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#2227375 - 12/13/19 08:06 PM Additional Appraisal
RustyShackleford Offline
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Good Afternoon,

I have an uncomfortable situation today. We disclosed on a consumer refinance transaction where we were paying of a Rural Development Loan. We had an appraisal done. Afterwards, we found out that an addition the customer had done was not included in the appraisal, and Rural Development required its inclusion in the valuation. The appraiser refused to provide this, and after experiencing some delays in closing, the borrower "requested we order another full appraisal" that would satisfy Rural Development's requirements. Can we add the cost of the new appraisal under section H of the closing disclosure, where it will be subject to no limit on increase? It was not on the copy the customer received 3 days before closing. My initial thought was that it would be subject to 0% increase limits, and we would have to eat it. But the LO is pushing hard on this, and I want to ensure I'm correct. Hopefully, I'm not!

Thanks,

R. Shackleford

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TRID - TILA/RESPA Integrated Disclosures Rule
#2227379 - 12/13/19 08:16 PM Re: Additional Appraisal RustyShackleford
raitchjay Offline
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You're paying off another lender--Rural Development, yes?
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#2227380 - 12/13/19 08:17 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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Yes, among other things.

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#2227381 - 12/13/19 08:19 PM Re: Additional Appraisal RustyShackleford
Dan Persfull Offline
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The appraiser refused to provide this,

That appraiser would immediately be removed from the approved appraisers list.

we found out that an addition the customer had done was not included in the appraisal

Did you know of the addition at the time the appraisal was ordered or was this discovered as a result to the appraisal?

If it was known at the time the appraisal was ordered I don't see a changed circumstance allowing for an increase in the appraisal fee. If it was a result of the appraisal then you have new information that was not known and you could rely on that as a factor for a changed circumstance.

I am assuming you (the bank) are requiring this appraisal as a condition of the loan therefore I don't think you can rely on a "customer requested change".

This is just thinking out loud based on the limited information provided.
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#2227382 - 12/13/19 08:20 PM Re: Additional Appraisal RustyShackleford
raitchjay Offline
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Well, maybe i'm being dense....but how can Rural Development put requirements on another bank's loan? Your loan will pay off their loan.....are they saying "you can't pay us off" without the additional appraisal?
Last edited by raitchjay; 12/13/19 08:22 PM.
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#2227383 - 12/13/19 08:29 PM Re: Additional Appraisal RustyShackleford
rlcarey Offline
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Your appraiser performed an appraisal and failed to include an addition to the property? How can that be - did he not inspect the property? Are there pictures of this addition in the appraisal? Sounds like you have a seriously flawed appraisal to me for which I would not be paying for.
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#2227384 - 12/13/19 08:32 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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Good questions, all. I have very limited information available, and just got off the phone with a processor. Evidently, Rural Development would not release the payoff amount without a copy of the appraisal. We procured the necessary releases, and sent that to them. They learned of the addition from that appraisal, and wanted to know the value of just the addition. This is what the appraiser refused to do, because it would require redoing the whole appraisal (comps, etc.). Some of the other payoffs on our loan were getting close to expiring, and the borrower requested a full appraisal, this time with an additional line/information showing the value of the addition separately. Hopefully that helps come to an answer one way or another.

FYI, I think the original appraisal was done prior to early disclosures.

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#2227385 - 12/13/19 08:33 PM Re: Additional Appraisal RustyShackleford
Truffle Royale Offline

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^^^same question here too PLUS remember the three day window to redisclose. Sounds like you may have known about the need for the includsion of the addition for more than three days which means very likely you may end up eating at least some of the costs.

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#2227386 - 12/13/19 08:35 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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To be clear, the value in the first appraisal included the addition. However, the addition's value was not broken out from the total. This was RD's objection. Does that help?

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#2227388 - 12/13/19 08:40 PM Re: Additional Appraisal RustyShackleford
RR Joker Offline
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I'm still trying to understand why this has any bearing whatsoever on RDC's payoff?
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#2227389 - 12/13/19 08:41 PM Re: Additional Appraisal RustyShackleford
raitchjay Offline
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I don't understand how Rural Development can make demands of your bank and your borrower on a loan that they are not party to.
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#2227390 - 12/13/19 08:43 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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I can't speak for RD; however, I know that they have refinance restrictions with prepayment penalties and such, so they probably reserve the right to hold back the payoff pending the proper valuation on the property so they can calculate the correct penalty amount. That's all well outside of my control, however. Where we're at now, is where's the right spot for the second appraisal fee?

