The Consumer Financial Protection Bureau, Federal Reserve Board, and Office of the Comptroller of the Currency announced Tuesday that the dollar threshold for smaller loan exemptions from appraisal requirements for higher-priced mortgage loans will increase to $34,200 in 2026, up from the current $33,500 threshold.
The $700 increase represents a routine annual adjustment that affects when lenders must obtain special appraisals for certain mortgage loans. Higher-priced mortgage loans below the new threshold will be exempt from enhanced appraisal requirements that typically apply to riskier lending transactions.
The threshold adjustment stems from regulatory requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which mandated special protections for higher-priced mortgage loans. These protections include requirements for additional appraisals to help ensure borrowers are not taking on loans they cannot afford and that properties serve as adequate collateral.
Higher-priced mortgage loans are those with annual percentage rates that exceed average prime offer rates by specified margins. For first-lien loans, the threshold is 1.5 percentage points above the average prime offer rate, while for subordinate-lien loans, it is 3.5 percentage points above that rate.
Under current regulations, lenders making higher-priced mortgage loans must obtain appraisals thatmeet enhanced standards, including physical inspection of the property's interior. However, loans below the dollar threshold are exempt from these special appraisal requirements, even if they otherwise qualify as higher-priced mortgage loans.
The three agencies coordinate annually to adjust this threshold based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers. This indexing mechanism ensures the threshold keeps pace with inflation and maintains its intended regulatory scope over time.
For lenders, the threshold increase means slightly more loans will be exempt from the enhanced appraisal requirements in 2026. Loans between $33,500 and $34,200 that would have required special appraisals under current rules will be exempt under the new threshold.
The appraisal requirements were designed to address concerns that emerged during the 2008 financial crisis, when inflated property valuations contributed to widespread mortgage defaults. Enhanced appraisal standards help ensure that property values are accurately assessed and that borrowers understand the true value of their collateral.
For borrowers, the exemption typically means faster loan processing and potentially lower costs, as enhanced appraisals can add time and expense to the mortgage origination process. However, consumer advocates note that appraisals provide important protections by helping ensure borrowers do not overpay for properties or take on excessive debt relative to property values.
The Federal Reserve Board, which has primary responsibility for implementing many Dodd-Frank mortgage provisions, works with the CFPB and OCC to maintain consistent standards across different types of lenders. The CFPB oversees many non-bank mortgage lenders, while the OCC supervises national banks and federal savings associations.
Industry groups have generally supported the annual threshold adjustments, viewing them as necessary technical updates that prevent inflation from gradually expanding regulatory requirements beyond their intended scope. The adjustments help maintain a consistent regulatory framework that distinguishes between smaller loans that pose less systemic risk and larger loans that warrant additional oversight.
The new threshold will take effect Jan. 1, 2026, giving lenders time to update their systems and procedures. Mortgage industry participants typically begin preparing for such changes well in advance, as loan origination systems must be programmed to apply the correct thresholds and requirements.
This represents the latest in a series of annual adjustments that have gradually increased the threshold over time. The original threshold was set at $25,500 when the rule took effect in 2014, and has been adjusted upward each year to account for inflation.
The announcement reflects ongoing coordination between federal financial regulators to implement and maintain the regulatory framework established after the financial crisis. Such technical adjustments, while seemingly minor, play important roles in ensuring that regulatory requirements remain appropriately calibrated to current economic conditions.
Lenders and industry participants can find additional information about the threshold change and related appraisal requirements on the agencies' websites. The agencies typically provide detailed guidance to help ensure smooth implementation of such regulatory updates.