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#2028659 - 07/21/15 09:10 PM Regulation B Notification Question
Cedar Point Guy Offline
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Cedar Point Guy
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Cedar Point
Hi All,

For regulation B notification purposes can I use the last date an appraisal was revised to count for the 30-day notification requirement?

Per Regulation B: A completed application means an application in connection with which a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested (including, but not limited to, credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral). The creditor shall exercise reasonable diligence in obtaining such information.

If the Bank regularly waits for an appraisal to make a credit decision, can I use the last date the appraisal was updated as my starting point for Notification purposes?
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#2028664 - 07/21/15 09:17 PM Re: Regulation B Notification Question Cedar Point Guy
rlcarey Online
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rlcarey
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If that is typically your last piece of information needed to make a decision, sounds good to me.
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#2028681 - 07/21/15 09:37 PM Re: Regulation B Notification Question Cedar Point Guy
M Cockrell Offline
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I'm curious.

Do you order an appraisal prior to obtaining "intent to proceed"?

I ask because, as a potential borrower, I would not commit to the cost of an appraisal, if the FI was unwilling to commit to (at least conditionally) approving the loan.

Cyclical conundrum created? That is to say: app received, 30-day clock begins, app determined to be "incomplete" (due to lack of appraisal), no decision rendered, intent to proceed requested, no intent to proceed reciprocated because no approval granted, no approval granted because decision cannot be finalized until appraisal received...
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#2028682 - 07/21/15 09:39 PM Re: Regulation B Notification Question Cedar Point Guy
rlcarey Online
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I'm sorry, I don't follow. What does "intent to proceed" have to do with determining whether you have a complete application???
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#2028687 - 07/21/15 10:00 PM Re: Regulation B Notification Question rlcarey
M Cockrell Offline
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In my opinion, it doesn't.

I may have misunderstood the original poster's question.

Regardless though, as the original poster states, "If the Bank regularly waits for an appraisal to make a credit decision..." it triggered the following thoughts: Why would an applicant agree to proceed and pay for an appraisal before the creditor provides an approval (conditional or otherwise)? Which led me to: Why would the FI order an appraisal without a fee? So, if the FI cannot get the applicant to provide "intent to proceed" (so they won't be short-changed on the fee), how can the creditor "wait for an appraisal to make a credit decision"?

Loop?
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#2028693 - 07/21/15 10:23 PM Re: Regulation B Notification Question Cedar Point Guy
rlcarey Online
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Then the creditor would have to pull out the incomplete application form or deny the application because the borrower did not pay the fee. Whether a creditor wants to issue a conditional approval or underwrite the loan up to that point is up to the creditor.
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#2028797 - 07/22/15 02:32 PM Re: Regulation B Notification Question rlcarey
M Cockrell Offline
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I am not a lender; so, I don't pretend to completely know their role, but to play devil's advocate, what's incomplete?

As an applicant, I've provided everything requested on the "1003" application (including, an estimated value), so my expectation is for the lender to issue a timely decision based on my credit and the anticipated cost/value of the property.

I would understand a letter/notice/confirmation of a approval (conditioned upon a satisfactory appraisal) and would most likely agree to paying a fee for an appraisal...at that point.

I would not understand, nor agree to, paying an appraisal fee for which I had been given no consideration at all.

And, if the lender denies me for not paying an appraisal fee before s/he provides a credit decision, I'm seriously thinking UDAP/UDAAP comes into play.

So, once again, we're back to the cyclical scenario:

Can you approve my loan?

Well, I need you to pay for an appraisal first.

But, I don't want to spend money on an appraisal, if you're not going to be able to approve my request.

Well, I won't be able to approve your request until I have an appraisal.

Chicken first!

No, egg first!

BTW, I really didn't mean to hijack the thread. Sorry.
Last edited by M Cockrell; 07/22/15 02:32 PM. Reason: grammar
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#2028806 - 07/22/15 02:48 PM Re: Regulation B Notification Question Cedar Point Guy
rlcarey Online
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Your personal approach to getting a loan is not related to the regulatory question at hand (how to determine when to start the 30 day notification clock).

