Home Equity Loan Appraisal

What type of "Appraisals" do you use for Home Equity Loans?

Closed End, HELOCS?

Hot topic here right now.

Up until middle of last year, FMV from the prior year tax bill. No inspection, drive-by, nuttin'.

Since then, exterior only/drive-by appraisal for all new requests.

Looking at a local appraisal firm who is developing a less expensive evaluation option than the drive-by.

The wrinkle though: a senior lending manager is insisting we go back to simple tax bills for the better part of the applications, and only use an appraisal for high CLTVs. Several peer banks in our area are still simply using the tax bill, and there is concern we are loosing this segment of the business because we are 'over-interpretting' the recent appraisal and evaluation guidelines.

That's what's driving it here. We currently do full blown on all real estate loans, due to the Reg Z appraisal rules and HVCC.

I think since these loans are not sold on the market, that discounts HVCC rules, and we wouldn't need to do Full Blown Appraisals.

These loans avereage in size of about $46k with the rare loan amoutn over $100k. So, I don't see a need for a full blown appraisal.

For our home equity loans, we do exterior only/drive-by appraisals.

The focus on the evaluation guidance and develop a solid process.

"The wrinkle though: a senior lending manager is insisting we go back to simple tax bills for the better part of the applications"

Just Jay: better get them a copy of the guidelines as you and I know that ain't going to cut it no matter what "they think" the competition is going. Almost every bank that I know that has been examined that did not have a detailed evaluation process that meets those new guidelines are being run through the wringer on their exams. That will cure all "wrinkles".

One more thought. When going through Richard Hagards DFA Appraisal Impact presentation material he mentions that "Higher Risk" requires a Physical Interior Inspection.

"For purposes of this section, the term ‘higherrisk
mortgage’ means a residential mortgage
loan as defined in section 129C:
• Secured by a principal dwelling
• …………. and
• with an annual percentage rate that exceeds the
average prime offer rate by 1.5% or more for first
lien and 3.5% for subordinate lien."

Appraisal must be performed by a certified or
licensed appraiser who conducts a physical
property visit of the interior of the mortgaged
property.
– No Drive-by appraisals (form 2055).
– No Automated Valuation Modeling (AVM).
– No Broker Price Opinions (BPO).
– No Exemptions."



So, do you all use the HPML calcualator to determine if the loan is "Higher Risk" before ordering the appraisal?

If the loan is over $250k, we require an external appraisal. If under, we have a non-interested employee (from a board-approved team) do an internal evaluation.

The Evaluation Content is described in detail in section "XIII. Evaluation Content" (page 13) of the Interagency Appraisal and Evaluation Guidelines. Have your senior lending manager read through that and ask them how a tax bill compares to the Evaluation Content required by the Guidelines. Good Luck