Keeping track of the number of appraisal requirements credit unions must follow can be daunting. For example, consider:
What most of these requirements have in common is the emphasis on appraiser independence. This means appraisals and real estate valuations must be based on the person’s independent professional judgment, free of any influence or pressure that may be exerted by anyone with an interest in the transaction.
Reg Z interim rule
The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Truth in Lending (TIL) Act last year to establish new requirements for appraisal independence for credit transactions secured by a consumer’s principal dwelling.
TIL Section 129E(a) “prohibits persons that extend credit or provide any service for a consumer credit transaction secured by the consumer’s principal dwelling from engaging in any acts or practices that violate appraisal independence” as described in the Federal Reserve Board’s implementing regulations.
The Fed published an interim final rule amending Reg Z last October implementing these provisions. The mandatory compliance date is April 1, 2011.
The new Reg Z provisions are similar to amendments issued in 2008 under the Home Ownership and Equity Protection Act (HOEPA), except that the new regulations apply to both closed-end and open-end credit transactions (e.g., home equity lines of credit) secured by a consumer’s principal dwelling. The 2008 regulations only applied to closed-end mortgage loans.
The regulation applies to any valuation (not just a formal appraisal) of a consumer’s principal dwelling, and to any person who performs valuation services or valuation management functions. A “valuation” is an estimate of the value of a consumer’s principal dwelling in written or electronic form, other than one produced by an automated model or system. And, the term “valuation management functions” refers to a variety of administrative activities undertaken in connection with the preparation of a valuation, for example, managing or overseeing the appraisal preparation process.