Whether such an action by the lender (refusing to look at an application without the payment of a fee) would be considered a UDAAP or not would be situation or transaction specific. Many banks will not crack open an application or proceed on an intent to proceed without the payment of a fee - whether for the appraisal or not. An applicant unhappy with that could go down to the next bank that does not charge a fee.
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#2029296 - 07/23/15 06:52 PM Re: Regulation B Notification Question rlcarey
M Cockrell Offline
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First, let me state, I do not mean for any of my comments here to come across as condescending. Again, never having been a lender myself, I'm only attempting to provide insight into my thought process and, where I may be lacking understanding, to prompt guidance or correction. As such, if I state the obvious, there's no "attitude" or malice intended.

Originally Posted By rlcarey
Your personal approach to getting a loan is not related to the regulatory question at hand (how to determine when to start the 30 day notification clock).


Agreed, it's not about me; it's about the 30-day clock. So, let me phrase my question as such:

How can an LO can wait on an appraisal before beginning the 30-day clock?

The original post correctly states:
Originally Posted By Cedar Point Guy
Per Regulation B: A completed application means an application in connection with which a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested (including, but not limited to, credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral).

An appraisal is not "additional information" which can be "requested from the applicant," neither is it an "approval or report by" a "governmental agency," nor is it an "approval or report by other persons" which serves "to guarantee, insure, or provide security for the credit or collateral." (That is accomplished via a mortgage, deed of trust, promissory note, security agreement, etc.)

An appraisal only serves to corroborate a value (which was presumably already supplied on the application).

Therefore, if an appraisal does not [i]complete[\i] an application, how can a lender wait on it before starting the 30-day Reg B clock?
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#2029302 - 07/23/15 07:02 PM Re: Regulation B Notification Question Cedar Point Guy
rlcarey Online
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a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications

So, you are implicating that this does not include an appraisal in a real estate transaction?
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#2029385 - 07/23/15 09:13 PM Re: Regulation B Notification Question rlcarey
M Cockrell Offline
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No, sir. I'm not implicating anything at all...at least, not intentionally anyway.

I've just been convinced (maybe mistakenly so) if the applicant has given a lender all the information necessary to determine whether or not they are credit-worthy (based on the amount they're requesting), then the LO should be able to make a decision as to approve (even if only conditionally), counter, or decline within 30 days of receiving the application.

So, if an appraisal (or whatever else, pay stubs, for example) is part of the information that the creditor regularly obtains and considers in evaluating applications, the application can be deemed incomplete and denied for incompleteness (or, in lieu of a flat out denial, a Notice of Incompleteness can be issued)…still within 30 days of receipt of the application, of course.

I don't want to make too many assumptions, as I can sometimes be quite thick-headed and slow, but am I following correctly?

If that's correct, would a denial simply read: "Application incomplete" without any further explanation?

Would the same hold true for an NOI ("Unable to make a decision due to lack of an appraisal" with the denial reason again being "Application incomplete")?
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#2029399 - 07/23/15 10:21 PM Re: Regulation B Notification Question Cedar Point Guy
rlcarey Online
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I think you are mixing things up a little here. Let's take it one step at a time.

You get an application and you need additional information from the applicant to make it a complete application. They either provide you that information in a timely manner or you send them a denial for incompleteness or a notice of incompleteness within 30 days unless things are moving forward.

The bank also needs other things to have a complete application in order to evaluate the credit and collateral, i.e., appraisal, title insurance, etc. The bank is expected to also be moving forward at a reasonable speed in obtaining those items.

Since obtaining the appraisal in the hands of the bank, the bank cannot deny the loan or send a NOI for things that are in the bank's control, but that still does not impact the 30 day notification requirement once the application is complete.

There is a little finesse involved when you are dealing with more complex loan transactions.
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#2029660 - 07/24/15 06:39 PM Re: Regulation B Notification Question Cedar Point Guy
Indy Banker Offline
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For what it's worth, I agree with RLC based on my experience in the business. Reg B doesn't require creditors to issue conditional approvals. If the creditor's policy is to require A, B & C to underwrite a certain type of credit - in this case mortgage-secured credit - and item C is a valuation of the real estate collateral, the 30-day clock begins ticking once the creditor receives the acceptable valuation report. That said, the creditor has to act diligently from time of application in ordering, receiving, and evaluating the collateral valuation once received. I'm not going to break down the regulation, but just based on anecdotal experiences with examiners, a creditor acting in this manner is normally not criticized for a 1002.9 violation.

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