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#2259486 - 09/09/21 08:56 PM Appraisal Notice; Denied w/in 3 days of app
Libby P. Offline
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Is the right to receive a copy of appraisal notice required if an application is denied within 3 days of the date of a complete application?
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#2259487 - 09/09/21 08:59 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
Dan Persfull Offline
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Yes, there is no exclusion for a denied or withdrawn application.
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#2259495 - 09/09/21 10:53 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
M Cockrell Offline
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Based on 12 CFR §1002.14(a)(4), every guru and industry resource person with whom I've spoken takes the same stance as Dan.

It's a bit long and drawn out, but if you'll indulge me, I'll attempt to justify a contrary opinion.

The referenced cite states, "Withdrawn, denied, or incomplete applications. The requirements set forth in paragraph (a)(1) of this section apply whether credit is extended or denied or if the application is incomplete or withdrawn."

Paragraph (a)(1) discusses the provision of the actual appraisal: "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," but it's paragraph (a)(2) [not (a)(1)] that addresses the disclosure requirement in question: "Disclosure. For applications subject to paragraph (a)(1) of this section, a creditor shall mail or deliver to an applicant, not later than the third business day after the creditor receives an application for credit that is to be secured by a first lien on a dwelling, a notice in writing of the applicant's right to receive a copy of all written appraisals developed in connection with the application."

An argument could be made that paragraph (a)(4) also applies to paragraph (a)(2), since paragraph (a)(2) specifies "...applications subject to paragraph (a)(1) of this section..."; however, if the disclosure is in fact required, why then didn't paragraph (a)(4) stipulate "the requirements set forth in paragraphs (a)(1) AND (a)(2) of this section apply whether credit is extended or denied or if the application is incomplete or withdrawn?"

Additionally, IF "appraisals and other written valuations [are not] developed," how then is paragraph (a)(2) even applicable?

To validate this idea, I refer you to the guidance issued by the CFPB: Factsheet: Transaction coverage under the ECOA Valuations Rule.

Page two of the guidance says...

"To determine whether a transaction is covered under the Rule, there are three questions that the creditor must answer in the affirmative:

1. Whether there is an application for credit?
2. Whether the application for credit is secured by a first lien on a dwelling?
3. Whether an appraisal or written valuation is prepared in connection with the application?"

Then, on page four, in the second paragraph under the “ARE DENIED OR WITHDRAWN APPLICATIONS FOR CREDIT COVERED UNDER THE RULE?” section, it reads:

“…assuming an application is withdrawn or denied, and the requirements in Sections 2 [“secured by a first lien on a dwelling”] and 3 [was an “appraisal or written valuation prepared in connection with the application”] below are met, the creditor is required to provide the disclosure and the appraisal or other written valuation…”

Furthermore, the guidance states, “If no appraisal or other written valuation was developed in connection with the application, there is no valuation to provide to the applicant and the creditor is not required to develop one.” (So, wouldn’t it be confusing to provide an applicant with a disclosure that states they have a right to receive a non-existent document?)

Paragraph three goes on to say, “…assuming the requirements in Sections 2 and 3 below are met, the creditor is also required to provide the applicant written notice of the right to receive…”

Therefore, the guidance would seem to suggest ALL THREE COMPONENTS – an app for credit, secured by a first lien dwelling, AND an appraisal/valuation is performed – MUST be affirmatively answered for the rule to apply.

So, if you have a “yes” to questions one and two, but a “no” to question three, the rule would NOT apply.


Having said all of that, of course, not providing the disclosure when it's required (IF it's indeed required) is a violation, while providing the disclosure when not required is NOT a violation.
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#2259499 - 09/10/21 12:45 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
Dan Persfull Offline
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From page 4:

Additionally, assuming the requirements in Sections 2 and 3 below are met, the creditor is also required to provide the applicant written notice of the right to receive a copy of all written appraisals developed in connection with the credit application within three business days of receipt, even when the application is denied or withdrawn. If a creditor denies, or an applicant withdraws, an application for credit subject to § 1002.14(a)(1) within three business days of receipt of the application, the creditor is still required to provide in writing a notice of the applicant’s right to receive a copy of all written appraisals prepared in connection with the application. The creditor may choose to modify the notice of right form to make clear to the applicant that the credit application has been denied.
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#2259506 - 09/10/21 02:01 PM Re: Appraisal Notice; Denied w/in 3 days of app Dan Persfull
M Cockrell Offline
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Dan, I cannot fully express how much I respect you and the other BOL gurus, so I don't mean to be overly argumentative laugh , but...

