35 Requirements for Higher-Priced Mortgage Loans 35(c) Appraisals for Higher-Priced Mortgage Loans 35(c)(2) Exemptions 35(c)(2)(i) Qualified Mortgages By statute, qualified mortgages “as defined in [TILA] section 129C” are exempt from the special appraisal rules for “higher-risk mortgages.” 15 U.S.C. 1639c; TILA section 129H(f)(1), 15 U.S.C. 1639h(f)(1). The Agencies implemented this exemption in the Interagency Appraisals Final Rule by cross-referencing § 1026.43(e), the definition of qualified mortgage issued by the Bureau in its 2013 ATR Final Rule. See § 1026.35(c)(2)(i). The Bureau defined qualified mortgage under authority granted to the Bureau to issue ability-to-repay rules and define qualified mortgage. See, e.g., TILA section 129C(a)(1), (b)(3)(A), and (b)(3)(B)(i), 15 U.S.C. 1639c(a)(1), (b)(3)(A), and (b)(3)(B)(i). To align the regulation with the statute, the Agencies propose to revise the cross-referenced definition of qualified mortgage to include all qualified mortgages “as defined pursuant to TILA section 129C.” 15 U.S.C. 1639c. In addition to authority granted to the Bureau, TILA section 129C grants authority to the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA), and the Rural Housing Service (RHS), which is a part of USDA, to define the types of loans “insure[d], guarantee[d], or administer[ed]” by those agencies, respectively, that are qualified mortgages. TILA section 129H(b)(3)(B)(ii), 15 U.S.C. 1639h(b)(3)(B)(ii). The Agencies recognize that HUD, VA, USDA, and RHS may issue rules defining qualified mortgages pursuant to their TILA section 129C authority. Therefore, the Agencies propose to expand the definition of qualified mortgages that are exempt from the HPML appraisal rules to cover qualified mortgages as defined by HUD, VA, USDA, and RHS. 15 U.S.C. 1639c. Question 2: The Agencies request comment on this proposed revision. 35(c)(2)(ii) 35(c)(2)(ii)(A) Loans Secured by a New Manufactured Home In the Final Rule, the Agencies exempted several classes of loans from the HPML appraisal rules, including transactions secured by a “new manufactured home.” 9 § 1026.35(c)(2)(ii). The exemption for transactions secured by a new manufactured home applies regardless of whether the transaction is also secured by the land on which it is sited. See comment 35(c)(2)(ii)-1. The reasons for the exemption were discussed in the Final Rule. 10 The Agencies' general rationale was that alternative means for valuing new manufactured homes exist that, based upon the Agencies' understanding of historical practice, appeared more appropriate for these types of transactions. The Final Rule did not address loans secured by “existing” (used) manufactured homes, which are, therefore, subject to the appraisal requirements unless the Agencies adopt an exemption. 9 The Final Rule also exempts qualified mortgages; reverse mortgage loans; transactions secured by a mobile home, boat, or trailer; transactions to finance the initial construction of a dwelling; and loans with maturities of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling. See § 1026.35(c)(2). 10 78 FR 10368, 10379-80 (Feb. 13, 2013). The Agencies propose to retain the exemption for transactions secured by new manufactured homes in re-numbered § 1026.35(c)(2)(ii)(A), but are seeking further comment on the scope of this exemption and whether certain conditions on the exemption might be appropriate. The Agencies further propose to re-number and revise comment 35(c)(2)(ii)-1 as proposed comment 35(c)(2)(ii)(A)-1. The proposed revisions to this comment are for clarity only; no substantive change is intended. Loans secured solely by a new manufactured home and not land. As noted previously, the Final Rule exempted HPMLs secured solely by a new manufactured home and not land from the HPML appraisal rules—thus, the Final Rule applies no valuation requirement to these transactions. Question 3: However, based on additional research and outreach, the Agencies seek comment on whether consumers in these transactions would benefit by receiving from the creditor a unit value estimate from an objective third-party source, such as an independent cost guide. Since the Final Rule was issued, consumer advocates have expressed concerns that some transactions in the lending channel for new home-only (chattel) transactions can result in consumers owing more than the manufactured home is worth. For this type of loan, consumer and affordable housing advocates assert that networks of manufacturers, broker/dealers, and lenders are common, and that these parties can coordinate sales prices and loan terms to increase manufacturer, dealer, and lender profits, even where this leads to loan amounts that exceed the collateral value. Advocates have raised concerns that, where the original loan amount exceeds the collateral value and the consumer is unaware of this fact, the consumer is often unprepared for difficulties that can arise when seeking to refinance or sell the home at a later date. They have also noted that that chattel manufactured home loan transactions tend to have much higher rates than conventional mortgage loans. 11 Some consumer advocates have suggested that giving the consumer third-party information about the unit value could be helpful in educating the consumer, particularly as to the risk that the loan amount might exceed the collateral value, and might prompt the consumer to ask questions about the transaction. Consumer advocates and other outreach participants had questions about the accuracy of available cost services for estimating the unit value of new manufactured homes. They asserted, for example, that where a manufactured home will be sited can have a major impact on the value of the home and that cost services do not in all cases sufficiently account for that aspect of the value. 12 Nonetheless, some advocates expressed the view that giving the consumer some cost estimate would be beneficial. 11 See, e.g., Howard Baker and Robin LeBaron, Fair Mortgage Collaborative, Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes (March 2013) at 10 (reporting that “[c]hattel loans typically feature higher interest rates than mortgages: current rates range between 6% and 14%, depending on the borrower's credit history and the size of the downpayment, compared to 2.5% to 5% for mortgages at the present time.”). This report is available at http://cfed.org/assets/pdfs/IM_HOME_Loan_Data_Collection_Project_Report.pdf . 12 The National Automobile Dealers Association (NADA) Manufactured Housing Cost Guide provides for adjustments based on, among other factors, the state in which the home is located and the quality of the land-lease community in which the home is located, if applicable. See NADAguides.com Value Report, available at www.nadaguides.com/Manufactured-Homes/images/forms/MHOnlineSample.pdf . Based on input from lenders and manufactured home valuation providers, the Agencies understand that in new home-only transactions, third-party cost services are not typically used to value the property. Instead, many creditors use the manufacturer's invoice, or wholesale unit price, and lend a percentage of that amount, which might exceed 100 percent to reflect, for example, a dealer mark-up and siting costs. As discussed in the Supplementary Information to the Proposed Rule, outreach participants have indicated that this practice—similar to that sometimes used for automobiles—is longstanding in new manufactured home transactions. 13 Lenders asserted that this method saves costs for consumers and creditors and has been found to be reasonably effective and accurate for purposes of ensuring a safe and sound loan. 13 See 77 FR 54722, 54732-33 (Sept. 5, 2012). Question 4: In light of additional concerns expressed about valuations in new manufactured home chattel transactions, the Agencies request comment on whether it may be appropriate to condition the exemption from the HPML appraisal requirements on the creditor providing the consumer with a third-party estimate of the manufactured home unit cost. Question 5: If so, the Agencies request comment on which third-party estimate(s) should be used for this purpose. Question 6: The Agencies also request comment on when this information should be required to be provided. 14 14 Unless the manufactured home alone, without land, is titled as real property under state law, loans secured solely by a manufactured home are not subject to the early disclosure requirements under Regulation Z, 12 CFR 1026.19, because they are not subject to RESPA. See § 1026.19(a)(1)(i) and 12 CFR 1024.2 (defining “federally related mortgage loan” to include only loans secured by residential real property). Therefore, the Agencies believe that in some chattel transactions, the time between application and consummation may be relatively short. Question 7: The Agencies request comment on whether the consumer typically receives unit cost information in a new manufactured home chattel transaction and what, if any, cost information from an independent third party source might be reasonably available to creditors, reliable, and useful to a consumer. Question 8: The Agencies further request comment on the utility of third-party unit cost information to consumers in these transactions (even if the creditor is using a different method to value the home). Question 9: The Agencies understand that the location of the property can impact the value of the home, even if the property on which the unit is sited is not owned by the consumer, and seek more information about the impact on home value of a unit's location and whether cost services are available that account adequately for differences in location. Question 10: The Agencies further request comment on whether readily-accessible, publicly-available information exists that consumers could use to determine whether their loan amount exceeds the collateral value in a new manufactured home chattel transaction, and whether consumers are generally aware of this information. 