Is it acceptable to provide an appraisal waiver at application? We have had some timing issues regarding closing deadlines where the appraisal would be available less than 3 days for the consumer to review. Our plan would be to get the waiver signed and deliver appraisal via e-mail as well as provide a paper copy prior to closing however it might be less than 3 days. Your feedback is appreciated.

If none of you applications will meet the HPML appraisal requirements, then you can provide the option to waive at application. The HPML appraisal requirements (see Reg.Z Section 35) do not allow waivers.

We only allow our commercial lenders to provide a waiver at application since there is a possibility one of our consumer applications can be a HPML appraisal loan.

Just my two cents -- I expect that examiners who see a pattern and practice of routinely encouraging applicants to sign a waiver of the timing requirement will criticize the lender.

Unfortunately I agree, but I think examiners are overstepping their authority.

We're not encouraging them to waive we just give them the option. The borrowers have the right to waive. In fact, most of commercial borrowers get upset for us just giving them the disclosure let alone making them wait three days. If we get criticized for a high number of commercial waivers then I'll be talking to a supervisor.

Have lenders actually been written up by examiners for allowing all borrowers to waive the right to receive the appraisal 3 days before closing? Just curious if this has happened.

I don't think the examiners are overstepping their authority here.

I don't think the rulemakers ever envisioned that bankers would be getting waivers upfront like they are. I feel this was an oversight in the rulemaking that they failed to make their intentions clear, or they simply did not give bankers enough credit in looking for loopholes.

You don't go through all that work and effort to make a rule so significant as the delivery rule just so in the end to say, but you can just skip all of this and get a waiver up front. Someone on the rule writing team goofed, and while we know they spirit and intent of the rule, the more banks that buck it by pushing waivers up front, I'm sure we can expect a correction in the future that will be more onerous that the current rule. Why we continue to do this to ourselves is beyond me...

Anecdotally, I have heard from two peers that examiners have asked about the practice, and both EICs were pleased that waivers were not being offered up front and only in limited and appropriate situations. Not sure what their reaction would have been if it were the other way.

We were also asked during our exam last November if we have this practice. We don't so we were good.

I know of several banks in my area who routinely have borrowers waive at time of application. I keep waiting to hear about the examiners cracking down on them but so far nothing.

Notice that the Reg B appraisal notice is in the integrated Loan Estimate disclosure as of 8/1/2015 and it does NOT have waiver language. I think that tells us something.

I'm wondering how they would be written up? If they follow to a letter the regulation, they can't be cited for a violation of Reg B. There's nothing in Reg B that prevents or discourages the practice of alerting the applicant to their right to waive the waiting period. Maybe a UDAAP finding...?

Well, the reason that the examiners might get all over a bank that routinely provides the opportunity to waive the three day right to a copy of the appraisal is because the CFPB directly opined that bank's should not be doing it.

See the preamble to the original Reg. B amendment:


"The Bureau believes that, in general, requests for waivers should not be presented to consumers less than three business days before consummation or account opening. Permitting such requests would, in the Bureau’s view, present a risk that consumers would feel unduly pressured to provide waivers in order to avoid delays in closing and that creditors could use such waivers to cure previous violations of the rule’s timing requirements."

While the CFPB used the term consumer in this analysis, we all know that this provision is broader than that. Whether they would not be as concerned if these were commercial borrowers, we will probably have to wait and see.

Thank you for reminding me of the preamble. I had forgotten that and need the reference for a conversation on this topic.

So a bank would be cited for a violation of the Bureau's "view" and not a violation of the actual regulation? (Rhetorical question - half joking...) I could see a UDAAP-like finding or maybe a "stop doing that" edict from an examiner, but I guess the CFPB is pretty much making their own rules up and even going farther than the laws passed by Congress. But all that being said, I agree that it is not a good practice and wouldn't want to have to defend it during an exam.

I would say consider this... going forward in a few weeks, or months, if you have to provide the CD three days before closing, and presumably you need an appraisal in and reviewed before issuing a CD, how would you make the argument that obtaining a waiver is necessary upfront at application when the appraisal and CD delivery times now sync up?

If you haven't discontinued your policy of presenting a waiver option at application already, I would give serious consideration to doing so going forward.

That's a strong argument, JJ, at least as it applies to TRID loans. It won't apply to business-purpose credits.

True, true.

We have an appraisal receipt acknowledgement on a borrower closing certification, that is signed at closing. It is worded to have the borrower choose that yes, they were provided the appraisal at least 3 day prior to closing, or no, it was provided less than 3 days before closing and they waive the requirement. (Not used for HPMLs.)

Reading Randy's Reg B preamble post, it seems like we better change this practice. Is there a requirement to have the borrower acknowledge receipt of the appraisal? Is documentation of the date it was sent enough?

There is no requirement to document receipt, but if you don't - good luck. Signing something after the fact at closing saying I got it, well good luck with that one also.

If you hand the person the appraisal, have them sign for it at that time. If you mail it, keep a copy of the cover letter in file.

It is really pretty simple.

In this process, if they say the appraisal was provided less than 3 days before closing, it is too late for a waiver, as that has the same timing requirement...at least three days prior to closing.