Topic: Appraisals and Valuations
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It is our practice to order appraisals for collateral monitoring during the term of our residential loans, which we do not charge the borrowers for. When loans are renewed, we reuse these existing appraisals if they are less than 12 months old. Under Regulation B, can we charge a fee for providing these appraisals to borrowers for their renewals?
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Yes, in our view, you may charge a fee when you provide a borrower with a previously developed appraisal for a loan renewal, provided that the fee is reasonable and used to reimburse you for the cost of that appraisal. Regulation B permits creditors to charge “a reasonable fee to reimburse the creditor for the…
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For a residential mortgage loan made to an Illinois land trust that is secured by residential property held in the trust (where our collateral is a first lien on the assignment of the beneficial interest in the land trust), does Regulation B require us to provide an appraisal notice and copy of the appraisal?
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Yes, we believe that you should provide a copy of the appraisal and appraisal notice to the land trustee for a loan secured by an assignment of the beneficial interest in the land trust, provided that the property held in the land trust is a dwelling (defined in Regulation B as a residential structure with…
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Under the TRID rules, if an appraised value comes in less than we anticipated and the applicant already has received the Loan Estimate, do we have a valid changed circumstance permitting us to issue a revised Loan Estimate? The lower appraisal value means that the loan amount will change, but none of the charges disclosed on the Loan Estimate will change.
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No, we do not believe the TILA-RESPA Integrated Disclosure (TRID) rules permit you to issue a revised Loan Estimate simply due to a lower appraised value of the property (subject to the discussion below). While you state that the charges will not change, the loan amount, estimated payments, cash-to-close and possibly other loan terms set…
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We have a loan portfolio for performing and re-performing loans, including loans secured by first position liens on 1-4 dwelling units. When we utilize loan workout options for these loans (such as loan modification, short sale, and deed-in-lieu), are we required to send an appraisal notice and copies of appraisals under the Equal Credit Opportunity Act (ECOA) and Regulation B?
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The answer depends on the type of workout option, but we think that certain loan modifications are subject to Regulation B — while a short sale and deed-in-lieu are not. Regulation B’s appraisal notice requirements apply whenever you receive an application for an extension of credit secured by a first lien on a dwelling. Therefore,…
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When we renew a commercial loan, we perform an analysis to determine whether we can reuse the existing appraisal or evaluation (versus developing a new appraisal or evaluation) under the Interagency Appraisal and Evaluation Guidelines. Does that analysis trigger the Equal Credit Opportunity Act (ECOA) appraisal notice requirements? Do we need to send a copy of our analysis to the customer?
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The ECOA’s appraisal notice requirement is triggered when your bank receives the application for a credit renewal, not by your bank’s analysis as to whether an appraisal or evaluation is still valid. The ECOA requires a bank to notify an applicant for credit secured by a first lien on a dwelling of their right to…
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Can our bank use an appraisal that has been addressed to another bank regarding a commercial loan under $250,000, provided that it has all the required criteria for an acceptable appraisal?
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Yes, your bank may use an appraisal addressed to another bank, provided that the other bank directly engaged the appraiser, the appraiser has no direct or indirect interest in the property or the transaction, and the appraisal conforms to FDIC appraisal regulations and is otherwise acceptable. We also note that your bank may use an…
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We are renewing a loan with a very low loan-to-value ratio (8%) secured by real property. The loan qualifies for an exemption from the appraisal requirements, but we need to perform an evaluation. Our appraiser recommended that we obtain a land evaluation, even though the property does have a building on it. Are there any regulatory guidelines for the use of a land evaluation in this situation?
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The Interagency Appraisal and Evaluation Guidelines provide general guidance for using a risk-based approach when relying on real property evaluations, but they do not address your specific facts. With its very low loan-to-value ratio here, the loan likely should be treated as a low-risk transaction. Taken together with your appraiser's recommendation for a land evaluation…
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Are there any Illinois laws related to appraisal management companies?
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Yes, the Illinois Appraisal Management Company Registration Act requires appraisal management companies (AMCs) to obtain licenses and comply with rules promulgated by the Illinois Department of Financial and Professional Regulation (IDFPR). In addition, legislation was introduced last spring to establish an Appraisal Management Company Recovery Fund, which would reimburse appraisers who are owed fees by…
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Do the new ECOA appraisal rules apply to business applicants?
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Yes, the new ECOA appraisal requirements apply to commercial loan applicants, provided that the loan will be secured by a first lien on a dwelling. The requirement to provide a copy of all appraisals or written valuations applies to any application for credit to be secured by a first lien on a dwelling, “whether the…