Articles
FAQs
Reg. B Appraisal Notice & Copy Requirements
Ordering and Reviewing Appraisals
Accepting Transferred Appraisals
Reg. B Appraisal Notice & Copy Requirements
Question: We have a prequalification request for a mortgage purchase loan. The applicants have not found a property, so the property address is unknown. Are we required to provide the Reg. B appraisal notice within three business days of receiving this prequalification request?
Answer: It depends if the request is considered an “application” under Reg. B. Section 1002.14 of Reg. B states the appraisal notice is triggered by an “application” for credit that is to be secured by a first lien on a dwelling and an appraisal will be developed in connection to that request. The key definition in this requirement is the term “application.”
An application is defined by Reg. B as “an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested.” The commentary further states that a creditor has latitude to establish its own application process, and to decide the type and amount of information it will require from credit applicants. In other words, the creditor determines what is, and what is not, an application based on the type and amount of credit requested.
As a result, the bank’s procedures should address what is considered an “application” and may state that an application for a mortgage purchase loan must include a property address. If a property has not been identified, the request is not an application; therefore, the requirement to provide the appraisal notice is not triggered. Conversely, if the bank procedures do not require a property address in its definition of “application,” a purchase money mortgage prequalification request that does not include a property address would trigger the appraisal notice within three business days if the bank’s normal procedures would be to develop or obtain an appraisal in connection with the credit request because it will be secured by a first lien on a dwelling.
Question: What are the requirements to use an appraisal waiver in lieu of providing a copy of the appraisal to the borrower three business days in advance of consummation as required by Reg. B for loans secured by a first lien on a dwelling?
Answer: Comment 6 to the Official Staff Commentary to Reg. B §1002.14(a) explains the applicant may waive the requirement for a creditor to provide a copy of the appraisal developed in connection with their loan request not later than three business days prior to consummation, provided the applicant provides the creditor an affirmative oral or written statement waiving the timing requirement, AND the creditor provides the appraisal copy at or before consummation.
When using an appraisal waiver, the applicant is only waiving the timing requirement, not the actual delivery of the copy of the appraisal.
Important reminders:
- The appraisal waiver must be obtained three business days prior to consummation.
- The creditor still must deliver copies of the appraisal at or before consummation.
- The file should clearly document the dates and method of delivery for both the appraisal waiver and copies of the appraisal.
Question: Regulation B requires a creditor to provide a credit applicant a copy of any appraisal or evaluation developed in connection with a request for credit and a notice of their right to receive a copy of the appraisal or evaluation when the extension of credit will be secured by a first lien on a dwelling. The term dwelling means a residential structure that contains one to four units whether or not that structure is attached to real property. The term includes, but is not limited to, an individual condominium or cooperative unit, and a mobile or other manufactured home. Does the term dwelling include a mixed-use structure that contains up to four living units and areas used for other purposes? The structure securing our loan has a business on their first floor and three apartments on the second floor.
Answer: That’s a good question. A guidance document on the appraisal-valuation rule in Reg. B issued by the Consumer Financial Protection Bureau indicates the definition of “dwelling” includes mixed-use properties with up to four units if:
- Only the residential units are pledged as collateral, or
- The entire property is pledged as collateral.
Since your loan will be secured by the entire mixed-use property containing one to four residential units and a new valuation (appraisal or evaluation) will developed for the requested credit, the notice and copy requirements apply to this transaction and must be provided to the applicant.
Excerpt from the guidance:
ARE MIXED-USE PROPERTIES “DWELLINGS?”
Structures that are not solely residential may satisfy the definition of a dwelling under the Rule (for example, structures that have commercial or retail space attached to or within a residential structure — often referred to as “mixed-use” properties). If the residential portion of a mixed-use property with one-to-four units secures the loan, the definition of a dwelling is satisfied. For example, a one-to-four-unit property that includes both a residential and commercial structure would satisfy the definition of a dwelling if:
- Only the residential portion of the property is pledged as collateral for the loan; or
- The entire property (both the commercial and residential structure) is pledged as collateral.
Question: How are business days counted for the purpose of providing a copy of the appraisal three business days prior to consummation for Reg. B? Do we use the general business day definition, the days the bank is open for substantially all banking functions, or the precise definition, counting all calendar days except Sundays and certain federal holidays?
