There are few things more exciting on the internet than a 29 page small entity compliance guide outlining the CFPB’s TILA Higher-Priced Mortgage Loans Appraisal Rule, so you can only imagine our joy at receiving it in all of its awe-inspiring ninja-turtle green beauty. After a pre-emptory trip to Starbucks for the caffeine necessary to fully absorb (read: stay awake) the magnificence of its content, we here at Landmark are happy to break it down for your convenience and for the stability of your frontal lobe.
Things you need to know:
TILA stands for Truth In Lending Act, which was made in 1968. It was amended in 2010 by the Dodd-Frank Wall Street reform and Consumer Protection Act. That’s a pretty long run.
When you originate one of these loans, you must:
- Use a licensed or certified appraiser
- Have the appraiser physically visit the property, view the interior and produce a written appraisal report
- Obtain an additional appraisal at your own expense if the property was acquired by the seller in the past 180 days and the resale price exceeds certain thresholds
- Provide a disclosure within three business days of application explaining the consumer’s rights with regard to appraisals
- Give consumers free copies of the appraisal reports performed in connection with the loan at least three days before consummation of the transaction
All of the above is only just the introduction. The meat and potatoes, in the order written, consist of:
- The HPML Appraisal Rule must be followed on applications received on January 18th, 2014 or later.
- What qualifies as an HPML loan
- Compliance, which consists of the bullet points above
The document itself has language evocative of a blend of IKEA furniture assembly instructions and DMV special registration forms. The phrase “In appendix N to Regulation Z” basically reminds the reader that this rabbit hole of regulation runs deep, and that CFPB providing us with bullet points truly is an act of mercy. In an additional attempt to ease compliance with these regulations, the CFPB also provides language for use in disclosure to consumers.
Definitions for seemingly forthright words are offered in a way that suggests that the potential for litigation based on a lack of clarity with the language was given ample thought, as terms such as “business day,” “flips” and “prompt” each get their own paragraphs.
The document itself is up front, answering questions both obvious and arcane, covering exemptions and special circumstances to the best of government foresight. The entire document can be found by clicking here. If you catch anything that you think is specifically worthy of attention, please feel free to highlight them in our comments section below.
We'll be providing more clarity and client education on this new rule later in year in preparation for its implementation.