The Consumer Financial Protection Bureau has issued a final rule
to implement Dodd-Frank amendments to the Equal Credit Opportunity Act that require creditors to provide to a first lien mortgage applicant a copy of all written appraisals and valuations developed in connection with the application. The final rule, which revises the existing Regulation B requirements for providing copies of appraisals to applicants, becomes effective on January 18, 2014. It will apply to first lien mortgage transactions for which a creditor receives an application on or after this date.
The final rule contains these key provisions:
The rule applies to applications for consumer or business purpose credit that are to be secured by a first lien on a residential structure containing one to four units, whether or not that structure is attached to real property. (Unlike the current Regulation B appraisal rule, the final rule does not apply to subordinate lien loans.)
A creditor must notify an applicant in writing within three business days of receiving an application that the applicant has a right to receive a copy of all written appraisals developed in connection with the application. Although it only requires creditors to give notice of an applicant’s right to a copy of “appraisals,” the rule also requires creditors to provide a copy of any non-appraisal valuations. For purposes of the rule, any estimate of a dwelling’s value developed in connection with an application (such as an automated valuation model report or broker price opinion) is considered a “valuation.”
(While the CFPB’s final rule on appraisals for higher-priced mortgages requires creditors to notify an applicant within three business days of receiving an application of the right to a copy of an appraisal and to obtain an additional appraisal at the applicant’s expense, it imposes no similar requirements for non-appraisal valuations. To allow creditors to use revised Sample Form C-9 to satisfy both the Regulation B notice requirement and the higher-priced mortgages notice requirement, the form only refers to an “appraisal.”)
The copy of each appraisal and other written valuation must be provided promptly upon their completion, or three business days before consummation for closed-end credit or account opening for open-end credit, whichever is earlier. Unless otherwise prohibited by law, a creditor may charge a reasonable fee to reimburse the creditor for the costs of the appraisal or valuation itself, but not for photocopying, postage, or other costs associated with providing a written copy to an applicant.
Applicants may waive the timing requirement for providing copies but must be given a copy of all appraisals and other written valuations at or prior to consummation or account opening. If the applicant provides a waiver and the transaction is not consummated or an account is not opened, the copies must be provided within 30 days of when the creditor determines consummation or account opening will not occur.
Ballard Spahr’s Mortgage Banking Group combines broad regulatory experience assisting clients in both the residential and commercial mortgage industries with formidable skill in litigation and depth in enforcement actions and transactions. It is part of the firm’s Consumer Financial Services Group, which produces the CFPB Monitor, a blog that focuses exclusively on important CFPB developments. To subscribe, use the link provided to the right.
For more information on the appraisal rule for higher-priced mortgage loans, contact Richard J. Andreano, Jr., at 202.661.2271 or firstname.lastname@example.org, John D. Socknat at 202.661.2253 or email@example.com, or Michael S. Waldron at 202.661.2234 or firstname.lastname@example.org.