15 15 The Bureau's new Regulation B valuation disclosure rules under the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et seq. (2013 ECOA Valuations Rule), consistent with current ECOA Regulation B, does not provide for the consumer to receive a copy of the manufacturer's invoice. See 12 CFR 1002.14(c) and comment 14(c)-2.iii (current Regulation B); see also 78 FR 7216 (Jan. 31, 2013) (issuing new 12 CFR 1002.14(b)(3) and comment 1002.14(b)(3)-3.iv, with an effective date of January 18, 2014). Question 11: Finally, the Agencies request comment on potential burdens and costs of imposing this condition on the exemption, and any implications for consumer access to credit (again, noting that any of these loans that are qualified mortgages are exempt under the separate exemption for qualified mortgages, § 1026.35(c)(2)(i)). Loans secured by a new manufactured home and land. Since issuing the Final Rule, the Agencies have obtained additional information on valuation methods for manufactured homes. Appraisers and state appraiser boards consulted in outreach efforts confirmed that USPAP-compliant real property appraisals with interior inspections are possible and conducted with at least some regularity in these transactions. 16 The Agencies understand that these appraisals value the land and the home together as a package based upon comparable transactions that have been exposed to the open market (as would be done with a site-built home or any other existing home). 17 They also can document additional value based on siting costs and the home's location, and in some cases can identify visible discrepancies between the manufacturer's specifications and the actual home once it is sited. 16 Comments on the Proposed Rule from a large real estate agent trade association also suggested that exempting these transactions may not be appropriate. 17 See, e. g., Texas Appraiser Licensing and Certification Board, “Assemblage As Applied to Manufactured Housing,” available at http://www.talcb.state.tx.us/pdf/USPAP/AssemblageAsAppliedToMfdHousing.pdf . In addition, USPAP-compliant real property appraisals are regularly conducted for all transactions under federal government agency and government-sponsored enterprise (GSE) manufactured home loan programs. 18 HUD Title II program standards, for example, which apply to transactions secured by a manufactured home and land titled together as real property, require USPAP-compliant appraisals. 19 18 See, e.g., HUD: 24 CFR 203.5(e); HUD Handbook 4150.2, Valuations for Analysis for Home Mortgage Insurance for Single Family One- to Four-Unit Dwellings (HUD Handbook 4150.2), chapter 8.4 and App. D; USDA: 7 CFR 3550.62(a) and 3550.73; USDA Direct Single Family Housing Loans and Grants Field Office Handbook (USDA Handbook), chapters 5.16 and, 9.18; VA: VA Lenders Handbook, VA Pamphlet 26-7 (VA Handbook), chapters 7.11, 11.3, and 11.4; Fannie Mae: Fannie Mae Single Family 2013 Selling Guide B5-2.2-04, Manufactured Housing Appraisal Requirements (04/01/2009); Freddie Mac: Freddie Mac Single Family Seller/Servicer Guide, H33: Manufactured Homes/H33.6: Appraisal requirements (02/10/12). 19 Title II appraisal standards are available in HUD Handbook 4150.2. For supplemental standards for manufactured housing, see HUD Handbook 4150.2, chapters 8-1 through 8-4. The valuation protocol in Appendix D of HUD Handbook 4150.2 calls for a certification that the appraisal is USPAP compliant (page D-9). A representative of manufactured home appraisers and a manufactured home community development financial institution (CDFI) representative stated that they conduct appraisals for loans secured by a new manufactured home and land before the home is sited based on plans and specifications for the new home. An interior property inspection occurs once the home is sited (although the CDFI representative indicated that it did not always use a state-certified or -licensed appraiser for the final inspection). These outreach participants suggested that, in their experience, qualified certified- or -licensed appraisers are not unduly difficult to find to perform these appraisals. 20 20 For HUD-insured loans secured by real property—a manufactured home and lot together—the Federal Housing Administration (FHA) requires creditors to use a HUD Title II Roster appraiser that can certify to prior experience appraising manufactured homes as real property. See HUD Title I Letter 481, Appendix 10-5. In commenting on the Proposed Rule and in outreach, lenders have raised concerns that comparable sales (“comparables”) of other manufactured homes can be particularly difficult to find. The Agencies understand that this can be a barrier to obtaining a manufactured home appraisal, especially in certain loan programs that require appraisals of manufactured homes to use a certain number of manufactured home comparables and have other restrictions on the comparables that may be used. 21 The Agencies note, however, that USPAP does not require that manufactured home comparables be used. USPAP allows the appraiser to use site-built or other types of home construction as comparables with adjustments where necessary. 22 A current version of the Appraisal Institute seminar on manufactured housing appraisals confirms that when necessary, USPAP appraisals can use non-manufactured homes as comparables, making adjustments where needed. 23 Based on their experience, an appraiser representative and a manufactured home CDFI representative in informal outreach with the Agencies stated that comparable properties have not been unduly difficult to find, even in rural areas. 21 See Robin LeBaron, FAIR MORTGAGE COLLABORATIVE, Real Homes, Real Value: Challenges, Issues and Recommendations Concerning Real Property Appraisals of Manufactured Homes (Dec. 2012) at 19-28. This report is available at http://cfed.org/assets/pdfs/Appraising_Manufacture_Housing.pdf. 22 See HUD Handbook 4150.2, chapter 8.4 (providing the following instructions on appraisals for manufactured homes insured under HUD's Title II program: “If there are no manufactured housing sales within a reasonable distance from the subject property, use conventionally built homes. Make the appropriate and justifiable adjustments for size, site, construction materials, quality, etc. As a point of reference, sales data for manufactured homes can usually be found in local transaction records.”). 23 See Appraisal Institute, “Appraising Manufactured Housing—Seminar Handbook,” Doc. PS009SH-F (2008) at Part 8, 8-110. Question 12: Based on this information, the Agencies request comment and information concerning whether to require USPAP-compliant appraisals with interior property inspections conducted by a state-licensed or -certified appraiser for HPMLs secured by both a new manufactured home and land. Question 13: The Agencies also seek comment on whether some other valuation method should be required as a condition of the exemption from the HPML appraisal requirements. At the same time, the Agencies believe that questions remain about the impact on the industry and consumers of requiring USPAP-compliant real property appraisals with interior inspections in transactions secured by a new manufactured home and land for which these types of appraisals are not already required. For example, manufactured home lenders commented on the Proposed Rule and shared in subsequent outreach that they typically do not conduct an interior inspection appraisal of a new manufactured home, but use other methods, such as relying on the manufacturer's invoice for the new home and conducting a separate, USPAP-compliant appraisal of the land. 24 Thus, requiring a USPAP-compliant appraisal with an interior inspection could require systems changes for some manufactured home lenders. If the USPAP-compliant appraisal with an interior inspection required under the Final Rule were more expensive than existing methods, then imposing the requirements of the Final Rule on these transactions would lead to additional costs that could be passed on in whole or in part to consumers. 24 Some consumer and affordable housing advocates and appraisers in outreach have expressed the view that separately valuing the component parts of a manufactured home plus land transaction can result in material inaccuracies. Question 14: Accordingly, the Agencies request data on the extent to which a USPAP-compliant real property appraisal with an interior property inspection would be of comparable cost to, or more or less expensive than, a USPAP-compliant appraisal of a lot combined with an invoice price for the home unit. Question 15: The Agencies also request comment on the potential burdens on creditors and consumers and any potential reduction in access to credit that might result from imposing requirement for a USPAP-compliant appraisal with an interior property inspection on all manufactured home creditors of loans secured by both a new manufactured home and land. In this regard, the Agencies ask commenters to bear in mind that any of these transactions that are qualified mortgages are exempt from the HPML appraisal requirements under the separate exemption for qualified mortgages. See § 1026.35(c)(2)(i). Question 16: Finally, the Agencies request comment on whether and the extent to which consumers in these transactions typically receive information about the value of their land and home and, if so, what information is received. 35(c)(2)(ii)(B) Loans Secured Solely by an Existing Manufactured Home and Not Land In new § 1026.35(c)(2)(ii)(B), the Agencies propose to exempt transactions secured solely by an existing (used) manufactured home and not land from the HPML appraisal requirements. Proposed comment 35(c)(2)(ii)(B)-1 would clarify that an HPML secured by a manufactured home and not land would not be subject to the appraisal requirements of § 1026.35(c), regardless of whether the home is titled as realty by operation of state law. The Agencies recognize that in certain states residential structures such as manufactured homes may be deemed real property, even though they are not titled together with the land. 25 The Agencies believe that the barriers discussed in more detail below to producing USPAP-compliant real property appraisals with interior property inspections for manufactured homes in home-only transactions are the same regardless of whether a jurisdiction categorizes the manufactured home as personal property (chattel) or real property. 