the quote from page 4 starts of with a conditional statement: [IF] "...assuming the requirements in Sections 2 and 3 below are met..." [THEN] "...the creditor is also required to provide the applicant written notice of the right to receive a copy of all written appraisals developed in connection with the credit application..."

According the guidance, a lender MUST be able to answer ALL three questions in the affirmative for the Rule to apply and, if an appraisal/valuation is not developed/performed (item 3), the lender would not be able to answer all the questions in the affirmative, and the application would NOT be subject to paragraph (a)(1) and, therefore, the provision of the disclosure [paragraph (a)(2)] would also be academic.

Otherwise, the entire guidance is contradictory (not that that ever happens wink ) and useless.


Again, having made that argument, is it just easier to provide the disclosure regardless? Absolutely! BUT, I believe this is a defendable position.
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#2259508 - 09/10/21 02:12 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
rlcarey Offline
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(a)(2) Disclosure. For applications subject to paragraph (a)(1) of this section

(a)(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.

I believe you are grasping at straws and confusing the notice requirement and the requirement to actually deliver a copy of an appraisal or evaluation.

Good luck with any examiner taking that position.
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#2259509 - 09/10/21 02:12 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
raitchjay Offline
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FWIW, i have always agreed with the position that M Cockrell holds (both on the appraisal notice question, and having immense respect for Dan).
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#2259513 - 09/10/21 02:27 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
Dan Persfull Offline
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I think the paragraph needs to be broken down into its sentences.


Additionally, assuming the requirements in Sections 2 and 3 below are met, the creditor is also required to provide the applicant written notice of the right to receive a copy of all written appraisals developed in connection with the credit application within three business days of receipt, even when the application is denied or withdrawn.

If a creditor denies, or an applicant withdraws, an application for credit subject to § 1002.14(a)(1) within three business days of receipt of the application, the creditor is still required to provide in writing a notice of the applicant’s right to receive a copy of all written appraisals prepared in connection with the application. The creditor may choose to modify the notice of right form to make clear to the applicant that the credit application has been denied.


It is not conceivable IMO that the CFPB in this guidance expected a FI to have an appraisal/evaluation developed within 3 business days of receiving the application. IMO the second sentence in that paragraph makes it clear the notice is required within 3 business days of receiving an application for credit that is to be secured by a first lien on a 1-4 dwelling regardless of the disposition of that application within the 3 business days following receipt of the application.
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#2259526 - 09/10/21 03:22 PM Re: Appraisal Notice; Denied w/in 3 days of app rlcarey
M Cockrell Offline
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Originally Posted by rlcarey
I believe you are grasping at straws and confusing the notice requirement and the requirement to actually deliver a copy of an appraisal or evaluation.

I don't believe I am. The Factsheet/Guidance is very clear (at least in this regard):

"To determine whether a transaction is covered under the Rule, there are three questions that the creditor MUST answer in the affirmative:

1. Whether there is an application for credit?
2. Whether the application for credit is secured by a first lien on a dwelling?
3. Whether an appraisal or written valuation is prepared in connection with the application?"

Is this an application for credit? If the answer is "No," stop, the Rule does NOT apply. If the answer is "Yes," continue to question 2.
Is it to be secured by a first lien on a dwelling? If the answer is "No," stop, the Rule does NOT apply. If the answer is "Yes," continue to question 3.
Was an appraisal or written valuation prepared? If the answer is "No," stop, the Rule does NOT apply. If the answer is "Yes," the Rule applies and both the disclosure AND the appraisal/valuation are required.

Paragraph (a)(4) ONLY applies to paragraph (a)(1).
Paragraph (a)(2) ONLY applies IF paragraph (a)(1) applies.
Paragraph (a)(1) ONLY applies IF an "appraisal [or] other written valuation [is] developed in connection with an application for credit that is to be secured by a first lien on a dwelling."

