Consumer Financial Protection Bureau Proposes Rule to Improve Consumer Access to Appraisal Reports

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Rule would give consumers additional rights to information on how a home value is determined

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released a proposed rule that would require mortgage lenders to provide home loan applicants with copies of written appraisals and other home value estimates developed in connection with the application. The rule would ensure that consumers receive information prior to closing about how the property’s value was determined.

“When looking to buy a home or refinance a mortgage, consumers need the best available facts and data,” said CFPB Director Richard Cordray. “This rule would guarantee consumers receive important disclosures on how a lender determines the value of the home, making it easier for loan applicants to make informed decisions.”

In response to the mortgage crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that creditors provide mortgage applicants with a copy of written appraisals and home value estimates developed in connection with the application. Today’s proposed rule would require that creditors inform consumers within three days of applying for a loan of their right to receive a free copy of appraisal reports and home value estimates. Creditors would then be required to provide the reports to consumers as promptly as possible, but in no case later than three days before closing, regardless of whether credit is extended, denied, incomplete or withdrawn.

Appraisals and other home value estimates are used by creditors to inform lending decisions for most home sales. Consumers are typically charged for the costs related to conducting an appraisal; however, currently consumers must request appraisal reports from creditors and may be charged a fee to obtain the report. Under the proposed rule, creditors could still charge reasonable fees associated with conducting appraisals and home value estimates; however, the rule would prohibit creditors from charging consumers fees for obtaining the reports.

The proposed rule would amend the Equal Credit Opportunity Act (ECOA)’s Regulation B, which require certain disclosures and prohibits lenders from discriminating on the basis of race, national origin, sex, or other protected bases. Under the Dodd-Frank Act, the Bureau is authorized to issue regulations implementing ECOA and supervise compliance with ECOA and Regulation B for certain lenders.

The CFPB welcomes comments on the proposed rule. The public will have 60 days, or until October 15, 2012 to review and provide comments on the proposed rule. The CFPB will review and analyze the comments before issuing a final rule in January 2013.

The CFPB’s proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_ECOA_proposed_rule.pdf

A summary of the CFPB’s proposed rule is available at: http:://files.consumerfinance.gov/f/201208_cfpb_ECOA_plain_language_summary.pdf

The proposed rule can be found here: http://files.consumerfinance.gov/f/201208_cfpb_ECOA_proposed_rule.pdf

This is one of several rulemakings governing mortgage practices currently underway at the Bureau in order to implement requirements of the Dodd-Frank Act. Today, in partnership with several other federal regulatory agencies, the Bureau is also issuing a proposed rule to establish special requirements concerning appraisals for higher-risk mortgage loans, which would require creditors to use a licensed or certified appraiser to prepare the written appraisal report based on a physical inspection of the property.

The interagency proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_HRM_proposed_rule.pdf

A summary of the interagency proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_HRM_plain_language_summary.pdf

~ Source Consumer Financial Protection Bureau (CFPB)

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2 Responses

  1. TD says:

    ??????
    I am so confused!!
    Wasn’t this ALREADY a part of the EQUAL CREDIT OPPURTUNITY ACT??? What exactly is new about this? Here is the info from the ECOA;
    Equal Credit Opportunity Act

    Sec. 202.5a Rules on providing appraisal reports.

    (a) Providing appraisals. A creditor shall provide a copy of the appraisal report used in connection with an application for credit that is to be secured by a lien on a dwelling. A creditor shall comply with either paragraph (a)(1) or (a)(2) of this section.
    (1) Routine delivery. A creditor may routinely provide a copy of the appraisal report to an applicant (whether credit is granted or denied or the application is withdrawn).
    (2) Upon request. A creditor that does not routinely provide appraisal reports shall provide a copy upon an applicant’s written request.
    (i) Notice. A creditor that provides appraisal reports only upon request shall notify an applicant in writing of the right to receive a copy of an appraisal report. The notice may be given at any time during the application process but no later than when the creditor provides notice of action taken under Sec. 202.9 of this part. The notice shall specify that the applicant’s request must be in writing, give the creditor’s mailing address, and state the time for making the request as provided in paragraph (a)(2)(ii) of this section.
    (ii) Delivery. A creditor shall mail or deliver a copy of the appraisal report promptly (generally within 30 days) after the creditor receives an applicant’s request, receives the report, or receives reimbursement from the applicant for the report, whichever is last to occur. A creditor need not provide a copy when the applicant’s request is received more than 90 days after the creditor has provided notice of action taken on the application under Sec. 202.9 of this part or 90 days after the application is withdrawn.
    (b) Credit unions. A creditor that is subject to the regulations of the National Credit Union Administration on making copies of appraisals available is not subject to this section.
    (c) Definitions. For purposes of paragraph (a) of this section, 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. The term appraisal report means the document(s) relied upon by a creditor in evaluating the value of the dwelling.

    NOTE: for complete text of entire ECOA;
    Equal Credit Opportunity Act – Full Text

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  2. Jeremy Hall Appraisals - CO Jeremy Hall Appraisals - CO says:

    Perhaps the good side of this is that AVM’s and BPO’s won’t be as relied upon for valuation, and will stay put where they belong. That only happens if the lender has to furnish those oftentimes unreliable price opinion and automatic value opinion results to the borrower. Borrower always gets a copy of the appraisal report, but as the definition of what is and what is not an appraisal is so diverse here to there; it makes good sense to inform the consumer of every instance of valuation and price development pertaining to their deal.

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Consumer Financial Protection Bureau Proposes Rule to Improve Consumer Access to Appraisal Reports

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