Apprise Your Appraisals
New CFPB rule requires creditors to give applicants free copies of appraisals.
May 19, 2013
In January, the consumer Financial Protection Bureau (CFPB) amended Regulation B to implement a Dodd-Frank Act amendment to the Equal Credit Opportunity Act (ECOA) concerning appraisals and other valuations.
The rule goes into effect Jan. 18, 2014.
The revisions generally will require all creditors to give applicants free copies of appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling.
It will require lenders to notify applicants in writing that copies of appraisals will be provided to them promptly.
Before the amendment, the ECOA required creditors to furnish appraisal reports “promptly upon request.” There is no longer an exemption to the rule for federal credit unions subject to NCUA’s appraisal regulations (Part 722).
A “dwelling” is a residential structure that contains one to four units, regardless of whether it is attached to real property.
This includes individual condominiums or cooperative units, mobile homes, or other manufactured homes, but not recreational vehicles, boats, motor homes, or other vehicles.
A “valuation” is any estimate of the value of a dwelling developed in connection with a creditor’s decision to provide credit.
Key sections of the rule address:
► Appraisals and other valuations (Section 1002.14[a]). Creditors must provide a copy of each appraisal or other written valuation promptly upon completion, or three business days prior to consummation of the transaction (for closed-end credit) or account opening (for open-end credit), whichever is earlier.
An applicant may waive the timing requirement and agree to receive a copy at or before consummation or account opening, except where otherwise prohibited by law.
A waiver must be obtained at least three business days prior to consummation of the transaction or account opening unless it pertains solely to the applicant’s receipt of a copy that contains only clerical changes from a previous version.
If the applicant provides a waiver and the transaction is not consummated or the account is not opened, the creditor must provide these copies no later than 30 days aft er making this determination.
► Disclosures (Section 1002.14[a] ). Creditors must notify applicants within three business days of receiving an application of their right to receive a copy of all written appraisals and valuations.
Here’s a sample disclosure (Form C-9): “We may order an appraisal to determine the property’s value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost.”
► Reimbursement (Section 1002.14[a]). The rule prohibits creditors from charging for a copy of appraisals/valuations (e.g., photocopying charges, postage, etc.), but permits them to charge a reasonable fee to reimburse for the cost of the actual appraisal/valuation (unless otherwise prohibited by law).
The reimbursement amount cannot be increased to cover the cost of providing documentation to the consumer.
► Withdrawn, denied, or incomplete applications (Section 1002.14[a]). Appraisal copy requirements apply whether credit is extended or denied, or if the application is incomplete or withdrawn.
► Electronic copies (Section 1002.14[a]). Copies of written appraisals and valuations may be provided to the applicant in electronic form subject to compliance with the Electronic Signatures in Global and National Commerce Act.
► Regulation Z appraisal rule (Section 1026.35[c]). Reg B appraisal requirements overlap with the rule on appraisals for higher-priced mortgages under Reg Z (Truth in Lending).
Reg Z also requires creditors to provide free copies of appraisals in transactions covered by the rule and to provide a disclosure at application.
The same appraisal notice can be used to satisfy both Reg B and the Truth in Lending rule in transactions where both rules apply.
For more information, visit CUNA’s eGuide to Federal Laws and Regulations (cuna.org, select “compliance”).
VALERIE MOSS is CUNA’s senior director of compliance analysis. Contact CUNA’s compliance department at firstname.lastname@example.org.