Appraisals are required for HPMLs unless an exception applies, as discussed below.

Regulation Z generally requires lenders to obtain written appraisals for HPMLs, but it contains eight exceptions to the HPML appraisal requirement. Exceptions include loans that meet the criteria for a qualified mortgage (QM) loan, loans that do not exceed $27,200, loans secured by mobile homes, boats or trailers, loans financing the initial construction of a dwelling, bridge loans and reverse mortgage loans, among others.

If your bank extends an HPML that meets one or more of these exceptions, the loan would be subject to the general appraisal requirements, which do not require appraisals for residential real estate transactions of $400,000 or less (recently raised from $250,000). However, an appropriate evaluation is required for transactions under this threshold. The Interagency Appraisal and Evaluation Guidelines provide that an evaluation may be “prepared by an individual or supported by an analytical method or a technological tool,” but a broker price opinion or comparative market analysis cannot be used as an evaluation. Consequently, we recommend reviewing the Interagency Guidelines sections on Evaluation Development and Evaluation Content for a full explanation of how to prepare an adequate evaluation.

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.35(c)(3)(i) (“Except as provided in paragraph (c)(2) of this section, a creditor shall not extend a higher-priced mortgage loan to a consumer without obtaining, prior to consummation, a written appraisal of the property to be mortgaged. The appraisal must be performed by a certified or licensed appraiser who conducts a physical visit of the interior of the property that will secure the transaction.”)

• Regulation Z, 12 CFR 1026.35(c)(2) (“Unless otherwise specified, the requirements in paragraph (c)(3) through (6) of this section do not apply to the following types of transactions:  

(i)  A loan that satisfies the criteria of a qualified mortgage as defined pursuant to 15 U.S.C. 1639c;

(ii)  An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in the official staff commentary to this paragraph (c)(2)(ii);

(iii)  A transaction secured by a mobile home, boat, or trailer.

(iv)  A transaction to finance the initial construction of a dwelling.

(v)  A loan with a maturity of 12 months or less, if the purpose of the loan is a ‘bridge’ loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling.

(vi)  A reverse-mortgage transaction subject to 12 CFR 1026.33(a).

(vii)  An extension of credit that is a refinancing secured by a first lien . . . 

(viii)  A transaction secured by: (A) A new manufactured home and land . . . or (B) A manufactured home and not land . . .”)

• Regulation Z, Official Interpretations, Paragraph 35(c)(2)(ii), Comment 3 (“For purposes of § 1026.35(c)(2)(ii), the threshold amount in effect during a particular period is the amount stated below for that period. . . . vii. From January 1, 2020, through December 31, 2020, the threshold amount is $27,200.”)

• FDIC Appraisal Regulations, 12 CFR 323.3(a) (“An appraisal performed by a State certified or licensed appraiser is required for all real estate-related financial transactions except those in which: (1) The transaction is a residential real estate transaction that has a transaction value of $400,000 or less; . . .”)

• FDIC Appraisal Regulations, 12 CFR 323.3(b) (“For a transaction that does not require the services of a State certified or licensed appraiser under paragraph (a)(1), (a)(5), (a)(7), or (a)(14) of this section, the institution shall obtain an appropriate evaluation of real property collateral that is consistent with safe and sound banking practices.”)

• Interagency Appraisal and Evaluation Guidelines, (December 2, 2010) (“An institution should be able to demonstrate that an evaluation, whether prepared by an individual or supported by an analytical method or a technological tool, provides a reliable estimate of the collateral’s market value as of a stated effective date prior to the decision to enter into a transaction.”)

• Interagency Appraisal and Evaluation Guidelines, (December 2, 2010) (“A valuation method that does not provide a property’s market value or sufficient information and analysis to support the value conclusion is not acceptable as an evaluation. For example, a valuation method that provides a sales or list price, such as a broker price opinion, cannot be used as an evaluation because, among other things, it does not provide a property’s market value. Further, the Dodd-Frank Act provides ‘[[i][/i]i]n conjunction with the purchase of a consumer’s principal dwelling, broker price opinions may not be used as the primary basis to determine the value of a piece of property for the purpose of loan origination of a residential mortgage loan secured by such piece of property.’ Likewise, information on local housing conditions and trends, such as a competitive market analysis, does not contain sufficient information on a specific property that is needed, and therefore, would not be acceptable as an evaluation. The information obtained from such sources, while insufficient as an evaluation, may be useful to develop an evaluation or appraisal.”)

• Regulation Z, 12 CFR 1026.35(c)(4) (“Except as provided in paragraphs (c)(2) and (c)(4)(vii) of this section, a creditor shall not extend a higher-priced mortgage loan to a consumer to finance the acquisition of the consumer's principal dwelling without obtaining, prior to consummation, two written appraisals, if: (A) The seller acquired the property 90 or fewer days prior to the date of the consumer's agreement to acquire the property and the price in the consumer's agreement to acquire the property exceeds the seller's acquisition price by more than 10 percent; or (B) The seller acquired the property 91 to 180 days prior to the date of the consumer's agreement to acquire the property and the price in the consumer's agreement to acquire the property exceeds the seller's acquisition price by more than 20 percent.”)