25 See, N.H. Rev. Stat. Ann Sec. 477:44 (2013). Question 17: The Agencies request comment on this view and approach. The Agencies also considered an exemption for loans secured by both an existing manufactured home and land, but are not proposing an exemption for these HPMLs. A discussion of the proposed treatment of both types of loans (secured solely by an existing manufactured home and secured by an existing manufactured home plus land) is below. Loans secured solely by an existing manufactured home and not land. The Agencies propose an exemption for transactions secured solely by an existing manufactured home and not land based on additional research and outreach. For the loans secured solely by an existing manufactured home and not land, the Agencies understand that current valuation practices generally do not involve using a state-certified or -licensed appraiser to perform a USPAP- and FIRREA-compliant real property appraisal with an interior property inspection, as required under TILA section 129H and the Final Rule. 15 U.S.C. 1639h. Outreach to manufactured home lenders indicated that they typically obtain replacement cost estimates derived from nationally-published cost services, taking into account the age (to derive depreciated values) and regional location of the home. One cost service adjustment form often used for this purpose also allows for an adjustment based upon the quality of the land-lease community where the property is located (if applicable). 26 Lenders have indicated that this method saves costs for consumers and creditors and has been found to be reasonably effective and accurate for purposes of ensuring a safe and sound loan. 26 See NADA, Manufactured Housing Cost Guide, available at NADAguides.com Value Report, available at www.nadaguides.com/Manufactured-Homes/images/forms/MHOnlineSample.pdf. In addition, lender commenters on the Proposed Rule raised concerns about the availability of data on comparable sales that may be used by appraisers for loans secured by an existing manufactured home and not land. They indicated that data from used manufactured home sales not involving land (usually titled as personal property) are not currently recorded in multiple listing services of most states, for example, so an appraiser's ability to obtain information on comparable manufactured homes without land is more limited than in real estate transactions. A provider of manufactured home valuation services subsequently confirmed to the Agencies that manufactured home sales information is generally not available through standard real estate data sources. The Agencies also understand that, in many states, appraisers are not currently required to be licensed or certified in order to perform personal property appraisals. Accordingly, the Agencies believe that an exemption for these transactions from the HPML appraisal rules would be in the public interest because it would facilitate continued consumer access to HPML financing for existing manufactured homes, which are an important source of affordable housing. 27 The Agencies believe that this exemption also would promote the safety and soundness of creditors, because creditors would be able to continue using currently prevalent valuation methods, which can facilitate offering products that they have relied on to ensure profitability and product diversity to mitigate risk. 27 See generally, Howard Baker and Robin LeBaron, FAIR MORTGAGE COLLABORATIVE, Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes (March 2013) at 9. This report is available at http://cfed.org/assets/pdfs/IM_HOME_Loan_Data_Collection_Project_Report.pdf . At the same time, consumer and affordable housing advocates have raised concerns about consumers borrowing more money than the home is worth in these transactions, which, as noted, also tend to have much higher rates than conventional loans secured by site-built homes. 28 The Agencies generally believe that consumers and creditors benefit when an accurate valuation is obtained for a credit transaction secured by the consumer's home. The Agencies further recognize that a manufactured home that has been previously occupied is subject to depreciation and might have wear and tear or other physical changes that can make the property value more difficult to assess than that of a new manufactured home. 29 The value of the home also may have changed as a result of changes in the broader housing market. 28 See, e.g., Howard Baker and Robin LeBaron, FAIR MORTGAGE COLLABORATIVE, Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes (March 2013) at 10. 29 The Agencies understand that appraisers typically limit their valuations to clearly visible features or physical changes to the home that can impact value. Detailed examinations of wear and tear are the purview of home inspections, which generally are the responsibility of the consumer to obtain. Question 18: The Agencies request comment on whether the proposed exemption should be conditioned on the creditor obtaining an alternative valuation ( i.e., a valuation other than a USPAP- and FIRREA-compliant real property appraisal with an interior property inspection) that is tailored to estimating the value of an existing manufactured home without land and providing a copy of it to the consumer. The Agencies believe that an exemption conditioned in this way may be in keeping with the intent behind TILA section 129H to ensure that consumers have access to information about the value of the home that would secure the loan before entering into an HPML. See TILA section 129H(c), 15 U.S.C. 1639h(c) (requiring a creditor to provide the applicant with a copy of any appraisal obtained under TILA section 129H). Question 19: To inform the Agencies in considering this condition, the Agencies request information on whether creditors typically obtain valuations for loans secured solely by an existing manufactured home and not land and, if so, what types of valuations they obtain. Question 20: The Agencies also seek commenters' views on the efficacy and accuracy of any prevailing valuation methods used for these loans. Some of these methods are discussed below. As noted, the Agencies are aware that HUD has property valuation standards for HUD-insured loans secured by an existing manufactured home and not land. 30 In addition, for appraisals of manufactured homes “classified as personal property,” HUD standards call for, among other requirements, the use of “an independent fee appraiser who has been certified by NADA to use NADA's National Appraisal System.” 31 Specifically, among other requirements, creditors of these types of HUD-insured loans must obtain an appraisal reflecting the retail value of comparable manufactured homes in similar condition and in the same geographic area. 32 Relevant HUD appraisal requirements for these loans also include specifications for appraiser qualifications, information that the creditor must provide to the appraiser, and the creditor's review of the appraisal. 33 The Agencies have concerns, however, that appraisers trained to conduct the types of appraisals required by HUD for its Title I program may be limited, but seek information on the availability of individuals to perform appraisals compliant with HUD Title I standards. 30 See HUD Title I Letter 481 (Aug. 14, 2009), Appendices 8-9, C, and 10-5. The Agencies note that the HUD Title I program appraisal requirements are for determining eligibility for insurance that benefits the creditor. 31 See HUD Title I Letter 481 (Aug. 14, 2009), Appendices 8-9, C, and 10-5, issued pursuant to authority granted to HUD under section 2(b)(10) of the National Housing Act, 12 U.S.C. 1703(b)(10). The Agencies understand that the NADA National Appraisal System is an appraisal method involving both the comparable sales and the cost approach. 32 See id. 33 See id. VA and USDA manufactured home programs do not involve transactions secured solely by a manufactured home and not land; thus, these programs do not incorporate special requirements for valuing these types of properties. USPAP Standards 7 and 8 for personal property provide guidance for appraising personal property based on several approaches—the sales comparison approach, cost approach, and income approach—which are to be used as the appraiser determines necessary to produce a credible appraisal. 34 The Agencies are aware that there are comparable-based methods of valuing existing manufactured homes without land other than the method prescribed for the HUD Title I program. In addition, for the cost approach, cost services are available for creditors to consult and make adjustments based on several factors (which might differ depending on the cost service used), such as the property age, condition, the land-lease community, and the home's geographic location. 35 These resources enable the creditor to obtain a depreciated replacement cost for an existing manufactured home. 34 See, e.g., USPAP Standards Rule 7-4. 