As previously reported, at the end of April 2020, the CFPB issued two factsheets regarding the Equal Credit Opportunity Act (ECOA) and Regulation B provisions that require creditors to provide the applicant with a copy of any written appraisal or other valuation developed in connection with an application for a first lien mortgage loan to be secured by a dwelling (ECOA Valuations Rule). One factsheet addressed the transactions that are covered by the rule, and the other factsheet addressed the rule’s delivery and timing requirements.

We noted that the first factsheet was likely to create confusion regarding the ECOA Valuations Rule’s coverage. Without announcement, the CFPB issued a revised version of the factsheet. The revised factsheet does not reflect that there is a prior version of the factsheet.

For the ECOA Valuations Rule to apply, there must be an application for credit to be secured by a dwelling. For purposes of the ECOA Valuations Rule, a “dwelling” is defined as “a residential structure that contains one to four units whether or not that structure is attached to real property. The term includes, but is not limited to, an individual condominium or cooperative unit, and a mobile or other manufactured home.”

The original factsheet and revised factsheet both provide that two factors determine whether a structure is a dwelling under the ECOA Valuations Rule: “The structure: (1) must be residential and (2) contain one-to-four units. When both factors are present, a dwelling exists.” Unfortunately, the first factsheet then provided the following examples of what are and are not dwellings:

Examples of structures that are dwellings:

• A 10-unit residential structure with three units securing a loan.
• A parcel of land with multiple residential structures totaling 20 units but with two-units in the same structure securing the loan.
• A 30-unit condominium with two condos securing a loan.

Examples of structures that are not dwellings include:

• Multiple dwellings, such as an inventory of individual housing structures, pledged as collateral.
• A building with more than four residential units securing a loan. For example, a 10-unit residential structure with eight units securing the loan.
• Land without any type of structure on it.
• Motor vehicles as defined in 12 USC § 5519(f)(1), including recreational vehicle trailers, motor homes, campers, and recreational boats.
• A three-unit commercial property.

Despite first indicating that the structure must contain one-to-four units to be a dwelling, the original factsheet then provided examples based on the number of units that secure the loan and not the number of units in the structure.

The revised factsheet sets forth the following examples of what are dwellings for purposes of the ECOA Valuations Rule:

Examples of structures that are dwellings:

• A parcel of land with multiple residential structures totaling 20 units but with two-units in the same structure securing the loan.
• A 4-unit condominium with two condos securing a loan.

The CFPB deleted the 10-unit residential structure example, and changed the 30-unit residential structure example to a 4-unit structure example.

With the examples of structures that are not dwellings, the CFPB revised the first example to read:

• Multiple structures, such as an inventory of individual housing structures, pledged as collateral.

In the first example, the CFPB replaced the word “dwellings” with the word “structures”.

What the CFPB still has not done in the revised factsheet is expressly address whether it interprets the ECOA Valuations Rule to apply when a loan is secured by a first lien on no more than four units in a residential structure that contains more than four units. As a result, the revised factsheet continues to create possible confusion as to the ECOA Valuation Rule’s coverage. If the CFPB interprets the rule to apply where a residential structure contains more than four units, it should amend the rule to provide clarity on that point and apply this interpretation only from the date that the amended rule is effective.