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Our loan document system does not produce an appraisal notice for home equity lines of credit (HELOCs). Is that correct? – IBA Compliance Connection

IBA Compliance Connection

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Our loan document system does not produce an appraisal notice for home equity lines of credit (HELOCs). Is that correct?

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Regulation B requires lenders to provide a notice of appraisal rights for credit applications secured by a first lien on a dwelling.

The appraisal notice is not required for HELOCs secured by a second or junior lien. However, if a HELOC will be secured by a first lien on a dwelling (for example, when the original purchase money loan already has been paid off), you are required to provide the applicant with the notice of appraisal rights. If your loan system does not produce this appraisal notice for first lien HELOCs, then you should have this corrected.

For resources related to our guidance, please see:

  • Regulation B, 12 CFR 1002.14(a)(2) (“For applications subject to paragraph (a)(1) of this section, a creditor shall mail or deliver to an applicant, not later than the third business day after the creditor receives an application for credit that is to be secured by a first lien on a dwelling, a notice in writing of the applicant’s right to receive a copy of all written appraisals developed in connection with the application. . . .”)

  • Regulation B, 12 CFR 1002.14(a)(1) (Paragraph (a)(1) applies to any “application for credit that is to be secured by a first lien on a dwelling.”)

  • Regulation B, 12 CFR 1002, Form C-9, Sample Disclosure of Right to Receive a Copy of Appraisals (“We may order an appraisal to determine the property’s value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost.”)