We have an existing loan that was approved and funded. The collateral includes a 1st lien on a dwelling. We gave the notice and the appraisal and all was good. The purpose of the loan was to construct a building on the parcel.

The borrower has come back because they need more money due to the plans changing (an entire building was added to the plan) and the builder changing mid-stream. We have approved the increase but have requested an updated appraisal to reflect the additional structure.

Would the Reg B appraisal rules apply in this situation? We are essentially renewing the loan with an increase and modifying the mortgage. The appraisal piece comes in because we have asked for an update to the existing appraisal. The loan approval was not contingent upon the appraised value; it was ordered to make sure our appraisal matches the ultimate collateral.

We have had this come up and we interpreted the Reg to indicate that yes it would apply since we did have a new/updated appraisal done. We provide the new/updated appraisal to the borrower once we receive it. I found the following under official interpretation in the Reg, hope this helps!

2.Renewals.
Section 1002.14(a)(1) applies when an applicant requests the renewal of an existing extension of credit and the creditor develops a new appraisal or other written valuation.

Thank you. I agree.