I am unclear on whether or not we need to provide a copy of an Appraisal Review to our customer. Reading the requirements under Reg B, an appraisal review that does not itself state a different estimate from the (original) appraisal is not a valuation that needs to be provided to the applicant. Is that correct?

I've read the following which seems to contradict: As long as an appraisal review does not restate the appraiser’s estimate of the property value or opinion of value (that is, it does not state a dollar amount) and, further, it does not state a different estimate of value, there is no need to provide an applicant a copy of the appraisal review since it does not include any estimate of value. In its “Small Entity Compliance Guide”, the CFPB stated: “Documents that discuss property value but are not valuations include: . . . Appraisal reviews that do not include the appraiser’s estimate of the property’s value or opinion of value. In addition, an appraisal review that does not itself state a different estimate from the appraisal would not be a valuation you must provide to the applicant.” (Refer to page 13 of the January 2014 edition of the Guide (Version 1.2).)

In our situation, the reviewer is stating that the value the original appraiser determined/came up with is valid. The review appraiser includes a summary section of the original appraisal that includes the original appraiser's value. The review appraiser does not re-state the value and includes an Overview Statement, "Reviewer concludes that on an accepted-or-rejected basis, there is sufficient information available to reasonably accept the concluded value as of the effective date of the value."

If the review includes the same value the original appraiser stated, do we need to provide it?

Great question. The short answer is no, I don't believe you need to provide an appraisal review that merely restates the value found on the actual appraisal.

Here's the long answer. This whole question seems to come from comment 3(vi) to 1002.14(b)(3) which provides examples of "other documents" that are not considered valuations, and says this:

"vi. Appraisal reviews that do not include the appraiser's estimate of the property's value or opinion of value."

Upon reading this comment in and of itself, it appears that an appraisal review that includes the "property's value or opinion of value" would NOT be considered an "other document" that is NOT considered a valuation - leaving question as to whether we must provide this document to the customer.

The trick with this is that this comment (iv) was thrown in at the very last minute, really, without allowing any of us to give input on this comment. To explain, the original 1/31/13 final rule did not include comment vi, but ended with comment v. On 10/1/2013, the CFPB released a last minute final rule adding a few amendments to the 1/31/13 rule, before it became effective on 1/18/2014. This is where comment vi was added.

In the prefatory text to the 10/1/2013 final rule, the CFPB has a section-by-section analysis discussing the example of "other documents" that are not considered a valuation. The point of this discussion was that the CFPB felt they had made an error in the 1/31/13 final rule by including two comments - 14(b)(3)-1.i & 14(b)(3) -3.v - that refer to a valuation as an appraiser's "estimate or opinion of the value of the property." Specifically, they said they felt the word "opinion" could "be read broadly to include even speculative opinions not based on an appraisal or other valuation model."

In other words, the CFPB felt that by including the word "opinion", they had altered the meaning of "valuation" to become inconsistent with ECOA. Therefore, they had proposed to remove the words "or opinion" from the two comments.

HOWEVER, one of the comments received (provided by a trade association) suggested that the proposed change could cause additional confusion, "because the term 'opinion of value' is commonly used to describe appraisals" and that appraisals are "generally not considered to be 'estimates'" and, therefore, it would be confusing to remove the word "opinion". This commenter suggested to "clarify that a valuation includes any 'estimate or opinion of value'" rather than deleting the word opinion altogether.

THERFORE, the CFPB - at the very last minute - added comment vi in attempts to resolve the concern from the trade association that deleting the word “opinion” could also cause confusion regarding whether and how the rule applies to appraisals that are commonly described as “opinions of value.” To do this, the CFPB substituted "opinion of value" for "opinion" in the first comment of concern - comment 14(b)(3) - 1.i, BUT rather than do the same in comment 14(b)(3) - 3.v, they deleted the reference to "opinion" in that comment, AND THEN decided to create comment 14(b)(3) - 3.vi instead, in attempts to provide clarification to the potential confusion identified by the trade association.

All of that said, it seems to me that comment 14(b)(3) - 3.vi did a poor job of clarifying things as it also created the question you asked. It seems to me that the CFPB did not intend to turn an appraisal review - one that merely restates a value from an actual appraisal - into a document that is considered an appraisal or valuation (which would require disclosure to an applicant). Therefore, I believe it is fair to answer your question based on comment 14(b)(3) - 3.i which has always said this: "i. Internal documents that merely restate the estimated value of the dwelling contained in an appraisal or written valuation being provided to the applicant."

To me, the bottom line is that if your appraisal review merely restates the value listed on an appraisal or valuation (which you are providing to the customer), then you don't need to provide the appraisal review, which would be a duplicate document (which the 1/31/13 final rule explained it wanted to avoid).

Adam,

Would you agree that, if the appraisal review restates the value from the appraisal but expresses an adjustment of that value (e.g. suggests that the appraisal is $1,000 too high and giving a justification for the reduction) would be something that would be subject to the copy to applicant requirement?

Yes, John. In that case, the adjustment and explanation are part of the total assignment of value, so they become part of the "valuation." This would align with the example of what is considered a valuation (and requires disclosure to the applicant) under comment 14(b)(3) - 1-ii, which includes "ii. A document prepared by the creditor's staff that assigns value to the property."

Said another way: If the value listed on an appraisal review just restates a value from an appraisal, it is not a valuation. If, however, the value on an appraisal review assists with the assignment of value, it is considered a valuation and, therefore, should be provided to the applicant.

Thanks, Adam. I wanted that to be part of the record of this discussion.