35 See, e.g., NADAguides.com Value Report, available at www.nadaguides.com/Manufactured-Homes/images/forms/MHOnlineSample.pdf; see also Fannie Mae Single Family 2013 Selling Guide B5-2.2-04, Manufactured Housing Appraisal Requirements (04/01/2009) and Freddie Mac Single Family Seller/Servicer Guide, H33: Manufactured Homes/H33.6: Appraisal requirements (02/10/12) (referencing the NADA Manufactured Housing Appraisal Guide® and the Marshall & Swift® Residential Cost Handbook as resources for manufactured home cost information). Question 21: The Agencies request comment on whether, to obtain the proposed exemption from the HPML appraisal rules for HPMLs secured by an existing manufactured home without land, a creditor should have to comply with the appraisal requirements for a manufactured home classified as personal property under HUD's Title I Manufactured Home Loan Insurance Program, or similar requirements involving comparable sales. Question 22: In this regard, the Agencies also seek additional comment and information on the availability of: (1) Comparable sales data for appraisers to use in an appraisal of a manufactured home alone, without land; and (2) state-certified or -licensed appraisers to appraise these properties. Question 23: The Agencies also request comment on whether the proposed exemption would appropriately be conditioned on the creditor obtaining, and providing to the consumer, a valuation of the dwelling that uses an independently published cost guide with appropriate adjustments for factors such as home condition, accessories, location, and community features, as applicable. Question 24: The Agencies request comment on whether use of a cost service with adjustments generally involves a physical inspection of the property, who conducts that physical inspection, and whether any condition on the proposed exemption allowing use of a cost service estimate with adjustments should require a physical inspection of the unit. Question 25: In addition, the Agencies seek comment on whether an appropriate condition for an exemption from the HPML appraisal rules would be more generally that the creditor have obtained and provided to the consumer an appraisal compliant with USPAP Standards 7 and 8 for personal property. The Agencies are considering whether it would be appropriate to provide the creditor with more than one option for obtaining an alternative valuation as a condition of this exemption. Loans secured by an existing manufactured home and land. The Agencies considered also exempting transactions that are secured by both an existing manufactured home and land. However, at this stage, the Agencies believe that an exemption for these transactions from the USPAP-compliant real property appraisal standards in the Final Rule would not be in the public interest and promote the safety and soundness of creditors. As discussed in the section-by-section analysis of § 1026.35(c)(2)(ii)(A), federal government and GSE manufactured home loan programs generally require compliance with USPAP real property appraisal standards for appraisals in connection with transactions secured by both a manufactured home and land. The Agencies believe that these requirements may reflect that conducting a USPAP-compliant appraisal following USPAP Standards 1 and 2 for real property appraisals are feasible for existing manufactured homes together with land. This view was affirmed by several participants in informal outreach with experience in the area of manufactured home loan appraisals, who indicated that USPAP-compliant real property appraisals with an interior inspection are feasible and performed with regularity in these types of transactions. For these reasons, the Agencies are not proposing to exempt loans secured by an existing manufactured home and land from the HPML appraisal requirements. The Agencies note that some commenters on the Proposed Rule recommended that the Agencies exempt these types of “land/home” transactions. 36 36 See 78 FR 10368, 10379-80 (Feb. 13, 2013). Question 26: The Agencies request further comment whether to exempt these transactions and, if so, why an exemption would be in the public interest and promote the safety and soundness of creditors. 35(c)(2)(vii) Certain Refinancings The Agencies are also proposing to exempt from the HPML appraisal rules certain types of refinancings with characteristics common to refinance products often referred to as “streamlined” refinances. Specifically, the Agencies propose to exempt an extension of credit that is a refinancing where the owner or guarantor of the refinance loan is the current owner or guarantor of the existing obligation. In addition, the regular periodic payments under the refinance loan must not result in negative amortization, cover only interest on the loan, or result in a balloon payment. Finally, the proceeds from the refinance loan may be used solely to pay off the outstanding principal balance on the existing obligation and to pay closing or settlement charges. As discussed more fully below, the Agencies believe that this exemption would be in the public interest and promote the safety and soundness of creditors. The following discussion of this proposed exemption includes a description of “streamlined” refinancing programs; a summary of the comments regarding an exemption for refinancings received on the 2012 Interagency Appraisals Proposed Rule; and an explanation of the requirements of, and conditions on, the proposed exemption. Background In an environment of historically low interest rates, the federal government has supported “streamlined” refinance programs as a way to promote the ongoing recovery of the consumer mortgage market. Notably, the Home Affordable Refinance Program (HARP) was introduced by the U.S. Treasury Department in 2009 to provide refinance relief options to consumers following the steep decline in housing prices as a result of the financial crisis. The HARP program was expanded in 2011 and is currently set to expire in 2015. Federal government agencies—HUD, VA, and USDA—as well as the GSEs have developed “streamlined” refinance programs to address consumer, creditor and investor risks. 37 These programs enable many consumers to refinance the balance of those mortgages through an abbreviated application and underwriting process. 38 Under these programs, consumers with little or no equity in their homes, 39 as well as consumers with significant equity in their homes, 40 can restructure their mortgage debt, often at lower interest rates or payment amounts than under their existing loans. 41 37 Under existing GSE “streamlined” refinance programs, Freddie Mac and Fannie Mae purchase and guarantee “streamlined” refinance loans for consumers under HARP (whose existing loans have loan-to-value ratios (LTVs) over 80 percent) as well as for consumers whose existing loans have LTVs at or below 80 percent. 38 See Fannie Mae Single Family Selling Guide, chapter B5-5, section B5-5.2 (Refi Plus® and DU Refi Plus® loans); Freddie Mac Single Family Seller/Servicer Guide, chapters A24, B24, and C24 (Relief Refinance® Loans); HUD Handbook 4155.1, chapters 3.C and 6.C (Streamline Refinances) and Title I Appendix 11-3 (manufactured home streamline refinances); USDA Rural Development Admin. Notice 4615 (Rural Refinance Pilot); and VA Lenders Handbook, chapter 6 (Interest Rate Reduction Refinance Loans, or IRRRLs). Creditworthiness evaluations generally are not required for Refi Plus, Relief Refinance, HUD Streamline Refinance, or IRRRL loans unless borrower monthly payments would increase by 20 percent or more. See HUD Handbook 4155.1, chapter 6.C.2.d; Fannie Mae Single Family Selling Guide, chapter B5-5, section B5-5.2 (Refi Plus and DU Refi Plus loans); Freddie Mac Single Family Seller/Servicer Guide, chapters A24, B24, and C24; VA Lenders Handbook, chapter 6.1.c. 39 For example, HARP supports refinancing through the GSEs for borrowers whose LTV exceeds 80 percent and whose existing loans were consummated on or before May 31, 2009. See http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx. 40 See, e.g., Freddie Mac 2011 Annual Report at Table 52, reporting that the majority of Freddie Mac funding for Relief Refinances in 2011 was for borrowers with LTVs at or below 80%. This report is available at http://www.freddiemac.com/investors/er/pdf/10k_030912.pdf. 41 Over two million streamlined refinance transactions occurred under FHA and GSE programs in 2012 (including both HPML and non-HPML refinances). According to public data recently reported by FHFA, 1,803,980 streamlined refinance loans occurred under Fannie Mae or Freddie Mac streamlined refinance programs. See FHFA Refinance Report for February 2013, available at http://www.fhfa.gov/webfiles/25164/Feb13RefiReportFinal.pdf. The Agencies estimate, based upon data received from FHA during outreach to prepare this proposal, that the FHA insured 378,000 loans under its “Streamline” program in 2012. Valuation requirements of “streamlined” refinance programs. The “streamlined” underwriting for certain refinancings often, but not always, does not include a USPAP-compliant appraisal with an interior-inspection appraisal. One reason for this is that, in currently prevailing “streamlined” refinance programs, the value of the property securing the existing and refinance obligations is not considered to determine borrower eligibility for the refinance. The owner or guarantor of the existing loan retains the credit risk, and the “streamlined” refinance does not change the collateral component of that risk. For “streamlined” refinances where the LTV exceeds or nearly exceeds 100 percent, the principal concern is not whether the creditor or investor could in the near term recoup the mortgage amount by foreclosing upon and selling the securing property. The immediate goals for these loans are to secure payment relief for the borrower and thereby avoid default and foreclosure; to allow the borrower to take advantage of lower interest rates; or to restructure their mortgage obligation to build equity more quickly—all of which reduce risk for creditors and investors and benefit consumers. However, a valuation—usually through an automated valuation model (AVM)—may be obtained to estimate LTV for determining the appropriate securitization pool for the loan. LTV as determined by this valuation can also affect the terms offered to the consumer. Sometimes an appraisal is required when the property is not standardized, or the current holder of the loan does not have what it deems to be sufficient information about the property in its databases. Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac each have “streamlined” refinance programs: Fannie Mae DU (“Desktop Underwriter®”) Refi Plus and Refi Plus® and Freddie Mac Relief Refinance-Same Servicer/Open Access®. Under these programs, Fannie Mae must hold both the old and new loan, as must Freddie Mac under its program. An appraisal is not required when the GSEs are confident in an estimate of value, which is then provided to lenders originating loans under these programs. 42 42 For GSE “streamlined” refinance transactions purchased in 2012 at LTVs of above 80 percent, AVM estimates were obtained for approximately 81 percent and appraisals (either interior inspection or exterior-only) were obtained for approximately 19 percent. For GSE “streamlined” refinance transactions purchased in 2012 at LTVs of 80 percent or below, AVM estimates were obtained for approximately 87 and appraisals (either interior inspection or exterior-only) were obtained for approximately 13 percent. HUD/FHA. The HUD “Streamline” Refinance program administered by the Federal Housing Administration (FHA) permits but generally does not require a creditor to obtain an appraisal. 