This new year will bring about more than a celebration of auld lang syne; it also will bring about the implementation of some significant legislation that affects matters of real estate appraisal reports.
The CFPB has issued the following final rule amendments, which will take effect in January:
-Disclosure and Delivery Requirements for Copies of Appraisals and Other Written Valuation Under the Equal Credit Opportunity Act (ECOA) (Regulation B)
-Appraisals for Higher-Priced Mortgage Loans Under the Truth in Lending Act (TILA) (Regulation Z)
Under the amended ECOA Regulation B requirements, a creditor must provide an applicant with copies of the final version of each appraisal and other written valuations that were developed in connection with an application for a loan secured by a first lien on a dwelling, and to require creditors to notify consumers in writing within three days of the application that copies of these appraisals or other valuations will be provided to them promptly. Such copies must be provided to the consumer at either (1) the completion of the appraisal or other written valuations or (2) within three business days prior to consummation or account opening, whichever is earlier. The requirement is automatic—the consumer does not need to request the copies, and there is to be no fee charged to the consumer in providing these copies.
There is a waiver option under ECOA for the consumer regarding the requirement to receive a copy at consummation or account opening, but this waiver must be received at least three business days prior to consummation or account opening, unless the specific appraisal or other written valuations pertain to a report that contains only clerical changes from a previously submitted version. It should be noted that the delivery requirements associated with this requirement apply whether the loan is consummated or not. In the case of a loan that
is not consummated, the creditor must provide copies no later than 30 days after it is determined that consummation will not occur.
Appraisal and other written valuations under ECOA would include: a report prepared by an appraiser including the estimate or opinion of the real estate’s value; a document prepared by the creditor’s staff that assigns value to the property; an automated valuation model (AVM) estimate; and a broker price opinion by a real estate agent, salesperson or broker. Any attachments or exhibits that are a part of the valuation would also be applicable.
The amended TILA Regulation Z requirements specifically pertain to higher-priced mortgage loans with provisions related to the manner in which an appraisal is performed, who can perform the appraisal and situations that require two appraisals to be completed, as well as provisions surrounding the delivery of the appraisal report to consumers. Reverse mortgages are excluded from these provisions; as such, those interested in a more detailed summary of these regulations can find that information on our Landmark Network, Inc. blog at bloglandmarknetwork.com, or through the CFPB website.
The burden for compliance with these regulations rests on the creditor. Many are formulating compliance procedures into their own in-house operations, while others are seeking assistance through a partnership with an AMC or other third-party solution providers. In either case, adaptation and implementation of these requirements will prove to be a challenge to some creditors, and it will no doubt be met with increased operating costs for all.
Certainly, the possible onslaught of appraisal and other written valuation reports may prove to be overwhelming to the average consumer. This is especially true as it relates to senior consumers consummating reverse mortgage loans. Most consumers find it challenging to understand a routine residential appraisal report; value-producing field and desk reviews, AVM and BPO documents will create a special challenge related to discernment and applicability to the loan process. Only time will tell how we as an industry respond to such consumer issues. However, these situations will undoubtedly require our special care, diligence and patience.
Detailed information regarding these amended regulations is readily available via the CFPB website at consumerfinance.gov. Landmark Network, Inc. is interested in your views, suggestions, plans and experiences surrounding these legislative changes. We invite you to contact us for discussion via our online blog forum referenced above.