Additionally, the Conclusion (at the bottom of page 8) states:

"The Rule requires creditors to provide an appraisal to an applicant if all three coverage components are present. These components are: 1) an application for credit, 2) an application that is secured by a first lien on a dwelling and 3) a valuation made in connection with the application. If a creditor determines that all three prongs are present, then the application is covered by the Rule, and the disclosure and valuation requirements apply."

Originally Posted by rlcarey
Good luck with any examiner taking that position.

Thank you, but we currently provide the disclosure for the express purpose of avoiding having to defend it to examiners. blush
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#2259533 - 09/10/21 03:47 PM Re: Appraisal Notice; Denied w/in 3 days of app Dan Persfull
M Cockrell Offline
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I would suggest this is similar to delivery of early disclosures (e.g., LE).

If an applicant is denied or chooses to withdraw within the three business days following the receipt of an application, the "earlies" are NOT required.

Just as the receipt of an LE wouldn't help an applicant who has been denied or has chosen to withdraw an application, neither would the disclosure of the right to receive a document that doesn't exist.

The disclosure portion of the Rule ONLY applies IF the app is denied/withdrawn in the first three days and an appraisal/valuation was prepared/developed (the regulators choice of words, not mine) in the same time-frame.
Last edited by M Cockrell; 09/10/21 04:05 PM. Reason: restated for clarification
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#2259538 - 09/10/21 04:38 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
rlcarey Offline
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Well, this first problem with that argument is that you are using logic and not basing it on the wording in the regulation itself. Plus, the regulation specifically addresses this in TRID, for example.

1026.19(e)(1)(iii) Timing - Comment 3.
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#2259543 - 09/10/21 04:51 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
rlcarey Offline
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You might want to also refer to the under lying law, which does not even provide for the three business day window for the delivery of the notice. And while the CFPB likely has the latitude to create a reasonable period for the delivery of the notice, they cannot change the law which requires the notification regardless of any other conditions.


SUBCHAPTER IV—EQUAL CREDIT OPPORTUNITY
§1691. Scope of prohibition

(e) Appraisals; copies of reports to applicants; costs
“(5) Notification to applicants
“At the time of application, the creditor shall notify an applicant in writing of the right to receive a copy of each written appraisal and valuation under this subsection.
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#2259544 - 09/10/21 04:52 PM Re: Appraisal Notice; Denied w/in 3 days of app rlcarey
M Cockrell Offline
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I'm not sure I follow.

How does 1026.19(e)(1)(iii) Timing - Comment 3 come into play here?

Are you saying if the applicant is denied or chooses to withdraw within the three-business-day period and the disclosure(s) was/were not provided (because of the denial/withdrawal), but then the applicant opts to move forward and the app is reinstated, we'd be in violation?
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#2259545 - 09/10/21 04:58 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
rlcarey Offline
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You stated: I would suggest this is similar to delivery of early disclosures (e.g., LE).

My point was that TRID directly indicates without any interpretation necessary that an LE is not required if the application is denied or withdrawn in the first three business days, unlike you trying to read something into Regulation B, which just isn't there.

This is 8 plus years into these changes and I know probably at least 6 banks that have been cited in examinations for failure to deliver the appraisal notice.
Last edited by rlcarey; 09/10/21 05:01 PM.
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#2259551 - 09/10/21 05:18 PM Re: Appraisal Notice; Denied w/in 3 days of app rlcarey
M Cockrell Offline
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Originally Posted by rlcarey
SUBCHAPTER IV—EQUAL CREDIT OPPORTUNITY
§1691. Scope of prohibition

(e) Appraisals; copies of reports to applicants; costs
“(5) Notification to applicants
At the time of application, the creditor shall notify an applicant in writing of the right to receive a copy of each written appraisal and valuation under this subsection.

Valid point and that's pretty clear-cut, but good grief! Why would the regulators re-write the law itself???