Answer: The Consumer Financial Protection Bureau (CFPB) provided a compliance fact sheet that addresses Reg. B appraisal delivery rules that will help answer this question. The factsheet explains that Reg. B does not provide a definition of “business day.” However, the factsheet reminds us that Reg. Z has a similar requirement to provide a copy of the appraisal for Higher Priced Mortgage Loans (HPMLs) and directs the reader to the CFPB’s Small Entity Compliance Guide for TILA’s HPML Appraisal Rule. The CFPB’s Small Entity Guide states creditors should use Reg. Z’s “general business day” definition for purposes of the HPML appraisal provisions.
In summary, creditors should use the general business day when providing appraisal copies on loans that are subject to Reg. Z requirements for HPMLs. For loans that are not HPMLs but are subject to Reg. B, the factsheet states a bank can apply their own reasonable definition, which may include Saturdays. (November 2020)
Question: One of our customers applied for a new loan that will be secured by a first lien mortgage and the property includes a single-family dwelling. We have an existing appraisal on the property and we already provided a copy of the appraisal to the customer. The appraisal is several years old. We will complete a new in-house valuation for the new loan. Do we need to provide a copy of the in-house valuation to the applicant?
Answer: Reg. B requires the bank provide a copy of all appraisals and other written “valuations” developed in connection with an application for credit to the applicant(s). Since the customer applied for a new loan and the bank developed a new valuation, the bank is required to provide a copy of the in-house valuation to the loan applicant.
Question: Reg. B states that the lender must deliver the appraisal copy to applicant at least three business days before closing. Does this mean we can close on the third business day or do we need to wait until the fourth business day?
Answer: Assuming you hand-delivered the appraisal copy to the applicant, you can close on the third business day. For example, assuming the week has no legal public holidays, if you hand-deliver the appraisal copy to the applicant on Monday, day one is Tuesday, day two is Wednesday and day three is Thursday. You can close on Thursday. You are not required to wait until midnight after third business day – as the rescission rule requires. You are permitted to close on the third day.
Some people find that counting backwards from the closing date is easier. For example, if closing is scheduled for Friday, then Thursday is one business day before closing, Wednesday is two business days before closing and Tuesday is three business days before closing. If the lender has confirmation of delivery of the appraisal copy to borrower by Tuesday, closing can occur on Friday.
Keep in mind Section 1002.14(a)(1) of Reg. B requires that the creditor “provide” copies of appraisals and other written valuations to the applicant “promptly upon completion,” or no later than three business days before consummation (for closed-end credit) or account opening (for open-end credit), whichever is earlier. For purposes of this timing requirement, “provide” means “deliver.” If providing the copy by a means other than in person delivery, the rules states “delivery” occurs three business days after mailing or delivering the copies to the last-known address of the applicant, or when evidence indicates actual receipt by the applicant, whichever is earlier. So you may have to add another three days for this “mailbox” rule; again, unless you have evidence of actual receipt by the consumer such as an overnight mail signed receipt or electronic communication from the borrower acknowledging receipt. (Reminder: if providing the appraisal copy electronically, you must comply with E-Sign Act requirements.)
Question: We are refinancing a mortgage loan and relying on an appraisal that was done several years ago when the original loan was made. Are the Reg. B requirements to provide a notice to the applicant of the fact we are obtaining an appraisal and then provide a copy of the appraisal three days prior to closing applicable?
Answer: Section 1002.14(a)(2) of Reg. B states Reg. B’s appraisal requirements are triggered when a creditor “develops” an appraisal or valuation “in connection with a credit secured by a first lien on a dwelling”:
1002.14(a) Providing appraisals and other valuations. (1) In general. A creditor shall provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. A creditor shall provide a copy of each such appraisal or other written valuation promptly upon completion, or three business days prior to consummation of the transaction (for closed-end credit) or account opening (for open-end credit), whichever is earlier.
The Official Staff Commentary to this section further provides an appraisal or valuation that was previously developed in connection with an earlier credit request and is used again in a renewal does not trigger the requirements. The IBA was able to verbally confirm with a CFPB representative that reuse of a previously obtained appraisal/valuation for a “new” extension of credit also does not trigger the Reg. B requirements. See comment #2 to Section 1002.14(a)(1):
#2. Renewals. Section 1002.14(a)(1) applies when an applicant requests the renewal of an existing extension of credit and the creditor develops a new appraisal or other written valuation. Section 1002.14(a)(1) does not apply to the extent a creditor uses the appraisals and other written valuations that were previously developed in connection with the prior extension of credit to evaluate the renewal request.