43 The Agencies understand that almost all FHA “streamlined” refinances are done without requiring an appraisal. 44 The FHA program does not require an alternative valuation type for transactions that do not have appraisals. 43 See, e.g., HUD Handbook 4155.1, chapter 6.C.1. 44 According to data from FHA, in calendar year 2012, only 1.1 percent of FHA streamline refinances required an appraisal. VA and USDA. VA and USDA programs do not require appraisals. The FHA, VA, and USDA streamline refinance programs also do not require an alternative valuation type for transactions that do not have appraisals. Private “streamlined” refinance programs. The Agencies also believe that private creditors may offer “streamlined” refinance programs for borrowers meeting certain eligibility requirements. Question 27: The Agencies seek comment and relevant data on how often private creditors obtain alternative valuation estimates in these transactions ( i.e., streamlined refinances outside of the government agency and GSE programs discussed above) when no appraisal is conducted. 45 45 In general, FIRREA regulations governing appraisal requirements permit the use of an “evaluation” (or in the case of NCUA, a “written estimate of market value”) rather than an appraisal in same-creditor refinances that involve no new monies except to pay reasonable closing costs and, in the case of the NCUA, no obvious and material change in market conditions or physical adequacy of the collateral. See OCC: 12 CFR 34.43 and 164.3; Board: 12 CFR 225.63; FDIC: 12 CFR 323.3; NCUA: 12 CFR 722.3. See also OCC, Board, FDIC, NCUA, Interagency Appraisal and Evaluation Guidelines, App. A-5, 75 FR 77450, 77466-67 (Dec. 10, 2010). Public Comments on the 2012 Proposed Rule A number of commenters on the 2012 Proposed Rule—a trade association representing community banks, a credit union association, a bank, and GSEs—recommended that the Agencies exempt refinancings. Some of these commenters expressed a view that the Dodd-Frank Act's “higher-risk mortgage” appraisal rules were not appropriate for refinancings designed to move a borrower into a more stable mortgage product with affordable payments. These types of refinancings often involve an abbreviated or “streamlined” underwriting process to facilitate the reduction of risks that the existing loan may pose for the consumer, the primary market creditor, and secondary market investors. Commenters pointed out, among other things, that these types of refinancings can be important credit risk management tools in the primary and secondary markets, and can reduce foreclosures, stabilize communities, and stimulate the economy. GSE commenters indicated that in many cases loans originated under federal government “streamlined” refinance programs do not require appraisals and asserted that doing so would interfere with these programs. Consumer advocates did not comment on the 2012 Proposed Rule, but in subsequent informal outreach with the Agencies for this proposal, expressed concerns about not requiring appraisals in HPML “streamlined” refinance programs. They expressed the view that a quality appraisal that is also required to be made available to the consumer can be a tool to prevent fraud in refinance transactions. They also pointed out instances in which an appraisal on a refinance transaction revealed appraisal fraud on the original purchase transaction. Question 28: The Agencies invite further comment on these and related concerns, and appropriate means of addressing these concerns as part of this rulemaking. Discussion The Agencies decline to propose an exemption for all refinance loans, as a few commenters suggested. The appraisal rules in TILA Section 129H apply to “residential mortgage loans” that are higher-priced and secured by the consumer's principal dwelling. TILA section 129H(f), 15 U.S.C. 1639h(f). The term “residential mortgage loan” includes refinance loans. 46 Accordingly, the Agencies believe that an exemption for all HPML refinances would be overbroad. For example, in refinances involving additional cash out to the consumer, consumer equity in the home can decrease significantly, increasing risks, so the Agencies do not believe an exemption from this rule would be appropriate. 46 “The term `residential mortgage loan' means any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling, other than a consumer credit transaction under an open end credit plan . . .” TILA section 103(cc)(5), 15 U.S.C. 1602(cc)(5). The Agencies do, however, believe that a narrower exemption for certain types of HPML refinance loans, generally consistent with the program criteria for “streamlined” refinances under GSE and federal government agency programs, would be in the public interest and promote the safety and soundness of creditors. The Agencies recognize that, by reducing the risk of foreclosures and helping borrowers better afford their mortgages, “streamlined” refinancing programs can contribute to stabilizing communities and the economy, both now and in the future. “Streamlined” HPML refinances can help borrowers who are at risk of default in the near future, as well as those who might not default in the near term, but could significantly benefit by refinancing into a lower rate mortgage for considerable cost savings over time. The Agencies also recognize that “streamlined” refinancing programs assist creditors and secondary market investors in managing credit risks. Originating HPML refinances that are beneficial to consumers can be important to creditors to ensure the continuing performance of loans on their books and to strengthen customer relations. For investors holding these loans, the “streamlined” refinances can reduce financial risks associated with potential defaults and foreclosures. The Agencies believe that an exemption from the HPML appraisal rules for certain HPML refinances would ensure that the time and cost generated by new appraisal requirements are not introduced into HPML transactions that are not qualified mortgages but that are part of programs to help consumers avoid defaults and improve their financial positions, and help creditors and investors avoid losses and mitigate credit risk. As discussed previously, the Agencies understand that, under the “streamlined” underwriting standards for several government and GSE refinancing programs, a full interior inspection appraisal is often not required. One reason for this is that the current value of the property securing the existing and refinance obligations generally is not considered to determine borrower eligibility for the refinance. The owner or guarantor of the existing loan retains the credit risk, and the “streamlined” refinance does not change the collateral component of that risk. In a “streamlined refinance,” the principal concern is not valuing the collateral to determine whether the creditor or investor could in the near term recoup the mortgage amount by foreclosing upon and selling the securing property if necessary. Goals for these loan programs include securing payment relief for the borrower and thereby avoid default and foreclosure; allowing the borrower to take advantage of lower interest rates; and enabling the borrower to restructure his or her mortgage obligation to build equity more quickly—all of which reduce risk of default and thereby promote the safety and soundness of creditors and investors and benefit consumers. Relationship to the 2013 ATR Final Rule. Under the Bureau's 2013 ATR Final Rule, loans eligible to be purchased, guaranteed, or insured by Fannie Mae, Freddie Mac, HUD, VA, USDA, or RHS are subject to the general ability-to-repay rules (found in § 1026.43(c)). See § 1026.43(e)(4)(ii). However, if they meet certain criteria, 47 they are considered “qualified mortgages” entitled to either a presumption of compliance or a safe harbor ensuring compliance with the general ability-to-repay rules, depending on the loan's interest rate. 48 See § 1026.43(e)(1), (e)(4). (Of course, they also can be “qualified mortgages” if they meet all the ability-to-repay criteria under the general definition of “qualified mortgage” See § 1026.43(e)(2).) As qualified mortgages, they are exempt from the HPML appraisal rules. See § 1026.35(c)(2)(i). 47 See § 1026.43(e)(4)(i)(A) (cross-referencing § 1026.43(e)(2)(i) through (iii), which require that the loan not result in negative amortization or provide for interest-only or balloon payments; limit the loan term at 30 years; and cap points and fees to three percent of the loan amount (with a higher cap for loans under $100,000). 48 Creditors making qualified mortgages that are “higher-priced” are entitled to a rebuttal presumption of compliance with the general ability-to-repay rules, while creditors making qualified mortgages that are not “higher-priced” are entitled to a safe harbor of compliance. A “higher-priced covered transaction” under the Bureau's 2013 ATR Rule is a transaction covered by the general ability-to-repay rules “with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by 1.5 or more percentage points for a first-lien covered transaction, or by 3.5 or more percentage points for a subordinate-lien covered transaction.” § 1026.43(b)(4). However, the Agencies believe that the separate exemption for certain refinances from the HPML appraisal requirement proposed in § 1026.35(c)(2)(vii) may be needed. First, the 2013 ATR Final Rule limits the qualified mortgage status of loans purchased or guaranteed by Fannie Mae and Freddie Mac under the special rules of § 1026.43(e)(4). However, these loans will not be eligible to be qualified mortgages if consummated on or after January 10, 2021, unless they meet the general definition of a qualified mortgage in § 1026.43(e)(2). See § 1026.43(c)(4)(iii)(B). For loans eligible to be insured or guaranteed under a HUD, VA, USDA, or RHA program, the qualified mortgage status conferred under § 1026.43(e)(4)(i) would be replaced for each type of loan when those agencies respectively issue rules defining a qualified mortgage based on each agency's own programs. See § 1026.43(e)(4)(iii)(A); see also TILA section 129C(b)(3)(ii), 15 U.S.C. 1639c(b)(3)(ii). Second, the Agencies believe that many private “streamlined” mortgage programs are likely to have similar benefits to consumers, creditors, and