A higher-priced loan is on a house the seller bought 75 days ago for $260,000 and is now selling for $299,000, a markup of 15%. The lender has one interior appraisal in the file. Assuming no appraisal exemption applies and the resale contract is signed 75 days after the seller's acquisition, is a second appraisal required under the HPML property-flipping rule?
Correct Answer
B) A 2nd appraisal is required: 75 days with a markup over 10% triggers it
B. The stipulated nonexempt HPML transaction requires a second appraisal. Measure to the resale agreement: 75 days places the transaction in the 90-or-fewer-day band. ($299,000 − $260,000) ÷ $260,000 = 15%, exceeding that band’s 10% threshold. Scope and exceptions: Coverage and no exemption are assumed. This result should not be applied to every resale or every mortgage. Source: 12 CFR 1026.35(c)(4)(i)–(ii) — https://www.consumerfinance.gov/rules-policy/regulations/1026/35/
Why This Is the Correct Answer
B. The stipulated nonexempt HPML transaction requires a second appraisal. Measure to the resale agreement: 75 days places the transaction in the 90-or-fewer-day band. ($299,000 − $260,000) ÷ $260,000 = 15%, exceeding that band’s 10% threshold. Scope and exceptions: Coverage and no exemption are assumed. This result should not be applied to every resale or every mortgage.
Why the Other Options Are Wrong
Option A: One appraisal is enough because an interior visit was already performed
An interior appraisal does not replace the separate two-appraisal requirement.
Option C: One appraisal is enough, since the markup is under the 20% flip threshold
The 20% threshold belongs to the 91–180-day band.
Option D: A 2nd appraisal is required only where the resale falls within 30 days
The applicable band is not limited to 30 days.
Exam Tip
Choose the time band before comparing the price increase.
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