Reg. B does not require the creditor develop an appraisal or valuation, but rather simply states IF the creditor does develop or obtain an appraisal/valuation, it must notify the applicant and provide a copy the appraisal or valuation. (Note, the Interagency Guidance on Appraisals and Valuations provides guidance on when an appraisal or valuation must be completed. It can be found at https://www.fdic.gov/news/news/financial/2010/fil10082a.pdf.)
The sample notice contained in an appendix to Reg. B states: “We may order an appraisal to determine the property’s value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost.”
Question: If I deny a customer a home loan request within three business days, do I still need to send the Reg. B Notice of Appraisal disclosure?
Answer: Yes. You must provide the appraisal notice disclosure within three business days of receiving an application for credit that is to be secured by a first lien on a dwelling. It is the application that triggers the disclosure requirement, not the creditor’s action related to the application. When a consumer-purpose, dwelling-secured application is approved, this disclosure is provided on the Loan Estimate.
However, when the application is denied and the LE is not delivered, or the application is for a business purpose loan to be secured by a first lien on the dwelling, the bank must still send the appraisal notice disclosure within three business days of taking an application. The bank has a couple of options for delivery of the appraisal notice in regard to denied applications:
- Send the appraisal notice with the denial notice within three business days of application; or
- Implement a procedure to provide a copy of the appraisal notice at time of application, for example by including it with an application packet.
Question: My bank received a loan application to purchase a residential dwelling that contains six units. A first lien on the dwelling will secure the loan and a new appraisal will be developed for this credit transaction. Since the loan will be secured by a residential property, do we need to provide the borrower a copy of the appraisal and the Notice of Right to Receive Copy of Appraisal under Reg. B?
Answer: Actually, no, not in this case. Per section 1002.14(b)(2) of Reg. B, the requirement to provide the appraisal notice and a copy of the appraisal to an applicant who applies for credit to be secured by a dwelling with one to four units. Since this dwelling has more than four units, the requirements to provide the appraisal notice and a copy of the appraisal to the applicant do not apply.
ORDERING and reviewing APPRAISALS
Question: If a creditor reviews an appraisal and determines that the value is lower or higher than the expected value, can the creditor request the appraiser to consider changing the value?
Answer: Yes, a creditor can ask the appraiser to revisit the value if certain circumstances exist. For example, if the appraisal contains errors, such as the square footage of a structure is inaccurate or there is a mathematical error in the adjustments, the creditor can request the appraiser to review the errors, determine if corrections are necessary and if changes are needed, if the appraised value is impacted.
Question: When a creditor requests an appraiser to reconsider the value he/she assigned to property, is the creditor violating Regulation Z’s valuation independence rules?
Answer: Actually, no. The Valuation Independence rules found in Reg. Z, 1026.42(c) and the 2010 Interagency Appraisal and Evaluation Guidelines allow a creditor to provide certain information to the appraiser. Examples of actions that are not violations of the independence rules include:
- Requesting the appraiser consider additional, appropriate property information;
- Providing information about comparable properties;
- Correcting errors in the report.
The creditor might have information about the property or comparable sales that was not available to the appraiser. They can provide that information to the appraiser for additional consideration. If the creditor finds a computational error, that can be provided to the appraiser as well. The types of actions that are not allowed include:
- Communicating a predetermined, expected, or qualifying estimate of value, or a loan amount or target loan-to-value ratio to an appraiser or person performing an evaluation;
- Specifying a minimum value requirement for the property that is needed to approve the loan or as a condition of ordering the valuation;
- Conditioning a person’s compensation on loan consummation;
- Failing to compensate a person because a property is not valued at a certain amount;
- Implying that current or future retention of a person’s services depends on the amount at which the appraiser or person performing an evaluation values a property;
- Excluding a person from consideration for future engagement because a property’s reported market value does not meet a specified threshold.
The Reg. Z requirements apply to consumer’s principal dwelling, however, the independence requirements found in the 2010 Interagency Appraisal and Evaluation Guidelines apply to all types of properties.
Question: During a review of an appraisal, we found deficiencies in the report. The value is high enough to support the credit. Do we have to send the appraisal back to the appraiser to fix the report?
Answer: Yes. The 2010 Interagency Appraisal and Evaluation Guidelines states that financial institutions should establish policies and procedures for resolving any inaccuracies or weaknesses in an appraisal or evaluation. Procedures should include:
- Communicating the noted deficiencies to and requesting correction of such deficiencies by the appraiser or person who prepared the evaluation. Implement internal controls to ensure that such communications do not result in any coercion or undue influence on the appraiser or person who performed the evaluation.