credit markets as those under GSE and government agency programs. However, not all private “streamlined” refinances that are HPMLs will be qualified mortgages because some could exceed the 43 percent debt-to-income ratio cap or fail to meet other qualified mortgage conditions. See, e.g., § 1026.42(e)(2). The Agencies believe that an exemption for not only GSE and government agency “streamlined” refinances, but also refinance loans under proprietary “streamlined” refinance programs, may be warranted. The Agencies considered limiting an exemption from the HPML appraisal rules for private “streamlined” refinances to refinances of non-standard to standard mortgages that would qualify for an exemption from the ability-to-repay rules under new § 1026.43(d) of the 2013 ATR Final Rule. However, the Agencies believe that the refinances exempt from the ability-to-repay rules under § 1026.43(d) include a universe of refinances that is narrower than the Agencies believe desirable for an exemption from the HPML appraisal rules. For example, to qualify for the ability-to-repay exemption as a refinance under § 1026.43(d), the existing obligation must be an adjustable-rate mortgage (ARM), an interest-only loan, or a negative amortization loan. See § 1026.43(d)(1)(i). In addition, among other conditions, the creditor must have considered whether the refinance loan “likely will prevent a default by the consumer on the non-standard mortgage once the loan is recast” out of the introductory rate under an ARM or higher payments under an interest-only or negative amortization loan. See § 1026.43(d)(3)(ii). However, the Agencies believe that “streamlined” refinance programs can benefit consumers and promote the safety and soundness of financial institutions even where the consumer is not at risk of imminent default. Definition of “refinancing.” Proposed § 1026.35(c)(2)(vii) defines a “refinancing” to mean “refinancing” in § 1026.20(a). 49 However, in contrast to the definition of “refinancing” under § 1026.20(a), a “refinancing” under proposed § 1026.35(c)(2)(vii) does not restrict who the creditor is for either the refinancing or the existing obligation. Commentary to § 1026.20(a) clarifies that a “refinancing” under § 1026.20(a) includes “only refinancings undertaken by the original creditor or a holder or servicer of the original obligation.” See comment 20(a)-5. By contrast, the proposed exemption allows a different creditor to extend the refinance loan, as long as the owner or guarantor remains the same on both the existing loan and the refinance. This aspect of the proposal is discussed more fully below. 49 See § 1026.20(a) for the definition of “refinancing.” 35(c)(2)(vii)(A) Same owner or guarantor. Consistent with “streamlined” refinance programs discussed previously, proposed § 1026.35(c)(2)(vii)(A) requires that, for the exemption for certain refinancings to apply, the owner or guarantor of the refinance loan must be the current owner or guarantor of the existing obligation. The Agencies propose to include this requirement as a condition of obtaining the refinance loan exemption from the HPML appraisal rules because the Agencies believe that this restriction is important to promote the safety and soundness of financial institutions and in turn benefits the public. The proposed rule uses the terms “owner or guarantor” rather than the term “holder” to clarify that the proposed regulation refers to the entity that either owns the credit risk because the loan is held in its portfolio or that guarantees the credit risk on a loan held in an asset-backed securitization. For example, assume Fannie Mae holds an existing obligation in its portfolio, which is then refinanced under one of Fannie Mae's “streamlined” refinance programs into a loan with a better rate and lower payments for the consumer. Fannie Mae might then decide to place the new refinance loan into a pool of loans guaranteed by Fannie Mae; in this case, Fannie Mae would technically be the guarantor, not the “owner.” However, under the proposal, the refinance would meet the condition of proposed § 1026.35(c)(2)(vii)(A)( 1 ) because the owner or guarantor remains the same on the refinance loan as on the existing obligation. Proposed comment 35(c)(2)(vii)(A)-1 clarifies that the term “owner” in § 1026.35(c)(2)(vii)(A) refers to an entity that owns and holds a loan in its portfolio. This comment would further clarify that “owner” does not refer to an investor in a mortgage-backed security. This proposed clarification is intended to ensure that creditors do not have to look to the individual owners of mortgage-backed securities to determine the same-owner status. The rationale for the same-owner requirement is not based upon the pooled mortgage situation where more than one investor holds an indirect interest in a loan through ownership of a mortgage-backed security. Accordingly, this comment also clarifies that the term “guarantor” in proposed § 1026.35(c)(2)(vii)(A)( 1 ) refers to the entity that guarantees the credit risk on a loan held by the entity in a mortgage-backed security. The Agencies believe that conditioning the exemption on the owner or guarantor remaining the same helps to promote the safety and soundness of creditors. This includes situations in which the refinancing creditor either owns the existing loan or has arranged to transfer the loan to a GSE or other entity that owns the existing loan. In these cases, the owner or guarantor of the refinance already holds the credit risk. In addition, the owner or guarantor of the existing obligation may have familiarity with the property or relevant market conditions as a result of having evaluated property value documents when taking on the original credit risk, as well as ongoing portfolio monitoring. By contrast, when the owner or guarantor of the “streamlined” refinance is not also the owner or guarantor of the existing loan, then the “streamlined” refinance involves new risk to the owner or guarantor of the “streamlined” refinance, whose safety and soundness would therefore be better served by a USPAP-compliant appraisal with an interior inspection. 50 50 Legislative history of the Dodd-Frank Act also suggests that Congress believed that certain underwriting requirements were not necessary in refinances where the holder of the credit risk remains the same: “However, certain refinance loans, such as VA-guaranteed mortgages refinanced under the VA Interest Rate Reduction Loan Program or the FHA streamlined refinance program, which are rate-term refinance loans and are not cash-out refinances, may be made without fully reunderwriting the borrower. . . . It is the conferees' intent that the Federal Reserve Board and the CFPB use their rulemaking authority . . . to extend the same benefit for conventional streamlined refinance programs where the party making the refinance loan already owns the credit risk. This will enable current homeowners to take advantage of current loan interest rates to refinance their mortgages.” Statement of Sen. Dodd, 156 Cong. Rec. S5928 (July 15, 2010). The Agencies generally believe that the “same owner or guarantor” criterion for the proposed exemption makes it unnecessary to require that the creditor (which is not necessarily the owner of the loan) also be the same for both the existing obligation and the refinance loan. If consumers can shop for a “streamlined” refinancing among multiple creditors without having to obtain an appraisal, they may be able to obtain better rates and terms. As a general matter, the purpose of the exemption for certain refinance transactions is to facilitate transactions that can be beneficial to borrowers even though they are higher-priced loans. When the consumer is not obtaining additional funds to increase the amount of the debt, and the entity that will own or guaranty the refinance loan is already the credit risk holder on the existing loan, there may be insufficient benefit from obtaining a new appraisal to warrant the additional cost. Questions have been raised, however, about whether safety and soundness issues might arise in some situations that would warrant an appraisal, even when the risk holder will remain the same. Specifically, in some private refinance transactions, the originating creditor for the refinance loan may be assuming “put-back” risk. This risk may be lessened if the holder or guarantor is a federal agency or GSE that operates under guidelines that limit the put-back risk for the originator. Question 29: Accordingly, the Agencies solicit comment on the circumstances in which the originator's assumption of put-back risk raises safety and soundness concerns that weigh in favor of requiring the originator to obtain a USPAP-compliant appraisal with an interior property inspection for a “streamlined” refinance loan. Question 30: The Agencies also seek information on the valuation practices of private creditors for refinanced loans where the private owner or guarantor remains the same and the loans are not sold to a GSE or insured or guaranteed by a federal government agency, including how often no valuation is obtained. 51 51 See OCC: 12 CFR 34.43 and 164.3; Board: 12 CFR 225.63; FDIC: 12 CFR 323.3; NCUA: 12 CFR 722.3. See also OCC, Board, FDIC, NCUA, Interagency Appraisal and Evaluation Guidelines, App. A-5, 75 FR 77450, 77466-67 (Dec. 10, 2010). 35(c)(2)(vii)(B) Prohibition on certain risky features. Proposed § 1026.35(c)(2)(vii)(B) would require that a refinancing eligible for an exemption from the HPML appraisal rules not allow for negative amortization (“cause the principal balance to increase”), interest-only payments (“allow the consumer to defer repayment of principal”), or a balloon payment, as defined in § 1026.18(s)(5)(i). 52 52 Section 1026.18(s)(5)(i) defines “balloon payment” as “a payment that is more than two times a regular periodic payment.” Proposed comment 35(c)(2)(vii)(B)-1 would state that, under § 1026.35(c)(2)(vii)(D), a refinancing must provide for regular periodic payments that do not: result in an increase of the principal balance (negative amortization), allow the consumer to defer repayment of principal ( see comment 43(e)(2)(i)-2), or result in a balloon payment. The comment would thus clarify that the terms of the legal obligation must require the consumer to make payments of principal and interest on a monthly or other periodic basis that will repay the loan amount over the loan term. The comment would further state that, except for payments resulting from any interest rate changes after consummation in an adjustable-rate or step-rate mortgage, the periodic payments must be substantially equal. The comment would cross-reference comment 43(c)(5)(i)-4 of the Bureau's 2013 ATR Final Rule for an explanation of the term “substantially equal.” 