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We are preparing an internal valuation for a 1–4 family property for purposes of a mortgage loan. Our internal valuation is based on a prior appraisal of the property as well as price comparisons listed on a public real estate website. Are we required to provide a copy of this internal valuation to our customer, or would this type of valuation be exempt from this requirement? – IBA Compliance Connection

IBA Compliance Connection

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We are preparing an internal valuation for a 1–4 family property for purposes of a mortgage loan. Our internal valuation is based on a prior appraisal of the property as well as price comparisons listed on a public real estate website. Are we required to provide a copy of this internal valuation to our customer, or would this type of valuation be exempt from this requirement?

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Yes, we believe you would be required to provide a copy of your internal valuation to your customer.

Under Regulation B, a creditor must provide an applicant with “a copy of all appraisals and other written valuations developed in connection with and application for credit that is to be secured by a first lien on a dwelling.” A valuation is “any estimate of the value of a dwelling developed in connection with an application for credit,” and the Commentary to Regulation B confirms that “a document prepared by a creditor’s staff that assigns value to the property” is an example of a valuation.

The Commentary to Regulation B also provides that “internal documents that merely restate the estimated value of a dwelling contained in an appraisal . . . being provided to an applicant” or “publicly available lists of valuations” are not considered valuations for purposes of the requirement to provide a copy of a written valuation to a loan applicant. However, we do not believe your internal valuation fits into either of these exempt categories since your bank prepares its own valuation based on both a prior appraisal and publicly available valuations.

For resources related to our guidance, please see:

  • Regulation B, 12 CFR 1002.14(a)(1) (“A creditor shall provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling.”)
  • Regulation B, 12 CFR 1002.14(b)(3) (“The term ‘valuation’ means any estimate of the value of a dwelling developed in connection with an application for credit.”)
  • Regulation B, Official Commentary, Paragraph 14(b)(3), Comment 1 (“Examples of valuations include but are not limited to: . . . ii. A document prepared by the creditor's staff that assigns value to the property.”)
  • Regulation B, Official Commentary, Paragraph 14(b)(3), Comment 3 (“Not all documents that discuss or restate a valuation of an applicant's property constitute a ‘valuation’ for purposes of § 1002.14(b)(3). Examples of documents that discuss the valuation of the applicant's property or may reflect its value but nonetheless are not ‘valuations’ include but are not limited to:

i. Internal documents that merely restate the estimated value of the dwelling contained in an appraisal or written valuation being provided to the applicant.

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iii. Publicly-available lists of valuations (such as published sales prices or mortgage amounts, tax assessments, and retail price ranges).”)