What is the HPML appraisal rule?

The Higher-Priced Mortgage Loans (HPML) Appraisal Rule was established by the Federal Reserve Board in 2013 to help protect consumers from obtaining loans that may be unaffordable. The rule requires mortgage lenders to obtain a written appraisal for certain higher-priced mortgage loans to ensure that the loan amount is not substantially higher than the property’s actual value.

FAQs about the HPML Appraisal Rule:

1. Who is subject to the HPML Appraisal Rule?

Lenders who offer higher-priced mortgage loans are subject to the HPML Appraisal Rule. These loans are typically those with interest rates that are higher than the average prime offer rate.

2. What type of loans are considered higher-priced mortgage loans?

A loan is considered a higher-priced mortgage loan if the annual percentage rate (APR) exceeds the average prime offer rate by a specific percentage. As of 2021, this percentage is 1.5% for first-lien loans and 3.5% for subordinate-lien loans.

3. What is the purpose of the HPML Appraisal Rule?

The main purpose of the HPML Appraisal Rule is to protect consumers from taking out loans that are significantly higher than the actual value of the property being purchased.

4. How does the HPML Appraisal Rule benefit consumers?

By requiring lenders to obtain a written appraisal for higher-priced mortgage loans, consumers are better protected from entering into loans that may be unaffordable or unsustainable.

5. What information is included in the written appraisal required by the HPML Appraisal Rule?

The written appraisal must include a detailed analysis of the property’s market value, information about the property’s physical condition, and an evaluation of comparable sales in the area.

6. Are there any exemptions to the HPML Appraisal Rule?

Yes, certain types of loans are exempt from the HPML Appraisal Rule, such as qualified mortgages, reverse mortgages, and loans for manufactured homes.

7. What are the consequences of non-compliance with the HPML Appraisal Rule?

Lenders who fail to comply with the HPML Appraisal Rule may face penalties, including fines and legal action. Non-compliance can also result in the loan being considered invalid.

8. How does the HPML Appraisal Rule impact the mortgage lending process?

The HPML Appraisal Rule adds an additional step to the mortgage lending process, as lenders must now obtain a written appraisal for certain higher-priced mortgage loans before finalizing the loan.

9. Can borrowers request a copy of the written appraisal obtained under the HPML Appraisal Rule?

Yes, borrowers have the right to receive a copy of the written appraisal obtained for their higher-priced mortgage loan. This allows them to review the information used to determine the loan amount.

10. How often does the HPML Appraisal Rule need to be followed?

The HPML Appraisal Rule must be followed for each higher-priced mortgage loan originated by a lender. It is a requirement that applies to individual loans rather than on a periodic basis.

11. Are there any updates or changes to the HPML Appraisal Rule?

The HPML Appraisal Rule may be subject to updates or changes by regulatory agencies to better protect consumers and align with current market conditions. Lenders should stay informed about any revisions to the rule.

12. What should borrowers do if they believe their lender has not followed the HPML Appraisal Rule?

If borrowers believe that their lender has not followed the HPML Appraisal Rule, they should first contact the lender to address their concerns. If the issue is not resolved, borrowers can seek assistance from regulatory agencies or legal professionals.

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