Come January 2014, creditors will be required to equip borrowers with more information on how the value of the borrower’s home is determined, even if the creditor doesn’t use that information in making its lending decision. How borrowers will use this additional information and its concomitant effect on creditors, appraisers, and appraisal management companies (“AMCs”) is yet to be seen.

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued a final rule amending Regulation B on January 18, 2013, implementing an Equal Credit Opportunity Act (“ECOA”) amendment under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). On the same day, the CFPB and the other banking agencies issued a joint rule implementing a related reform, a Truth-in-Lending Act (“TILA”) amendment regarding appraisals for higher-priced mortgage loans (“HPML Rule”). This alert provides an overview of how the changes to Regulation B will affect creditors; a separate alert will address the HPML Rule. The CFPB’s final rule amending Regulation B will become effective for applications received by a creditor on or after January 18, 2014.

The CFPB’s final rule amends Regulation B by requiring creditors to provide applicants in credit transactions secured by a first lien with a copy of all appraisals and other written valuations, including automated valuation models (“AVMs”) and broker price opinions (“BPOs”), developed in connection with a credit application, as a matter of course, irrespective of whether the creditor uses the valuation in making the credit decision. Since 1991, ECOA and Regulation B have required creditors to provide credit applicants for both first- and subordinate-lien loans, upon written request, with copies of appraisal reports used in connection with applications for a loan secured by real property in order to make it easier for loan applicants to determine whether a loan was denied due to discrimination. According to the CFPB, the new rule will provide information to borrowers of first-lien loans that will enhance their understanding of how creditors estimated the value of their homes and enable borrowers to better detect if there was any unlawful discrimination involved in the loan process, consistent with the purposes of ECOA.