Appraisals for Higher-Priced Mortgage Loans (HPML's)

Did you know that in certain circumstances you are required to get TWO full appraisals when creating an owner finance note? TILA Higher-Priced Mortgage Loans (HPML) Appraisal Rule went into affect for applications received on or after January 18, 2014. If you create a loan for a consumer’s primary residence that does NOT meet the Qualified Mortgages standard but meets the definition of a Higher-Price Mortgage Loan, then you must:

• Disclose to consumers within three days after the consumer applies that they are entitled to a free copy of any appraisal the creditor orders and notify them that they can hire their own appraiser at their own expense.

• Obtain a written appraisal performed by a certified or licensed appraiser in conformity with USPAP and Title XI of FIRREA

• The appraiser must do an interior inspection and provide a written report 

• Deliver copies of the appraisals to the applicants no later than three business days before consummation
  

If the property is a flip (the seller has owned the property less than 180 days), then a second appraisal is required if

1. The price increase is more than 10% of the purchase price if the seller acquired the property in the past 90 days
2. The price increase is more than 20% of the purchase price if the seller acquired the property in the past 180 days

The second appraisal must:

1. Be a written report by a licensed appraiser in compliance with USPAP and FIRREA based on an inter property visit; the appraisal must be done by a different firm than the first appraisal performed
2. Analyze
1. Difference in acquisition and sales price
2. Change in market conditions
3. Property Improvements the seller made

Remember, by creating a QUALIFIED MORTGAGE, you are exempted from these requirements. Use a qualified RMLO who specializes on working with real estate investors to make sure all of your paperwork is in compliance.