The bank I am working at deducts the appraisal fee from the loan proceeds. I have never seen this practice before. Just wondering if any other banks are doing this.

It's done all the time although the practice may change with the new Reg B proposal. I would suspect banks will most likely start requiring the appraisal fee be paid up front due to the proposed changes.

Thanks Dan.

Dan, what about the issues raised under TILA which prohibits even the collection of checks or credit card info prior to the delivery of disclosures to the customer? What would be the workaround other than having the customer come back after the 3 day period has run?

That will depend on how your shop operates. If you hand the disclosures to the applicant face to face there is no prohibition from requesting the fees at that time. If you mail the disclosures you simply put a statement in your cover letter the appraisal fee must be paid by a certain date or no further action will be taken.