I didn't know I was going to have to become an attorney and be familiar with every law/regulation variation!
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#2259552 - 09/10/21 05:21 PM Re: Appraisal Notice; Denied w/in 3 days of app rlcarey
M Cockrell Offline
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M Cockrell
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Dallas, TX
Originally Posted by rlcarey
You stated: I would suggest this is similar to delivery of early disclosures (e.g., LE).

My point was that TRID directly indicates without any interpretation necessary that an LE is not required if the application is denied or withdrawn in the first three business days, unlike you trying to read something into Regulation B, which just isn't there.

This is 8 plus years into these changes and I know probably at least 6 banks that have been cited in examinations for failure to deliver the appraisal notice.

Gotcha. Thanks for the claification.
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#2259553 - 09/10/21 05:30 PM Re: Appraisal Notice; Denied w/in 3 days of app rlcarey
M Cockrell Offline
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I understand the law holds greater weight than the regulation, but for us poor slobs (i.e. non-attorneys) trying to make sure our FI's are adhering to the regulation, how frequently does this happen???

And, without comparing every stinkin' law to the implementing regulation, how're we supposed to know when variances like this occur?

I mean, why even have regulations, if everything has to default back to the law?

Sorry, but this is so very disheartening!

(I'll step off my soapbox now.)
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#2259558 - 09/10/21 05:42 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
rlcarey Offline
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I guess the whole idea here is that if you are going to develop a contrary opinion, that usually takes some extensive research.

You may have guidance from the regulators, which always carries the warning that it is not the regulation. Read the CFPB Federal Register release on Compliance Aids: https://www.federalregister.gov/documents/2020/01/27/2020-00648/policy-statement-on-compliance-aids

Then you have the underlying regulation and sometimes the law itself. Case law may also come into play in certain circumstance.

It is not easy or quick.

But that is the greatest part of the BOL Forums is that is provides a forum for the free exchange of ideas. There is no judge or jury as to who is right and who is wrong. Each person is allowed to come to their own conclusion. Commenters end up agreeing or agreeing to disagree. We have all been on one side of a discussion or the other more than once.

Thanks for the back and forth - it keeps us all sharp regardless of whether we change our minds or not.
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#2259560 - 09/10/21 05:46 PM Re: Appraisal Notice; Denied w/in 3 days of app rlcarey
M Cockrell Offline
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And, this is why I respect the heck out of the BOL gurus.

Thanks, again.
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#2260889 - 10/07/21 04:52 PM Re: Appraisal Notice; Denied w/in 3 days of app rlcarey
M Cockrell Offline
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M Cockrell
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After being humbled by Randy and the law (vs. the reg), I have a follow-up question:

Since the law says, "At the time of application..." would providing it in an application "package" meet the requirement? IOW, before an app is actually received.

For example, a potential client says they'd like to apply for a loan. We provide them with an app "package" (e.g., general information and some early disclosures, such as the appraisal disclosure notice). They complete the app and return it at some time later.

Is furnishing the disclosure notice with the package acceptable? Or, must we wait until they actually submit the app?
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#2260903 - 10/07/21 08:34 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
Oursisnottoreasonwhy Offline
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We include it with all of our mortgage app packets.
We also have the verbiage on our denial forms.

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#2261047 - 10/12/21 08:37 PM Re: Appraisal Notice; Denied w/in 3 days of app Libby P.
John Burnett Offline
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I'd support THAT suggestion, M Cockrell. If you are required to provide the disclosure "not later than the third business day after the creditor receives an application ...." you can provide it on any date that is earlier than the third business day after you get the application.
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#2261062 - 10/13/21 02:00 PM Re: Appraisal Notice; Denied w/in 3 days of app John Burnett
M Cockrell Offline
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M Cockrell
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But the law (not the reg) - as quoted by Randy - stipulates "at application."

So, my question was: If we opt to provide it with our app packages (to ensure it's not overlooked), is that acceptable? Or, must we wait until we receive the actual application.

IOW, we offer it at the time a customer says, "I'd like to apply for credit." Or, "How do I apply credit?" (preapplication)
"Here's an application and all these disclosures."

vs.

"Here's my application." (at application)
"Oh, thank you very much. Here is your 'Right to Receive a Copy of an Appraisal Notice."

Based on y'all's experience/expertise, would the examiners even draw that distinction?
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