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Commercial Loans: Customer Copy Of Appraisal Required?
by Mary Beth Guard, BOL Guru

Question: Is there any regulation or law that requires that a financial institution provide a copy of an appraisal (commercial loan on commercial property) to the borrower? Our policy has always been not to give that out since the Bank engaged the appraiser and that it did not matter if the borrower paid for that appraisal.

Answer: The only regulation which currently requires that a copy of an appraisal be given to the applicant (or a notice of right to receive a copy) is Regulation B, and its provisions only apply to an application for a loan that is or would be secured by a dwelling.

The purpose of the loan and type of borrower do not matter -- only the collateral does. Under the applicable part of Regulation B, "dwelling" is defined to mean a residential structure that contains one to four units whether or not that structure is attached to real property. The term includes, but is not limited to, an individual condominium or cooperative unit, and a mobile or other manufactured home.

If your commercial borrower is securing the loan with something that meets the definition of a dwelling, and you obtain (or perform) an appraisal on it, you have to provide a copy, or a notice of the right to receive a copy. For other types of property, there is no requirement to provide a copy of the appraisal.

Please note, however, that you may have a state law requirement to provide a copy. For example, BOL User Debra M. Manos noted there is a CA requirement in Business & Professions Code Section 11423 to provide a notice of Appraisal Availability to applicants for loans secured by non-residential property.

The original version appeared in the January/February 2003 edition of the Oklahoma Bankers Association Compliance Informer.

First published on 5/26/03

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