We have taken a home for collateral to do a bridge loan for 9 months to purchase another primary residence. We took the house as "abundance of caution" and did not do an appraisal. Am I correct in assuming we do NOT need to give the Appraisal Notice?

I guess i'm concerned about how a loan to purchase a primary residence, secured only by their current primary residence, qualifies as "abundance of caution"?

Sounds pretty wacky to me.

If you attained a value on the property (internal valuation or any other method) I would give the notice. The appraisal notice is required if you attained a value on the property, not just for appraisals.

And that notice should have been given at application, and the evaluation promptly upon completion.

I understand you point, that was not my decision, the Bank President's apparently very strong client.

If you didn't do an appraisal or evaluation, there's no point giving the notice. Not having the appraisal or evaluation and trying to claim abundance of caution down the road i think is going to be your bigger issue .

I just want to add: i'm not saying it's impossible for this to be a true case of abundance of caution....we can't tell from the information provided. If your borrower has a large reserve of cash or something....maybe it would be.

If the request is subject to the appraisal copy requirement, the notice requirement applies whether or not you do an appraisal. It doesn't have to make sense -- it's a regulation.

John...can you explain that a bit more? I've been under the impression that if an appraisal or evaluation isn't "developed" as part of the transaction (for example, perhaps an existing appraisal is used on an internal refinance), then there's no notice requirement, nor a provision (of the appraisal or evaluation) requirement.

I've been under the impression that if an appraisal or evaluation isn't "developed" as part of the transaction (for example, perhaps an existing appraisal is used on an internal refinance), then there's no notice requirement, nor a provision (of the appraisal or evaluation) requirement.

What section of 1002.14 do you base that impression on?

(a) Providing appraisals and other valuations. (1) In general. A creditor shall provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling.

How does that exempt the notice requirement of 1002.14(a)(2)?

I was under the impression that even if we had planned to use a previous appraisal. We would still be required to provide the notice, but since we didn't order a new appraisal or valuation we would not have to provide the customer with a copy of the old appraisal.

1002.14(a)(2) starts basically with "for applications subject to (a)(1)". If there is no appraisal or evaluation developed with the transaction, (a)(1) doesn't apply; therefore, how can (a)(2) apply? That's how i've been looking at it.

We would still be required to provide the notice, but since we didn't order a new appraisal or valuation we would not have to provide the customer with a copy of the old one.

That would be correct. See the Commentary to 1002.14(a)(1)(2).

All loans secured by a 1st lien in a 1-4 is subject to .14(a)(1). If no appraisal or evaluation is obtained then there is no copy to be provided but that does not exempt the loan from .14(a)(1).

Ok Dan...i understand where you're coming from.

Form C-9—Sample Disclosure of Right to Receive a Copy of Appraisals.

We may order an appraisal to determine the property's value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close.

You can pay for an additional appraisal for your own use at your own cost.


The notice states that we may, not that we will, order an appraisal in relation to the transaction and that we will give you a copy of any appraisal obtained.

That's just not how i interpret "subject to". If ALL first lien loans were subject to (a)(1), then ALL first lien loans would carry the requirement for the appraisal or evaluation to be given to the applicant......and the rest of (a)(1) makes it clear that it has to be "developed in connection with an application for credit".

c) Disclosures. In addition to other disclosures required by this part, in a mortgage subject to this section, the creditor shall disclose the following in conspicuous type size:

That's from Section 32 of Reg. Z. We don't give the HOEPA disclosures to non-HOEPA loans...what's the difference?

(a) Providing appraisals and other valuations. (1) In general. A creditor shall provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling . . . .

As I said previously all loans requests that are to be secured by a 1-4 is subject to .14(a)(1). IOWs if you get an appraisal you have to provide a copy of it, if you don't there is not a copy to provide but again that doesn't exempt the loan request from .14(a)(1). If you later within the process decide to get an appraisal then you will have to provide a copy of that appraisal and if you knew the lien would be a 1st you had better provided the notice within 3 business days of receiving the application.

As discussed many time you cannot relate one regulatory requirement to another one. Reg. Z and Reg. B's requirements are independent of one another. In Reg. Z if the loan is not subject to section 32 then it is exempt from section 32, just like a RMT is exempt from section .15 and .20 and closed-end home equity loans are exempt from section .40.

No where in 1002.14 does it state or imply that the notice is not required when it is known the loan request will be secured by a 1-4.

Examples of loans that would not be subject to .14(a)(1):

Subordinate liens
Multifamily dwellings
Motor Homes (see the Commentary to .14(b)

Reg. B and Reg. Z have a different definition of "subject to"? Consumer purpose loans secured by the primary residence of the borrower would be 'subject to' (as you're defining it) Section 32...if they weren't 'subject' to it, you wouldn't be testing the loan for it.

Sorry Dan, i think "For applications subject to paragraph (a)(1) of this section" and "developed in connection with an application for credit that is to be secured by a first lien on a dwelling" is actually pretty clear. Not trying to argue with you; we can agree to disagree.

What do you do with a request that is to be secured with a first lien in a 1-4 and you later determine you will need an appraisal? At that time you will have to provide the a copy of the appraisal developed but since you did not provide the notice within 3 days of application you have violated .14(a)(2).

Providing the copy is dependent on developing an appraisal or evaluation. Providing the notice is dependent on receiving an application not when you decide you need an appraisal or evaluation.

I tell my staff to not provide the notice only if we KNOW we will use an existing appraisal or evaluation. I agree that if you don't provide the notice and later in the application process decide to develop a new appraisal or evaluation, you have violated the rule. I don't agree that the rule requires it when you don't develop a new appraisal or evaluation.

Similar discussion:

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1910828&Searchpage=3&Main=219871&Words=%2Bappraisal+%2Bdisclosure&Search=true#Post1910828


Seems to support raitchjay's POV.

Dan, the reg uses an instance of a subordinate lien...and then if that later changes, you give it within 3 days...wouldn't the same theory apply here? If you KNOW you aren't going to do a new one, I don't see where it applies.

We generally do a new one for everything due to S&S...but just sayin.

I'm aware of the exception for a subordinate lien. But a loan request that is to be secured by a subordinate lien is not subject to .14(a)(1).

An abundance of caution property is not subject to the Interagency appraisal rules but where is it exempt from .14(a)(1) or (2) if the lien will be a 1st?

If the notice requirement was intended to be provided only if or when you decided an appraisal will be obtained or is needed then why didn't the regulation allow 3 business days from that date instead of 3 business days from the date of application to provide the notice?

Again the model notice says "We may", not "We will" order an appraisal.