Appraisal Notice Disclosure

We're currently evaluating what changes we need to make in our Commercial Lending and Loss Mitigation departments to accomodate the new Appraisal Rule.

One option in both areas, is to provide the Appraisal Disclosure 100% of the time, but with a disclaimer sentence explaining that only certain transactions are subject to this rule and therefore, only certain transactions will be receiving copies of their appraisals.

Thoughts?

Is anyone else adopting a similar structure where the disclosure is given 100% of the time, but the appraisal is only delivered per the rule requirements?

Management has decided here to give notice and copies of appraisals 100% of the time.

That's an option we've debated, but it presents a significant amount of logistical challenges. Hence the strategy I suggested above.

I'm concerned though that we could be criticized for providing a disclosure 100% of the time, but only providing appraisal copies some of the time. Not sure how a disclaimer sentence would be received.

We've historically provided appraisals to all RE applicants, so I am assuming we will continue to do the same here, even if the loan isn't technically covered by the new rules. Just getting the lenders to provide the disclosure will be difficult enough! Sending out a copy of the appraisal will be the easy part, they are already doing that.

If you give the disclosure on a loan that is technically not subject to the rule, wouldn't you still have to follow the regulation and delivery the appraisal days prior to closing.

This is what some of our commercial lenders will have issues with.

If the transaction is not subject to the regulation then it will not be covered by the regulation regardless of what you give them. If you give them a document that says you are going to do something and then you do not do it, that is another issue.

That makes sense. I had originally thought to give the disclosure on all loans but then thought if we give it, need to comply.

We are going to include an appraisal notice on our commercial loan application form and the HELOC disclosures that the appraisal will be provided if secured by a first lien on a 1-4 unit dwelling. We then just provide the appraisal copy when it is applicable.

We are going to include an appraisal notice on our commercial loan application form.

You might want to re-think that approach:

1002.4(d) Form of disclosures. (1) General rule. A creditor that provides in writing any disclosures or information required by this part must provide the disclosures in a clear and conspicuous manner and, except for the disclosures required by §§1002.5 and 1002.13, in a form the applicant may retain.

As the HVCC disclosure (required by Fannie/Freddie) was replaced in 2010 with the AIR disclosure and would appear to be pretty much what will be required with the new ECOA disclosure - does anyone know if Fannie/Freddie will be eliminating the AIR disclosure requirement once the ECOA disclosure goes into effect?
Thanks!

We are also trying to determine if Fannie/Freddie will be eliminating the AIR disclosure. We are hoping they will....seems like one appraisal disclosure should be enough.

I know the notice is only required for 1st lien...anyone giving the notice on all RE secured loans?

Well the notice requirement for a non-QM HPML extends to junior liens.

In my research on this new regulation, I was looking at the ECOA Implementation Guide and on page 9 there is a Implementation Guide that states, " Implementation Tip: Plan to update your Regulation B appraisal notice for first-lien transactions. Once the ECOA Valuations Rule takes effect, the Regulation B appraisal notice also will no longer be required for second-lien or other subordinate-lien transactions. The text of a sample notice is in Appendix C, Form C-9.". This is the first time I have seen this. Help please!

We are giving the notice on all RE secured loans. We already give the appraisals for any lien.

We were going to include the notice on our application as well. Is the problem with this b/c the applicant does not receive the disclosure in a form they may retain?

We've decided to add the verbiage to the Application (1003) and do away with a seperate disclosure that the customer can keep because we will be sending out a copy of the appraisal no matter the outcome of the application.

Correct me if I'm wrong, but doesn't the rule state that the lender must send a copy of appraisal? So wouldn't that take care of any confusion?

Yes. See 12 CFR 1002.14(a)(1).

Yes - the disclosure must be in a form that the customer can retain (1002.4(d)).

I may be overreaching here on the rule BUT if the application has verbaige that we will give a copy of the appraisal to the customer, then why would it still be required to give an extra piece of paper that states the customer has a right to receive a ocpy of appraisal?

What happened to the paperwork reduction act?