Contact: Edmund D. Harllee; Williams Mullen (North Carolina & Virginia)
On Wednesday, February 13, 2013, the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, National Credit Union Administration, Bureau of Consumer Financial Protection (the “Bureau”) and Federal Housing Finance Agency (collectively, the “Agencies”) published final rules in the Federal Register amending Regulation Z (Truth in Lending) to implement the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) with respect to appraisals for “higher-risk mortgages.” Proposed rules on this topic were reported in this publication on October 2, 2012.
The Act generally defines a “higher-risk mortgage” as a closed-end consumer transaction secured by a principal dwelling, and having an annual percentage rate (or “APR”) of 1.5% above the average prime offer rate (or “APOR”) for first-lien loans, 2.5% above the APOR for first-lien jumbo loans and 3.5% above the APOR for junior-lien loans. The final rules refer to “higher-risk mortgages” as “higher-priced mortgage loans” (“HPMLs”), the current terminology in Regulation Z, and require the creditor to determine whether a loan is an HPML by comparing the APR to the APOR. The Bureau had requested comment on replacing the APR with a “transaction coverage rate,” or “TCL,” for purposes of making this determination, but has decided to defer consideration of this matter until the Bureau considers the merits of a more inclusive definition of “finance charge” (see a discussion of this topic in this publication of October 2, 2012).
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