- Addressing significant deficiencies in the appraisal that could not be resolved with the original appraiser by obtaining a second appraisal or relying on a review that complies with Standards Rule 3 of USPAP and is performed by an appropriately qualified and competent state certified or licensed appraiser prior to the final credit decision. Replacing evaluations prior to the credit decision that do not provide credible results or lack sufficient information to support the final credit decision.
Question: We ordered an appraisal from an appraiser who is on our approved appraiser list. The appraiser assigned the appraisal to someone else who is not on our approved appraiser list. The appraiser who is on our list signed the appraisal as the “Supervisory Appraiser”. Can we accept this appraisal?
Answer: Yes, the bank can accept the appraisal unless the bank’s own appraisal policy prohibits it. When an appraiser signs an appraisal in the capacity of a “supervisory appraiser”, it means they are supervising a trainee appraiser. The supervisory appraiser inspects the property with the trainee. The supervisory appraiser also reviews and accepts responsibility for the appraisal, certifying it complies with USPAP standards. Supervisory appraisers must be state-certified appraisers who are in good standing for a minimum of three years. More information on supervisory appraisers from the Appraisal Foundation is found here. (March 2019)
Question: What information should the regulated institution provide to the appraiser upon engagement?
Answer: The regulated institution should provide the property’s address, its description, and any other relevant information. The regulated institution may also provide a copy of the sales contract for purchase transactions. However, the information provided by the regulated institution should not unduly influence the appraiser or in any way suggest the property’s value. The regulated institution and the appraiser should agree on the scope of the appraisal in advance, consistent with the Uniform Standards of Professional Appraisal Practice (USPAP) and the agencies’ appraisal regulations and interagency guidelines.
Question: When selecting residential appraisers, may loan production staff use a revolving preapproved appraiser list, provided the list is not under their control?
Answer: Yes, loan production staff may use a revolving, board-approved list to select a residential appraiser, provided the development and maintenance of the list is not under their control. Staff responsible for the development and maintenance of the list should be independent of the loan production process. In developing the list, a regulated institution should consider the knowledge and expertise of the selected appraiser for a given assignment. For example, the list should indicate the qualifications of the appraiser to perform appraisals in particular markets and on various types of residential property transactions.
If the next available name on the list is not selected, the departure should be properly documented in the credit file. The administrative procedures should include a process for qualifying an appraiser for initial placement on the list as well as for periodic monitoring of the appraiser’s performance to assess whether to retain an appraiser on the list. Further, there should be periodic internal review of the appraiser selection process to ensure that appropriate procedures are being followed and that controls exist to ensure independence.
Question: Must the individual appraiser, rather than the appraisal firm, sign and accept the terms of an engagement letter for it to be considered valid?
Answer: The agencies have no specific requirements with respect to who signs and accepts the engagement letter. The appraiser, however, must sign the certification page of the appraisal report.
Question: Can a borrower pay the appraiser directly for an appraisal that is ordered by the lender?
Answer: Since the regulated institution has engaged the appraiser for its services, the regulated institution should be the party to remit payment to the appraiser. The regulated institution may seek reimbursement from the borrower for the cost of the appraisal. However, the borrower may not recommend an appraiser to the institution or select the appraiser.
ACCEPTING TRANSFERRED APPRAISALS
Question: Can an appraisal be transferred from one lender to another and, if so, under what circumstances?
Answer: A regulated institution may accept an appraisal transferred from another regulated institution or from a financial services institution (that is, a non-regulated institution), provided 1) the appraiser is engaged directly by the institution transferring the appraisal, 2) the appraiser has no direct or indirect interest in the property or transaction, 3) the existing appraisal or evaluation remains valid, and 4) the regulated institution determines that the appraisal conforms to the agencies’ appraisal requirements and interagency guidelines and is otherwise appropriate. (A financial services institution describes entities that provide services in connection with real estate lending transactions on an ongoing basis.) Regulated institutions are expected to perform a more thorough review when accepting an appraisal from another financial services institution to confirm that the appraisal complies with the regulation and has sufficient information to support the lending decision. Moreover, the regulated institution accepting the appraisal should determine whether appropriate documentation is available to confirm that the financial services institution (not the borrower) ordered the appraisal.
Question: Can a regulated institution accept an appraisal prepared by an appraiser who was engaged by a loan broker?
