Pursuant to requirements of the Dodd-Frank Act, the Consumer Financial Protection Bureau has issued rules amending Regulation B that concern customer notification of, and a requirement to furnish free copies of written appraisals and other written valuations used in connection with an application for any loan secured by a first lien on a dwelling. This rule is separate, and distinguishable, from the rule requiring written appraisals on higher-priced mortgage loans. These rules became final on January 18, 2013 and will become effective on January 18, 2014.
The rules amend the appraisal provisions found in Regulation B (implementing the Equal Credit Opportunity Act). Previously, Regulation B required that a lender provide an applicant with a copy of any appraisal report used in connection with an application for a mortgage loan secured by residential real property, upon the applicant’s request. Under the Dodd-Frank Act, lenders will be required to automatically provide applicants with a copy of a written appraisal report or other valuation report prepared in connection with an application for a first lien loan to be secured by a dwelling. The applicant must also receive a notification/disclosure concerning the appraisal at the beginning of the application process. The requirements of the rules may be satisfied through electronic delivery of the copies and/or notifications.
The notification requirement establishes that within three (3) business days of receiving an application, the lender must provide the applicant with a notice of the applicant’s right to receive a free copy of any appraisal or written valuation developed in connection with the application. If the application is not originally intended to be secured by a first lien on a dwelling, and later is amended to be so secured, the notice must be delivered within 3 business days of the lender’s determination that the loan is to be secured by a first lien on a dwelling. Sample language for the notification is included in the rules.
The copy of the appraisal or valuation must be provided free of charge to the applicant, but the applicant may be charged with the reasonable cost of the appraisal. The copy of the appraisal must be provided to the applicant promptly upon completion of the appraisal, or within 3 business days prior to consummation of the loan, or, in the case of open-end credit, prior to account opening. If the loan is not consummated or the account is not opened, the lender must provide the copy within 30 days of determination that the closing will not occur. There is a provision for the applicant to waive the timing requirement for receipt of the copy at least 3 business days prior to the closing, but the waiver itself must be delivered at least 3 business days prior to the closing. The requirement to furnish a copy of any appraisal or valuation apply whether the credit is extended or denied or if the application is incomplete or withdrawn.
Note that the requirements of these rules apply more broadly than those concerning the HPML appraisal requirements. These requirements apply to both closed-end and open-end loans secured by a first lien on a dwelling. Also, pursuant to the definition of a “dwelling” in the rules, the requirements apply to any one-to-four family residential structure, and includes condominiums, cooperatives, mobile, or other manufactured homes.