If a second appraisal is required/requested, I know the borrower cannot be charged for it. Do you have to include it as a lender paid fee on the CD?

If the borrower wants to order a second appraisal, why is it even involved in the loan transaction? Tell them to contact an appraiser and order one. It has nothing to do with the lender as you cannot use it.

Not sure her question is suggesting that the borrower wants to order a second appraisal for their own purpose. I'm assuming by "a second appraisal is required/requested" Jenny means that it's triggered by the 2nd appraisal requirement of the HPML Appraisal Rule regarding flipped properties. The Bank would be requiring it. She even states that the borrower cannot be charged for it which also comes from that rule.

If that is the case, then where would the fee for the 2nd appraisal be reflected and how? We've never had to deal with this scenario since this rule went into effect so I don't have a response for Jenny.

We do have a similar scenario that I'd be interested in your input Randy. In our case, we have a borrower that did not like the results of the first appraisal and asked us to order a 2nd appraisal that they would be paying for. They did not shop for the 2nd appraisal as we ordered from another appraiser on the Bank's approved list. Where would this 2nd appraisal fee go? The 2nd appraisal was not required by the Bank, but the borrower did not shop for the service as we controlled that. While the first appraisal fee would go in Section B, Required Service/Borrower Not Allowed to Shop... does the 2nd appraisal fee go in the same place with Changed Circumstances/Revised LE considerations triggered... or does it go in Section H because the Bank did not require the 2nd appraisal regardless of whether the borrower was allowed to shop?

Yes, if the appraisal was required under Section 35 it would go in Section B and shown in the Paid By Others column with an (L) designation.

As to your second question, getting yourself involved in that is your first mistake. Tell them to go order one if they want one in the future. Can I ask a question? What would have happened if the second appraisal came in at a much higher amount?

First mistake? There's more?

I should have clarified that in addition to the borrower questioning the resulting value, our independent appraisal reviewer also questioned the resulting value and comps used. We just started using Mercury Network a few months ago to begin ordering appraisals. The initial appraiser that picked up this appraisal assignment was new to the Bank and not on our approved appraisal list. It was our first experience dealing with this new appraiser. Our appraisal reviewer had recent comps available to them for properties of similar size and in the same market that reflected significantly higher price per square feet values than what the initial appraiser used. Our appraisal review staff was unable to resolve its concerns about the initial appraisal result with the appraiser, so a second appraisal was ordered from an appraiser on our approved list.

We have an appraisal ordering and review process that is independent of loan production staff.

The second appraisal came in much higher as your question asks. We accepted that appraisal. Not necessarily because it's result came back much higher, but because the appraisal reviewer believed the 2nd appraisal to be the most credible of the two.

OK - then the first appraisal, it sounds to me, that it was unacceptable to the bank after it went through the appraisal review process and the differences could not be rectified when working with the appraiser.

I can understand that fact and the fact that the bank then subsequently ordered a second appraisal.

Given these circumstances IMHO, what you cannot do, is charge the borrower for the first appraisal, as the bank rejected it.

Whether the bank has to pay the first appraiser for a defective appraisal is a contract issue between the bank and the appraiser.

What it is not, is the borrower's fault that you, the lender, chose an appraiser that could not deliver an acceptable product and therefor charging the consumer for the first appraisal puts you squarely in a UDAAP position.

Thanks for the quick response Randy.

Agreed, regarding the treatment of the fee for the first appraisal for the same reasons stated.

We will pay the first appraiser for the service performed and won't try to challenge payment. We likely won't use them in the future.

Thanks again!