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#1874328 - 11/26/13 03:27 PM Appraisal Rules & Cross-pledged Collateral
Eileen White Offline
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If we make a new loan to be secured by property already pledged to secure an existing loan ....in other words, if we cross-pledge the new loan with existing collateral pledged to another loan....would a new appraisal be required (requiring a copy delivered to the customer)? I'm thinking "No" because we would not be "developing" that appraisal in connection with the new transaction...but I would like to hear other opinions.

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Interagency (Reg Z) and CFPB Reg B Appraisal Rules
#1875291 - 12/02/13 08:05 PM Re: Appraisal Rules & Cross-pledged Collateral Eileen White
John Burnett Offline
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I agree unless the new loan is an HPML that requires an appraisal with a standard that the older appraisal has not met. If that's the case, you won't be able to use the older appraisal and you'll have to develop a new one in connection with the new transaction.
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#1886406 - 01/14/14 05:23 PM Re: Appraisal Rules & Cross-pledged Collateral John Burnett
JLT Offline
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OK, so to take the cross collateralization question a step further ~ we do cross collateralization for many loans. I am thinking the Reg. B rule is triggered per property, not per loan in these cases. For example: if we are doing a renewal on a loan in February and do an evaluation, we need to deliver that valuation. Then if we do a renewal of another loan which uses that same property as collateral in March and another evaluation is completed, we would then need to deliver that "new" valuation as well.

This has been a lively topic of discussion here in our shop and am hoping I can get some direction. Thanks!

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#1886452 - 01/14/14 06:23 PM Re: Appraisal Rules & Cross-pledged Collateral Eileen White
rlcarey Online
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the Reg. B rule is triggered per property, not per loan in these cases.

The Reg. B rule is triggered per application - per property has nothing to do with it. If you develop an appraisal or evaluation due to the application, you have to give the appraisal/evaluation to the applicant.
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#1886642 - 01/14/14 08:59 PM Re: Appraisal Rules & Cross-pledged Collateral rlcarey
JLT Offline
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To be sure I understand this and the "per application" aspect of the rule:
Each request for renewal is an "application" and if we are doing a new appraisal and/or evaluation on a property that uses cross collateralization, if it is tied to that particular loan, we would need to deliver the appraisal and/or evaluation.

Correct?
Last edited by JLT; 01/14/14 09:02 PM. Reason: More specific wording
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#1886712 - 01/14/14 11:39 PM Re: Appraisal Rules & Cross-pledged Collateral Eileen White
rlcarey Online
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Yes. The key is you have provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit.

This applies when an applicant requests the renewal of an existing extension of credit and the creditor obtains a new appraisal/evaluation report.

This does not apply when a creditor uses the appraisal report previously obtained to evaluate the renewal request.
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#1886791 - 01/15/14 02:22 PM Re: Appraisal Rules & Cross-pledged Collateral rlcarey
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Got it. Many thanks for your help!

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#1887031 - 01/15/14 06:39 PM Re: Appraisal Rules & Cross-pledged Collateral Eileen White
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Is there any "out" to this since cross-collateralizing would essentially be the bank taking a second mortgage on that loan behind it's own first loan? I thought I'd ask, since second or subordinate liens are excluded.
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#1887034 - 01/15/14 06:42 PM Re: Appraisal Rules & Cross-pledged Collateral Eileen White
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Taking a second lien is not cross collateralization.
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#1905940 - 03/17/14 04:17 PM Re: Appraisal Rules & Cross-pledged Collateral Eileen White
TAC598 Offline
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If two properties are being taken for collateral and one of the borrowers soley owns one of the properties, must the appraisal notice be given separately to the sole owner or to both borrowers?

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#1905948 - 03/17/14 04:34 PM Re: Appraisal Rules & Cross-pledged Collateral Eileen White
rlcarey Online
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Notices go to applicants. Ownership of the property is irrelevant.
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