We have a loan to purchase 3 vacant residential lots. We have a land appraisal report but there is a picture of a dwelling being constructed. The loan proceeds are only for the lot purchase, not for the construction of the dwelling. Does the appraisal notice requirements apply in this case?

Thanks,

Also, the customer is going to build homes on these lots for resale but not with these loan proceeds.

How are you going to exclude the dwelling as collateral?

The appraisal notice and appraisal copy are required.

I assume your mortgage encompasses all existing and future improvements to the property. So will you have a first lien in the dwelling being constructed? That determines if the 1002.14 disclosure requirements are applicable, not the type of appraisal that was ordered.

I just came across on the below note - since the customer is going to build dwellings, more than one, is it exempt?


Note: The CFPB has informally noted that loans to developers that are secured by inventories of one-to-four family dwellings are not covered. The rule applies where there is “a” dwelling—not multiple ones. However, it would apply to loans secured by a single dwelling (like construction of a custom home).

Do you have a link to the document that quote came from?

Regardless of where it came from, three vacant lots with one house on them is not "secured by inventories of one-to-four family dwellings".

I got it from IBAT's website - see below link to the guide. It's under "What is a dwelling?" section.

https://www.ibat.org/PDFs/2016/08/2...dit-opportunity-act-ecoa-valuations-rule

Interesting. I will have to ask them from where they received this informal guidance. It sure flies in the face of the footnote in the final rules. Multiple single family dwellings would not be the same as a 12 unit apartment complex in this example. The single family dwellings all remain in the definition of a 1-4 family dwelling found in the regulation, whether there is one or more of them taken as collateral.


Footnote 79: With respect to the example raised by a creditor and two national creditor associations—three four unit buildings operated as a 12-unit apartment complex, the text of the rule makes clear that a four unit residential building would be a dwelling, but a 12-unit apartment complex is not. Thus a transaction secured by a four-unit residential building would be covered by the rule, but a transaction secured by the entire 12-unit apartment complex would not be. Because this question can be analyzed in a straightforward manner by reference to the text of the rule, the Bureau does not believe that further commentary is needed for this to be apparent. Similarly, the definition of ‘‘dwelling’’ refers to the example of an ‘‘individual condominium or cooperative unit,’’ but not to a cooperative building as a whole, even though such a building may contain several individual units.

What Randy said. ^^^

No way would I rely on that statement, especially since they gave no supporting reference to the material where the quote came from.

I frankly don't understand why providing the notice (except when it's CLEARLY not required) is such an issue. Why not just include the notice and stop wasting time splitting hairs.