53 The comment would also clarify that a single payment transaction is not a refinancing meeting the requirements of § 1026.35(c)(2)(vii) because it does not require “regular periodic payments.” 53 Comment 43(c)(5)(i)-4 states as follows: “In determining whether monthly, fully amortizing payments are substantially equal, creditors should disregard minor variations due to payment-schedule irregularities and odd periods, such as a long or short first or last payment period. That is, monthly payments of principal and interest that repay the loan amount over the loan term need not be equal, but the monthly payments should be substantially the same without significant variation in the monthly combined payments of both principal and interest. For example, where no two monthly payments vary from each other by more than 1 percent (excluding odd periods, such as a long or short first or last payment period), such monthly payments would be considered substantially equal for purposes of this section. In general, creditors should determine whether the monthly, fully amortizing payments are substantially equal based on guidance provided in § 1026.17(c)(3) (discussing minor variations), and § 1026.17(c)(4)(i) through (iii) (discussing payment-schedule irregularities and measuring odd periods due to a long or short first period) and associated commentary.” The information provided by a USPAP-compliant real property appraisal with an interior property inspection may be particularly important for creditors and consumer where these features are present. For example, additional equity may be needed to support a loan with negative amortization, and the risk of default might be higher for loans with interest-only and balloon payment features. The Agencies recognize that consumers who need immediate relief from payments that they cannot afford might benefit in the near term by refinancing into a loan that allows interest-only payments for a period of time. However, the Agencies believe that a reliable valuation of the collateral is important when the consumer will not be building any equity for a period of time. In that situation, the consumer and credit risk holder may be more vulnerable should the property decline in value than they would be if the consumer were paying some principal as well. 54 54 The Agencies acknowledge that these increased risks may be lower where the interest-only period is relatively short (such as one or two years), because the payments in the early years of a mortgage are heavily weighted toward interest; thus the consumer would be paying down little principal even in making fully amortizing payments. The Agencies also recognize that, in most cases, balloon payment mortgages are originated with the expectation that a consumer will be able to refinance the loan when the balloon payment comes due. These loans are made for a number of reasons, such as to control interest rate risk for the creditor or as a wealth management tool, usually for higher-asset consumers. Regardless of why a balloon mortgage is made, however, there is always risk that a consumer will not be able to either independently make the balloon payment or refinance, with significant consequences if something unexpected happens and the consumer cannot do so. To protect the creditor's safety and soundness, the creditor should have a firm understanding of the value of the collateral and the trajectory of property values in the area in making a balloon mortgage. This can help the creditor adjust loan and payment terms to mitigate default risk, which benefits both the creditor and the consumer. The Agencies note that the GSE and government “streamlined” refinance programs described above do not allow these features, in part because helping a consumer pay off debt more quickly is one of the goals of these programs. 55 In addition, the prohibition on risky features for this proposed exemption is consistent with provisions in the Dodd-Frank Act reflecting congressional concerns about these loan terms. For example, in Dodd-Frank Act provisions regarding exemptions from certain ability-to-repay requirements for refinancings under HUD, VA, USDA, and RHS programs, Congress similarly required that the refinance loan be fully amortizing and prohibited balloon payments. 56 The proposal is also consistent with a provision in the Bureau's 2013 ATR Final Rule that exempts from all ability-to-repay requirements the refinancing of a “non-standard mortgage” into a “standard mortgage.” See § 1026.43(d). To be eligible for this exemption from the ability-to-repay rules, the refinance loan must, among other criteria, not allow for negative amortization, interest-only payments, or a balloon payment. See § 1026.43(d)(1)(ii). Further, no GSE or federal government agency “streamlined” refinance program allows these features. The Agencies believe that these statutory provisions and program restrictions reflect a judgment on the part of Congress, government agencies, and the GSEs that refinances with negative amortization, interest-only payment features, or balloon payments may increase risks to consumers and creditors. 55 See, e.g., Fannie Mae, “Home Affordable Refinance (DU Refi Plus and Refi Plus) FAQs” (June 7, 2013) at 11 (describing options for meeting the requirement that the refinance provide a borrower benefit); Freddie Mac, “Freddie Mac Relief Refinance Mortgages SM —Open Access Eligibility Requirements” (January 2013) at 1 (describing options for meeting the requirement that the refinance provide a borrower benefit). 56 See Dodd-Frank Act section 1411(a)(2), TILA section 129C(a)(5)(E) and (F), 15 U.S.C. 1639c(a)(5)(E) and (F). TILA section 129C(a)(5) authorizes HUD, VA, USDA, and RHS to exempt “refinancings under a streamlined refinancing” from the Act's income verification requirement of the ability-to-repay rules. 15 U.S.C. 1639c(a)(5). See also TILA section 129c(a)(4), 15 U.S.C. 1639c(a)(4). In sum, the Agencies are concerned that negative amortization, interest-only payments, and balloon payments are loan features that may increase a loan's risk to consumers as well as to primary and secondary mortgage markets. 57 Thus, in the Agencies' view, permitting these non-qualified mortgage HPML refinances to proceed without USPAP-compliant real property appraisals with interior inspections would not be consistent with the Agencies' exemption authority, which permits exemptions only if they promote the safety and soundness of creditors and are in the public interest. 57 See also OCC, Board, FDIC, NCUA, “Interagency Guidance on Nontraditional Mortgage Product Risks,” 71 FR 58609 (Oct. 4, 2006). Question 31: The Agencies request comment on whether prohibiting the regular periodic payments on the refinance loan from resulting in negative amortization, payment of only interest, or a balloon payment is an appropriate condition for an exemption from the HPML appraisal rules for “streamlined” refinances. 35(c)(2)(vii)(C) No cash out. Proposed § 1026.35(c)(2)(vii)(C) would require that the proceeds from a refinancing eligible for an exemption from the HPML appraisal rules be used for only two purposes: (1) To pay off the outstanding principal balance on the existing first-lien mortgage obligation; and (2) to pay closing or settlement charges required to be disclosed under RESPA. Proposed comment 35(c)(2)(vii)(C)-1 would state that the exemption for a refinancing under § 1026.35(c)(2)(vii) is available only if the proceeds from the refinancing are used exclusively for two purposes: paying off the consumer's existing first-lien mortgage obligation and paying for closing costs, including paying escrow amounts required at or before closing. According to this comment, if the proceeds of a refinancing are used for other purposes, such as to pay off other liens or to provide additional cash to the consumer for discretionary spending, the transaction does not qualify for the refinancing exemption from the HPML appraisal rules under § 1026.35(c)(2)(vii). The Agencies also view the proposed limitation on the use of the refinance loan's proceeds as necessary to ensure that the principal balance of the loan does not increase, or increases only minimally. This in turn helps ensure that the consumer is not losing significant additional equity and that the holder of the credit risk is not taking on significant new risk, in which case a full interior inspection appraisal to assess the change in risk could be beneficial to both parties. The Agencies also note that limiting the use of proceeds to allow for no extra cash out for the consumer other than closing costs is consistent with prevailing “streamlined” refinance programs. 58 It is also consistent with the exemption from the Bureau's ability-to-repay rules for refinances of “non-standard mortgages” into “standard mortgages.” 59 See § 1026.43(d)(1)(ii)(E). The Agencies believe that consistency across mortgage rules can help facilitate compliance and ease compliance burden. 58 See, e.g., Fannie Mae Single Family Selling Guide, chapter B5-5, Section B5-5.2; Freddie Mac Single Family Seller/Servicer Guide, chapters A24, B24 and C24. 