Agencies Issue Proposal on Method to Adjust Threshold for Exempting Small Loans from Special Appraisal Requirements

The Consumer Financial Protection Bureau (CFPB), the Federal Reserve Board, and the Office of the Comptroller of the Currency (OCC) today issued a proposal detailing the method that will be used to make annual inflation adjustments to the threshold for exempting small loans from higher-priced mortgage loan appraisal requirements.

The Dodd-Frank Act amended the Truth in Lending Act to add special appraisal requirements for higher-priced mortgage loans, including a requirement that creditors obtain a written appraisal based on a physical visit to the home’s interior before making a higher-priced mortgage loan. The rules implementing these requirements contain an exemption for loans of $25,000 or less and also provide that the exemption threshold will be adjusted annually to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The calculation method proposed would allow the thresholds to keep pace with the CPI-W. Among other clarifications, the proposal details that if there is no annual percentage increase in the CPI-W, the agencies will not adjust the exemption threshold from the prior year.

Comments will be due 30 days after the rule is published in the Federal Register, which is expected shortly.

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