Do you feel like you’re being buried under not just new regulations, but the paperwork that accompanies it? When it comes to compliant appraisal policies and procedures many community bank lenders believe they are compliant now, or at the least, believe they know what to do to become compliant. But so many regulations have changed that touching all the bases can be difficult. The Consumer Financial Protection Bureau (CFPB) is moving towards enforcement and oversight, and penalties that will make everyone take notice.
One of the many regulations that the CFPB is charged to oversee is the Equal Credit Opportunity Act (ECOA). One existing ECOA appraisal rule is:
- Consumer has a right to a copy of the appraisal
- Creditor has two options for compliance
1. Notify the consumer of this right and provide a copy only after receiving a consumer’s
2. Automatically provide the consumer a copy of the appraisal.
The NEW ECOA appraisal rule is:
- 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.
The lender does not have a ‘choice’ now, the valuation MUST be provided. And what is startling to many lenders now is the new law applies to BOTH consumer and COMMERCIAL transactions! This is the only new requirement in the 2014 mortgage reform amendments that applies to commercial, so it’s understandable why many commercial lenders are unaware of it.
The new ECOA Rule is effective for all applications (remember both residential and commercial) received on or after January 18, 2014. The trigger for the application is the ‘date’ of the application. The term ‘valuation’ means any estimate of the value of a dwelling developed in connection with an application for credit. It can be an appraisal, an evaluation, even a AVM, or auditor’s card.
There is quite a bit more to these regulations. For example, what does ‘promptly’ mean? At SAMCO we are now offering direct email to the customer/borrower of the valuation product (either an appraisal or evaluation) to make life a little simpler. The lender is notified of the receipt by the borrower and there is an electronic trail to audit. Tell me what you think about this new regulation and how you will be handling this new wrinkle in the compliance fabric!