Answer: The agencies’ appraisal regulations allow a regulated institution to accept an appraisal prepared by an appraiser engaged by another financial services institution, including a loan broker. This is allowed as long as the regulated institution has appropriate controls in place to ensure that the appraiser is acting on behalf of the financial services institution, the appraisal conforms to the requirements of the regulation and is otherwise acceptable, and the appraiser is independent from the borrower. Regulated institutions should review broker-ordered appraisals thoroughly to ensure that the appraisal complies with the regulation and meets the quality standards required by the institution’s appraisal policies.
Question: May an appraisal be readdressed to a regulated institution from the borrower or another institution?
Answer: A regulated institution cannot accept an appraisal that has been readdressed or altered by the appraiser with the intent to conceal that the original client was the borrower. Readdressing appraisals to conceal the original client, whether the client is a borrower or another financial services institution, is misleading and violates the agencies’ regulations and USPAP.
Question: May an appraisal be routed from one lender to a regulated institution via the borrower?
Answer: A regulated institution cannot accept an appraisal from the borrower unless the regulated institution can confirm that the appraisal was in fact ordered by another regulated institution or financial services institution. In accepting the appraisal, the regulated institution must also confirm that the appraiser is independent of the transaction and that the appraisal conforms to the agencies’ appraisal regulations and is otherwise acceptable.
APPRAISAL THRESHOLDS
Question: A borrower is purchasing a property at a price below current market value. The appraised value is higher than the purchase price. For underwriting purposes, can we use the appraised value to determine the loan-to-value?
Answer: For loans to purchase an existing property, Regulation H indicates creditors should use the lesser of the purchase price or the appraised value to determine the loan-to-value. Regulation H, Subpart E, Real Estate Lending and Appraisal Standards, defines “Value” as “an opinion or estimate, set forth in an appraisal or evaluation, whichever may be appropriate, of the market value of real property, prepared in accordance with the agency’s appraisal regulations and guidance. For loans to purchase an existing property, the term, value, means the lesser of the actual acquisition cost or the estimate of value.” It is because of this provision in Regulation H, loan and underwriting policies and procedures require use of the “lesser of the purchase price or estimated/appraised value” when calculating LTV on purchase money transactions.
Question: I understand creditors now have three thresholds to consider when determining if a loan requires an appraisal(s) by a state certified/licensed appraiser. However, I am confused regarding how to apply the new $500,000 threshold. For example, if a loan for $600,000 is secured by both farmland and a 1-4 family residential property, which appraisal threshold do I use?
Answer: The Interagency Guidance states the bank should use the “transaction value” when determining if an appraisal is required. The rule states for loans or other extensions of credit, the transaction value is the loan amount. It further states for sales, leases, purchase, investments in or exchange of real property, the transaction value is the market value of the real property. The transaction value is then applied to three threshold levels, which when exceeded; require an appraisal conducted by a state certified/licensed appraiser:
- $400,000 when secured by a single 1-4 family residential property.
- $500,000 when secured by property that is NOT a single 1-4 family residential property.
- $1,000,000 when making a business loan that is a real estate-related financial transaction and is NOT dependent on the sale of, or rental income derived from, real estate as the primary source of repayment.
In cases where multiple pieces of real estate secure one loan, the bank should first look to the loan amount. In your scenario, the loan amount is above the $400,000 threshold. So, you then would determine if either property is eligible for an evaluation instead of an appraisal by looking at the estimated market value of each property. If the 1-4 family residential property has an estimated market value equal to or less than $400,000, an evaluation is acceptable. Similarly, if the farmland is dependent upon the sale of or rental income derived from, real estate as the primary source of repayment and has an estimated market value of $500,000 or less an evaluation would suffice. If the farmland is not dependent upon the sale of, or rental income derived from, real estate as the primary source of repayment, and has an estimated market value of $1,000,000 or less (referred to as a qualifying business loan), an evaluation would also be acceptable for this property. See the Interagency Appraisal and Evaluation Guidelines for further details and limitations.
EVALUATIONS
Question: Our bank is a small creditor under Regulation Z. We qualify for the small creditor exemption under the HPML escrow requirement and also qualify under the ATR — QM rules to make Small Creditor Qualified Mortgages. Does the fact we are a small creditor also provide us relief from the requirement to review every appraisal or evaluation obtained by the bank?
