FHFA Announces GSE Conforming Loan Limits for 2022
The Federal Housing Finance Agency (“FHFA”) announced that the maximum conforming loan limit for first mortgages secured by one-unit properties acquired by Fannie Mae and Freddie Mac in 2022 will be $647,200, with the exception of several higher-cost areas where higher loan limits will be in effect.
The $647,200 amount represents a 18.05% increase from the current $548,250 limit that has been in effect since January 1, 2021. The loan limits will also increase in nearly all high-cost counties. Some states incorporate FHFA’s conforming loan limits into their “high-cost home loan” and other laws.
Appraisals for Higher-Priced Mortgage Loans Exemption Threshold Adjustment
The Consumer Financial Protection Bureau, Federal Reserve Board, and Office of the Comptroller of the Currency announced the threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $27,200 to $28,500.
Under the Truth in Lending Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, higher-priced mortgage loans must satisfy certain special appraisal requirements, unless exempt. An extension of credit is exempt if equal to or less than the applicable threshold amount as adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1 of the preceding year.
Effective January 1, 2022, the exemption threshold increased from $27,200 to $28,500.
Dollar Threshold Adjustments in Regulations Z for Determining Exempt Transactions
The Consumer Financial Protection Bureau and the Federal Reserve Board announced final rules amending the official interpretations for Regulation Z (the regulation that implements the Truth in Lending Act) related to the dollar threshold for exempt consumer credit transactions.
An extension of credit that exceeds the applicable threshold amount or has an express written commitment to extend credit in excess of the applicable threshold amount is exempt from the provisions of Regulation Z. This exemption does not apply to: (1) loans secured by real property, or personal property used as the principal dwelling of the consumer; or (2) private education loans.
The commentary for Regulation Z provides that the exemption threshold will be adjusted annually, effective January 1 of each year based on any annual percentage increase in the CPI-W that was in effect on the preceding June 1.
Effective January 1, 2022, the exemption threshold amount increased from $58,300 to $61,000.
CFPB Adjusts Asset-Size Threshold for Exemption from Escrow Account Requirements for Higher-Priced Mortgage Loans
The Consumer Financial Protection Bureau (“CFPB”) has adjusted the asset-size threshold for an exemption from the Truth in Lending Act’s (“TILA’s”) escrow account requirements for higher-priced mortgage loans.
For 2022, the threshold will be $2.336 billion. This is increased from 2021, when the threshold was $2.230 billion. Therefore, creditors with assets (including assets of certain affiliates) of less than $2.336 billion as of December 31, 2021 may qualify for an exemption from the escrow account requirements for higher-priced mortgage loans. This threshold will also apply in certain circumstances during a grace period, with respect to transactions with applications received before April 1, 2023. Please note there are other requirements that the creditor must meet to take advantage of the exemption.
This adjustment also affects the “qualified mortgage” rules under Regulation Z. A “small creditor portfolio loan” that meets certain requirements is considered a “qualified mortgage.” One of these requirements is that the creditor must not exceed the asset-size threshold for the exemption from the escrow account requirement for higher-priced mortgage loans. Further, a qualified mortgage generally may only provide for a balloon payment under certain conditions. One of these conditions is that the creditor must not exceed the asset-size threshold.
Finally, the adjustment also affects the “high-cost mortgage” rules under Regulation Z. Generally, a high-cost mortgage may not provide for a balloon payment. But this limitation does not apply to a “balloon payment qualified mortgage.” As explained above, one of the requirements for a “balloon payment qualified mortgage” is that the creditor not exceed the asset-size threshold.