Appraisal 3 day waiver

Posted By: Refresher2020

Appraisal 3 day waiver - 09/24/20 10:07 PM

We have some originators that want to add a waiver to the initial disclosure package that would waive the 3 day appraisal delivery requirement. They say it's an insurance policy so that we wouldn't have to postpone closing. How would regulators view a disclosure like this being delivered in every initial disclosure package?

Any input is truly appreciated!
Posted By: rlcarey

Re: Appraisal 3 day waiver - 09/25/20 11:11 AM

There is no specific prohibition, but it does still does not prevent you from violating the deliver "promptly upon completion" rules. Check out 1002.14(a)(1) - Comments 4 and 5. Waiver or not you still have send the appraisal promptly upon completion.
Posted By: Truffle Royale

Re: Appraisal 3 day waiver - 09/25/20 03:07 PM

I'm willing to bet examiners are not going to take kindly to making an appraisal waiver SOP. My understanding is they are meant to be used if a situation warrants, not as a blanket to facilitate fast closings.
Posted By: Inherent_Risk

Re: Appraisal 3 day waiver - 09/25/20 03:18 PM

As long as you're not hiding it, I don't think anyone would have a problem with a just in case waiver. The reg doesn't require you to scramble at the last minute to get a waiver if the customer is willing to waive earlier. As Randy noted, if you're consistenetly providing them at or close to closing, then there is probably going to be an issue with your process from a "promptly upon completion" standpoint. From your post, it sounds like the process for actual delivery isn't going to be changing though.
Posted By: Truffle Royale

Re: Appraisal 3 day waiver - 09/29/20 09:26 PM

Sorry to disagree with you, Inherent_Risk, but the type of insurance policy (or as you called it 'just in case') use the OP cited was specifically pointed out to us by an examiner of what NOT to do.
Posted By: Andy_Z

Re: Appraisal 3 day waiver - 09/30/20 11:18 AM

There is a reason behind the rule.
There are occasional exceptions that harm customers, so waivers are allowed.
Having waivers requested as an SOP sounds more like "in case we screw up" than "for the occasional benefit of a consumer."

Auditing the files and SOP I would opine that it is more a requirement for a consumer to give up a right than to meet a possible need in the future, which could be addressed in the future, as intended.
Posted By: Inherent_Risk

Re: Appraisal 3 day waiver - 09/30/20 01:30 PM

What did they cite Truffle? What exactly would the harm be in following disclosure at application?

"You are entitled to you you valuation propmptly upon completion and 3 days prior to closing. We will always provide any valuations to you promptly upon completion and before closing, but you can waive the 3 day waiting period before closing. If you would like to waive the requirement to provide your valuation prior to closing please initial here."

I do agree that if you just throw a waiver onto an application and in order to move forward, the applicant has to sign, that would certainly be problematic, but not do to the timing, but rather the lack of choice.
Posted By: Dan Persfull

Re: Appraisal 3 day waiver - 09/30/20 02:07 PM

Why would the applicant choose to waive their rights unless there is an issue that would cause a delay in the closing. Only then should the option to waive the appraisal requirement or postpone the closing be presented. It should be the applicant's choice to waive the appraisal or postpone the closing. You referred to the "lack of choice", isn't only giving them the choice to waive the appraisal giving them a lack of choice.

We have some originators that want to add a waiver to the initial disclosure package that would waive the 3 day appraisal delivery requirement.

I bet you a dollar to the proverbial whole in a doughnut at least 85-90% of these loan officer's clients waive their right and with this statement added to the disclosure it will increase to 95-100%.

"Oh, by the way if you sign this waiver we can close the loan at least 3 days sooner."
Posted By: Truffle Royale

Re: Appraisal 3 day waiver - 09/30/20 05:17 PM

Thanks, Dan, for elaborating and hitting on exactly what the examiners pointed out, namely that there should be a NEED to consider waiving the right to a copy of the appraisal. Putting the waiver into the early disclosure packet on every loan is not addressing any need. As laid out by the OP, it's nothing more than a roundabout to avoid the timing clock.
Posted By: lend

Re: Appraisal 3 day waiver - 09/30/20 07:23 PM

so..... In the case of a homestead purchase, we give the "Right to Receive" disclosure at application. In the event the appraisal is not finished 3 days before closing would we ask the customer to sign something at that time stating they wish to waive the right to receive 3 days before closing and understand the bank will provide the appraisal promptly upon receipt?
Posted By: rlcarey

Re: Appraisal 3 day waiver - 09/30/20 07:37 PM

As long as promptly upon receipt is prior to closing - yes.
Posted By: Inherent_Risk

Re: Appraisal 3 day waiver - 10/01/20 01:12 PM

Quote
Why would the applicant choose to waive their rights unless there is an issue that would cause a delay in the closing. Only then should the option to waive the appraisal requirement or postpone the closing be presented. It should be the applicant's choice to waive the appraisal or postpone the closing. You referred to the "lack of choice", isn't only giving them the choice to waive the appraisal giving them a lack of choice.

If the applicant has to waive in order to move forward with the application (or if it appears they do), I do think that is problematic.
It should be clear in the method you use to obtain the waiver that they have an option. In my example above I was picturing including that on the written application as an optional place to initial (similar to joint intent). You could also have 2 check boxes. One for waiving timing and one for getting 3 days before closing to make it more clear there was a choice.

Quote
that there should be a NEED to consider waiving the right to a copy of the appraisal.

Says who (besides possibly an overzealous examiner)? There are regs that require a reason to waive. I don't believe this is one of them.

"[...]An applicant may waive the timing requirement in this paragraph (a)(1) and agree to receive any copy at or before consummation or account opening, except where otherwise prohibited by law. Any such waiver must be obtained at least three business days prior to consummation or account opening, unless the waiver pertains solely to the applicant's receipt of a copy of an appraisal or other written valuation that contains only clerical changes from a previous version of the appraisal or other written valuation provided to the applicant three or more business days prior to consummation or account opening. If the applicant provides a waiver and the transaction is not consummated or the account is not opened, the creditor must provide these copies no later than 30 days after the creditor determines consummation will not occur or the account will not be opened."

"If, no later than three business days prior to consummation or account opening, the applicant provides the creditor an affirmative oral or written statement waiving the timing requirement under this rule;"

I don't see anything requiring a need or not allowing a lender to offer that option at application to all applicants.
Posted By: John Burnett

Re: Appraisal 3 day waiver - 10/05/20 02:12 PM

Originally Posted by lend
so..... In the case of a homestead purchase, we give the "Right to Receive" disclosure at application. In the event the appraisal is not finished 3 days before closing would we ask the customer to sign something at that time stating they wish to waive the right to receive 3 days before closing and understand the bank will provide the appraisal promptly upon receipt?


Because the waiver under these circumstances has to be received no later than three business days before closing, you can't solicit a waiver three days before closing (unless you get tht waiver immediately).. You have to know by the third business day before closing that the waiver will be needed to avoid postponing the closing.

The waiver can be oral, but be sure to document it.