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#2227392 - 12/13/19 09:05 PM Re: Additional Appraisal RustyShackleford
RR Joker Offline
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Is this a random request that may or may not be made by the RDC? If so, I would say you have a valid CC. I don't think you can put it under other as it's going to be required for you to be able to make the loan, and not an option.
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#2227393 - 12/13/19 09:10 PM Re: Additional Appraisal RustyShackleford
rlcarey Offline
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Galveston, TX
There are definitely a whole lot of missing pieces here to this puzzle. You sure they are not trying to refinance one RD loan with a new one and this is an underwriting issue and not one of paying off the existing loan?
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#2227394 - 12/13/19 09:11 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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The requirement for the appraisal to release the payoff isn't random, and it's written into their payoff request form. The final page of the payoff form discusses improvements to the property, and the requirement for an addendum to the appraisal with itemization of improvements.

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#2227395 - 12/13/19 09:13 PM Re: Additional Appraisal RustyShackleford
raitchjay Offline
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In that case, it sounds like your lender should have known of this requirement from the beginning (and should have properly engaged the appraiser to require such itemizations) and not knowing it wouldn't create a valid CC.
Last edited by raitchjay; 12/13/19 09:15 PM. Reason: add clarification in parentheses
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#2227396 - 12/13/19 09:13 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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The last sentence of my previous post should read: "The final page of the payoff request instructions form discusses improvements to the property, and the requirement for an addendum to the appraisal with itemization of improvements." It specifically discusses subsidy recapture adjustments due to property improvements.

Randy, to answer your question, our loan is an in-house loan, and will not be a new RD loan.

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#2227397 - 12/13/19 09:13 PM Re: Additional Appraisal RustyShackleford
raitchjay Offline
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OK
But i'm still confused by this scenario....
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#2227398 - 12/13/19 09:14 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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Thanks, Raitchjay. Now you know why I posted here in the first place!

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#2227399 - 12/13/19 09:16 PM Re: Additional Appraisal RustyShackleford
raitchjay Offline
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OK
Let others chime back in........i don't have a great deal of confidence that i really understand what is going on here.
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#2227400 - 12/13/19 09:18 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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Sounds good, thank you for letting me know. My gut tells me that RD's instructions, which we received a little less than a month ago, may preclude our ability to call this a CIC. However, the fact that the appraisal was sourced before that might change that. I'm spinning on this one!

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#2227403 - 12/13/19 09:48 PM Re: Additional Appraisal RustyShackleford
rlcarey Offline
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Galveston, TX
This is why they are asking.

Subsidy Recapture

Payment subsidies received on loans approved after October 1, 1979 are subject to recapture. This means that when the property is sold, transferred, or no longer occupied by the customer, all or part of the subsidy granted must be repaid to the government. The amount of subsidy recapture will be determined by the increase in property value since the loan originated. Subsidy recapture must be calculated when the loan is paid off.

How to Receive a Final Payoff Statement

Refinancing

• Customer's name, loan number(s) and written authorization to release payoff(s).

• A copy of a Uniform Residential Appraisal Report (usually available from the lender). Any capital improvements must be itemized on a separate addendum to the appraisal.

• A copy of the Good Faith Estimate or estimated settlement statement from the lender.

• Payoff good thru date.
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#2227404 - 12/13/19 09:50 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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Exactly. I apologize for not communicating that clearly the first time around--there are a lot of ins, a lot of outs, and a lot of "what have yous" in this situation.

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#2227405 - 12/13/19 09:51 PM Re: Additional Appraisal RustyShackleford
RustyShackleford Offline
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So, knowing that we obtained the first appraisal well before getting the payoff instructions, do we have a valid CiC, or do we eat the cost of the second appraisal?

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#2227406 - 12/13/19 09:55 PM Re: Additional Appraisal RustyShackleford
raitchjay Offline
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OK
The thought i'm having is this: should it have been the borrower's responsibility (since he's the one who got the loan and should know about RD's rules about prepayment penalties or whatever it is that is behind their request on this appraisal) or the bank's responsibility to have known at the time of application what RD's rules about payoffs and appraisals were? I guess what i mean by that is.....it sounds like your bank is perfectly accepting of the first appraisal, it just doesn't meet RD's wishes. Your borrower then asked your lender to order another appraisal to appease RD. IF the responsibility (in my first question) is with the borrower, then i think your lender messed up by ordering an appraisal that your bank wasn't requiring, but that you were doing as basically a favor for your borrower, so he could make RD happy. In that scenario, IMO, your lender should have told the borrower to order the appraisal himself, give it to RD and it would not have been a part of your loan at all. But since banks shouldn't be in the game of ordering appraisals that aren't for their own use, you'd be stuck paying for the 2nd appraisal anyway. If however, it was on the lender to know about RD's rules about payoffs and appraisals, then i think the 2nd appraisal wouldn't qualify for a CC and you'd be eating it.

So....that's what i'm wondering.....but either way, it seems to me as if your bank will be paying for the 2nd appraisal.
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