59 Under the 2013 ATR Final Rule, a refinance loan or “standard mortgage” is one for which, among other criteria, the proceeds from the loan are used solely for the following purposes: (1) To pay off the outstanding principal balance on the non-standard mortgage; and (2) to pay closing or settlement charges required to be disclosed under RESPA. See § 1026.43(d)(1)(ii)(E). Question 32: The Agencies request comment on this proposed condition on the “streamlined” refinance exemption, and whether other protections are warranted to ensure that the loan's principal balance and overall costs to the consumer do not materially increase. Question 33: In this regard, the Agencies specifically seek comment on whether the Agencies should require that financed points and fees on the refinance loan not exceed a certain percent, such as the percentage caps for points and fees on qualified mortgages. See § 1026.43(e)(3); see also § 1026.43(d)(1)(ii)(B) (capping points and fees for refinances of “non-standard mortgages” into “standard mortgages” exempt from ability-to-repay requirements). For example, the Agencies heard from consumer advocates that frequent, serial refinancing with higher points and fees could lead to a significant loss of equity, and increased exposure for creditors, that would warrant a new appraisal for the same or similar reasons that an appraisal would be important where additional cash out is obtained. Additional condition: obtaining an alternative valuation and providing a copy to the consumer. Question 34: The Agencies also seek comment on whether the exemption for refinance loans should be conditioned on the creditor obtaining an alternative valuation ( i.e., a valuation other than a FIRREA- and USPAP-compliant real property appraisal with an interior inspection) and providing a copy to the consumer three days before consummation. In requesting comment on this issue, the Agencies note that the purpose of TILA section 129H is, in part, to protect consumers by ensuring that they receive a copy of an appraisal with an interior property inspection of the home before entering into a HPML that is not a qualified mortgage. 15 U.S.C. 1639h. Specifically, TILA section 129H mandates providing a copy of an appraisal with an interior property inspection for HPMLs that are not exempt from the appraisal requirements, three days before closing, with no option to waive this right. See TILA section 129H(c), 15 U.S.C. 1639h(c). 60 The Agencies' Final Rule implements these requirements. See § 1026.35(c)(6). 60 A similar requirement under ECOA permits the consumer to waive the right to receive a copy of valuations or appraisals in connection with an application for a first-lien mortgage secured by a dwelling no later than three days before closing. The consumer may not, however, waive the right to receive copies of valuations or appraisals altogether. See ECOA section 701(e)(2), 15 U.S.C. 1691(e)(2). Regulations implementing this provision were adopted by the Bureau earlier this year in the 2013 ECOA Valuations Rule. See 78 FR 7216 (Jan. 31, 2013); Regulation B, 12 CFR 1002.14(a)(1). A refinanced mortgage loan is a significant financial commitment: For example, the refinance loan can have an extended term, typically as long as 30 or 40 years; the refinance loan can be an adjustable-rate mortgage that creates interest rate risk in the future; the refinance loan may actually have increased payments (for example, if the term of the new loan is shorter); and a “streamlined” refinance transaction has transaction costs. Question 35: Because refinances do involve potential risks and costs, the Agencies seek comment on whether conditioning the proposed exemption on creditors obtaining an alternative valuation and giving a copy to the consumer would better position consumers to consider alternatives to refinancing, and whether consumers seeking refinances typically need or want to consider alternatives. These alternatives might include, among others, remaining in the home with the existing loan; refinancing through a different program that would involve underwriting, potentially at a better rate or other improved terms; seeking a possible loan modification; or selling the home. Question 36: The Agencies seek comment and relevant data on whether this additional condition would be necessary. In this regard, the Agencies understand that some type of estimate of value is typically developed in a “streamlined” refinance transaction. For example, for any loan not eligible for a federal government program or to be sold to a GSE, federally-regulated depositories have to obtain either an “evaluation” or an appraisal for a refinance transaction. 61 61 See OCC: 12 CFR 34.43 and 164.3; Board: 12 CFR 225.63; FDIC: 12 CFR 323.3; NCUA: 12 CFR 722.3. See also OCC, Board, FDIC, NCUA, Interagency Appraisal and Evaluation Guidelines, 75 FR 77450, 77458-61 and App. A, 77465-68 (Dec. 10, 2010). In addition, as noted ( see infra note 42), data on GSE “streamlined” refinances indicates that either an AVM or an appraisal (interior inspection or exterior-only) was obtained for all “streamlined” refinances purchased by the GSEs in 2012. In addition, as of January 2014, amendments to ECOA, implemented by the Bureau in revised Regulation B, will require all creditors to provide to credit applicants free copies of appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling. 62 See 12 CFR 1002.14(a)(1); 78 FR 7216 (Jan. 31, 2013) (2013 ECOA Valuations Final Rule). The copies must be provided to the applicant promptly upon completion or three business days before consummation. See id. Regulation B defines “valuation” to mean “any estimate of the value of a dwelling developed in connection with an application for credit.” 63 Id. § 1002.14(b)(3). 62 All refinances proposed for an exemption would be first-lien mortgage loans. 63 “Valuation” is separately defined in Regulation Z, § 1026.42(b)(3). That definition does not include AVMs, however, which was deemed appropriate for purposes of the appraisal independence rules under § 1026.42. Here, however, the Agencies believe that an estimate of value provided to the consumer could appropriately include an AVM. The Agencies recognize, however, that estimates of value might not always be required by federal law or investors. For example, certain non-depositories and depositories are not subject to the appraisal and evaluation requirements that apply to depositories under FIRREA, and might not obtain a valuation on a “no cash out” refinance. Question 37: The Agencies request comment generally on the extent to which either appraisals or other valuation tools such as AVMs or broker price opinions are used in connection with “streamlined” refinances by non-depositories in particular. Question 38: The Agencies also seek comment on whether additional criteria or guidance would be needed to describe the type of home value estimate that a creditor would have to obtain and provide to the consumer and, if so, what the additional criteria or guidance should address. Other conditions. The Agencies are not proposing additional conditions in the regulation text on the types of refinancings eligible for the exemption from the HPML appraisal rules. In this way, the Agencies seek to maintain flexibility for government agencies, GSEs, and private creditors to adapt and change their borrower eligibility requirements and other requirements for “streamlined” HPML refinances to address changing market environments and factors that may be unique to their programs. At this time the Agencies do not see the need to impose conditions that address borrower eligibility, such as requiring that the borrower have been on-time with payments on the existing mortgage for a certain period of time. For example, some “streamlined” refinance programs currently require that borrower eligibility criteria be met, such as that the consumer have been current on the existing obligation for a certain period of time. 64 Some of these programs also provide that certain benefits must be present in the transaction, such a lower monthly payment or lower interest rate. For this proposed exemption from the HPML appraisal requirements for refinances, the Agencies are not proposing to impose conditions that address borrower eligibility or to define what types of benefits must result from the transaction. The Agencies believe that it is unclear how the need for a particular type of appraisal (versus some other type of valuation that the creditor may perform under other regulations or its own policies) relates to borrower eligibility requirements or the existence of a borrower benefit in the new transaction. 64 See also 2013 ATR Final Rule § 1026.43(d)(2)(iv) and (v). The exemption from the ability-to-repay rules for refinances of “non-standard mortgages” into “standard mortgages” under the 2013 ATR Final Rule requires that, among other conditions: (1) The consumer made no more than one payment more than 30 days late on the non-standard mortgage in 12-month period before applying for the standard mortgage; and (2) the consumer made no payments more than 30 days late in the six-month period before applying for the standard mortgage. See § 1026.43(d)(2)(iv) and (v). Question 39: However, the Agencies request comment on whether the Agencies should adopt additional criteria for HPML “streamlined” refinancings that would be exempt from the HPML appraisal rules, including, but not limited to, requirements regarding whether the consumer has an on-time payment history and whether consumer “benefits” exist as part of the refinance transaction. The Agencies request that commenters supporting inclusion of these types of criteria explain why and comment on what the parameters of an on-time payment history should be and how “benefit” should be defined. Conclusion For the reasons discussed previously, the Agencies believe that an exemption from the HPML appraisal rules for refinances under the proposed conditions would be “in the public interest and promotes the safety and soundness of creditors.” TILA section 129H(b)(4)(B), 15 U.S.C. 1639h(b)(4)(B). The Agencies believe that an exemption from the HPML appraisal rules for these loans would ensure that the time and cost of new appraisal requirements are not introduced into non-qualified mortgage HPML transactions that are part of programs designed to help consumers avoid defaults and improve their financial positions, and help creditors and investors avoid losses and mitigate credit risk. The Agencies further believe that the exemption is appropriately narrow in scope to capture the types of refinancings that Congress has generally expressed an intent to facilitate, without being overbroad by exempting all HPML refinances from the HPML appraisal rules. See, e.g., TILA sections 129C(a)(5) and (6), 15 U.S.C. 1639c(a)(5) and (6). 65 65 See als [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2013-17086. Public record. Not legal advice.