Topic: CFPB 2014 Mortgage Rules: Copies of Appraisals and Valuations under ECOA
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We have a construction-only loan for the construction of a dwelling, and the loan has a twelve-month term. We have a second lien on the land underlying the dwelling and a first lien on the dwelling itself. Do the Equal Credit Opportunity Act (ECOA) appraisal requirements apply?
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Yes, we believe that the ECOA appraisal requirements do apply to this loan. The ECOA appraisal requirements apply to any loan “secured by a first lien on a dwelling,” and there is no exception for construction or temporary loans. For resources related to our guidance, please see: Regulation B, 12 CFR 1002.14(a) (“A creditor shall…
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A consumer applied for a loan that is subject to the TILA-RESPA Integrated Disclosure (TRID) rules. The consumer indicated an intent to proceed with the loan, but we did not end up originating the loan. The consumer refuses to pay our appraisal fee. Can we pull the fee amount from the consumer’s checking account at our bank?
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Yes, we believe that your bank may exercise a valid right of setoff for the unpaid appraisal fee against the applicant’s checking account, provided that your bank properly disclosed the appraisal fee and that the applicant would be charged the fee to reimburse your bank for the cost of the appraisal (and the applicant had…
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When we extend our in-house balloon mortgage loans, we reevaluate the property. The evaluations usually consist of driving by the property and concluding either that the property value is consistent with our original appraisal or that it has deteriorated. We document the evaluations and retain the documentation in our loan files. Are we required to provide a copy of these evaluations to the applicants and obtain their signatures of receipt?
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Yes, we believe that your bank should provide copies of these evaluations to applicants requesting renewals of loans secured by a first lien on a dwelling. While the applicants’ signatures are not required, obtaining their signatures would be a prudent step for documenting your compliance with this requirement. Regulation B requires creditors to provide applicants…
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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…
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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…
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If we have a loan closing on Friday, April 4, the new ECOA appraisal rules require us to provide a copy of the appraisal by Tuesday, April 1 (per the example in the CFPB’s Small Entity Compliance Guide). If we are mailing the appraisal, does that mean we have to mail the appraisal by March 28 so that it arrives by April 1?
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We agree with your analysis, but with the proviso that for higher-priced mortgage loans, a different definition of “business day” will apply which may require a different mailing date. Based on the ECOA appraisal regulation and staff commentary, if you are mailing an appraisal to a borrower, it must be placed in the mail six…
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Are there any prohibitions on charging fees for our in-house valuations under Illinois law? The CFPB’s new ECOA rules state that we can charge mortgage loan borrowers for appraisals or valuations, if not otherwise prohibited by law.
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We are not aware of any Illinois law that would prohibit or limit your ability to charge customers a fee for the cost of a property appraisal or valuation, which is permitted by Regulation B (12 CFR 1002.14(a)(3)). Section 5e of the Illinois Banking Act states that “[n]otwithstanding the provisions of any other law in…