Answer: Unfortunately there is no exemption based on the size of the bank in the appraisal rules. The appraisal review requirements are found under Section XV of the Interagency Appraisal and Evaluation Guidelines and are further clarified in FAQ 5 of the Frequently Asked Questions on the Appraisal Regulations and the Interagency Appraisal and Evaluation Guidelines (issued in 2018). FAQ 5 explains: As part of the credit approval process and prior to making a final credit decision, a financial institution should review appraisals and evaluations to confirm that they comply with the agencies’ appraisal regulations and the financial institution’s internal policies. However, the Interagency Appraisal and Evaluation Guidelines explain the depth of the review may be commensurate with the risk of the transaction.
Question: Does a tax-assessment value from the local taxing authority constitute an evaluation? Can a loan officer who approves and/or recommends a loan conduct an evaluation if the market value that the officer develops in the evaluation does not exceed the tax-assessment value?
Answer: A value from the taxing authority alone is insufficient to be considered an evaluation. An evaluation report should include calculations, supporting assumptions, and, if utilized, a discussion of comparable sales. If tax assessment information is used as part of an evaluation, the regulated institution should document the facts and analysis used to demonstrate that there is a valid correlation between the assessed values of the taxing authority and the property’s market value. In addition, an evaluation should describe the real estate collateral, its condition, and its current and projected use. A regulated institution should ensure that an individual who performs an evaluation is independent of the loan production function. Simply restricting the size of a transaction to less than the tax-assessed value alone does not comply with the agencies’ appraisal regulations or the interagency guidelines, which address standards of independence.
(See “Independence of the Appraisal and Evaluation Function” in the interagency guidelines at https://www.fdic.gov/news/news/financial/2005/fil2005a.html)
HPML Appraisal Requirements
Question: If a creditor makes a loan that is determined to be an HPML, what is required if no exception applies?
Answer: Creditors who make HPMLs:
- Must establish escrow accounts for taxes and required insurance premiums on for HPMLs in a first lien position; and,
- Must obtain an appraisal by a licensed or certified appraiser that includes an interior inspection of the property. A second appraisal may be required if the property is deemed to be “flipped” as defined in 1026.35(c)(4).
Question: Are there exceptions to the HPML appraisal requirement?
Answer: Yes. A creditor is not required to obtain an appraisal for the HPML transaction if:
- The transaction is a Qualified Mortgage as defined in 12 CFR 1026.43(e) and (f);
- For transactions in amount of $27,200 or less (for 2021 – amount is adjusted annually);
- The transaction is a streamline refinances; subject to certain conditions (E.g., no cash out);
- Subject to restrictions and conditions, the transaction secured by a new manufactured home and land or an existing manufactured home – see details of exception at § 1026.35(c)(2)(viii);
- The transaction secured by a mobile home, boat, or trailer;
- The transaction is to finance the initial construction of a dwelling;
- The transaction is a bridge loans with a maturity of 12 months or less connected with the acquisition of a consumer’s principal dwelling; and,
- The transaction is a reverse-mortgage transaction subject to § 1026.33(a).
Question: A second appraisal is required if a property has been “flipped”. When is a property considered to have been flipped?
Answer: Reg. Z defines a property as being flipped if:
- The seller acquired the property 90 or fewer days prior to the date of the consumer’s agreement to acquire the property and the price in the consumer’s agreement to acquire the property exceeds the seller’s acquisition price by more than 10 percent; or
- The seller acquired the property 91 to 180 days prior to the date of the consumer’s agreement to acquire the property and the price in the consumer’s agreement to acquire the property exceeds the seller’s acquisition price by more than 20 percent.
If a second appraisal is required, Reg. Z outlines specific criteria that must be analyzed. See §1026.35(c)(4). It’s also import to note there are exemptions to the second appraisal requirement as well outlined in §1026.35(c)(vii).
Question: Is the Reg. B HPML appraisal requirement only applicable to first-lien HPML transactions?
Answer: No – the Reg. B HPML appraisal requirement is applicable to both first and subordinate lien loans unless an exemption applies.
Question: If the transaction is covered by Reg. B’s appraisal notice and copy requirement as well as Reg. Z’s HPML appraisal notice and copy requirement, do we have to provide two notices and copies?
Answer: No – the notice requirements are nearly identical. Both Reg. B and Reg. Z require the notice of the right to receive a copy of the appraisal be given within three business days of application. The content of the notices is almost identical. Both regulations also require the creditor to provide a copy of the appraisal upon completion, but not later than three business days prior to consummation. However, while the Reg. B rule does provide a limited exception to providing the appraisal copy three days prior to consummation, the Reg. Z HPML requirement does not. Complying with the Reg. Z HPML appraisal notice and copy requirements when originating a HPML fulfills the Reg. B appraisal requirements as well.