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HPML 2nd Appraisal Rule

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  • #4884
    TheBank
    Participant

    On an HPML purchase transaction, I am trying to get a better understanding of the exemption from the 2nd appraisal rule in a sale within 180 days when the sales price has increased by > 20%, or within 90 days by > 10%. The rule exempts credit when the consumer’s acquisition is from a person “who acquired title to the property through foreclosure….as the holder of a defaulted mortage loan.” Does that mean the borrower or 2nd owner must be purchasing the property from, for example a bank or mortgage company that had a lien on the property when the 1st owner in this example owned it? or can this exemption apply if a builder bought the property at foreclosure from a bank, then made improvements to resell to our borrower? Would the exclusion apply in this example?

    #4905
    rcooper
    Keymaster

    1026.35(c)(4)(vii): You do not have to order an additional appraisal for a covered HPML used to acquire the property from a person who acquired title on the property via foreclosure, deed-in-lieu of foreclosure, or other similar judicial or nonjudicial procedure through that person’s exercise of rights as the holder of a defaulted loan.

    If I’m understanding your question and examples correctly, this exemption would apply to the the purchase of the foreclosed property from the bank (since the bank would be the person who acquired title via foreclosure), but would not apply when that purchaser resells the property.

    Note: Business purpose loans are not covered by Reg Z and, therefore, the HPML appraisal rules do not apply to business purpose loans.

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