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To: Chief Executive Officers of National Banks and Federal Savings Associations, Department and Division Heads, All Examining Personnel, and Other Interested Parties

Description: Notice of Proposed Rulemaking


The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, and the National Credit Union Administration issued a joint notice of proposed rulemaking on August 15, 2012. The proposal would implement new appraisal requirements for higher-risk mortgage loans under the Truth in Lending Act. These requirements were imposed by the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010.1


The proposal implements new Truth in Lending Act requirements, which prohibit a creditor from extending credit in the form of a higher-risk mortgage loan to any consumer without first 

  • obtaining a written appraisal performed by a certified or licensed appraiser who conducts a physical property visit of the interior of the property. 
  • obtaining a second appraisal from a different certified or licensed appraiser if the purpose of the higher-risk mortgage loan is to finance the acquisition of a property from a seller within 180 days of the acquisition of that property by that seller at a price that was lower than the current price of the property. The second appraisal must include an analysis of the difference in acquisition prices, changes in market conditions, and any improvements made to the property between the date of the previous acquisition and the current acquisition. 
  • providing the applicant, at the time of the initial mortgage application, with a statement that the 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 by an appraiser of the applicant’s choosing at the applicant’s expense. 
  • providing the applicant with one copy of each appraisal conducted in accordance with these requirements without charge, at least three days prior to the transaction closing date. 

A higher-risk mortgage loan is a residential mortgage loan secured by a consumer’s principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate for the mortgage is set 

  • 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 conforming loan amount in effect as of the date the interest rate is set; 
  • by 2.5 or more percentage points, in the case of a first-lien residential mortgage loan having an original principal obligation amount that exceeds the conforming loan amount in effect as of the date the interest rate is set; and 
  • by 3.5 or more percentage points for a subordinate lien residential mortgage loan. 

Several exclusions from the definition of “higher-risk mortgage” are explained in the proposed rule. The proposed rule would implement the requirements of the statute. It would apply to national banks, federal savings associations, and their respective subsidiaries that originate higher-risk mortgage loans. The notice of the proposed rule was published in the Federal Register on September 5, 2012, at 77 Fed. Reg. 54722. Comments are due by October 15, 2012.

Further Information

Contact Robert L. Parson, Appraisal Policy Specialist, (202) 649-6423; Carolyn B. Engelhardt, Bank Examiner (Risk Specialist–Credit), (202) 649-6404; Charlotte M. Bahin, Senior Counsel, (202) 649-6281 or Mitchell Plave, Special Counsel, Legislative & Regulatory Activities Division, (202) 649-6285; or Krista LaBelle, Counsel, Community and Consumer Law, (202) 649-6221.

Daniel P. Stipano
Acting Chief Counsel

 1 Pub. L. 111-203, 124 Stat. 1376, at Section 1471, creating new section 129H of the Truth in Lending Act.

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