At the time of application, the creditor shall notify applicants in writing of the right to receive a copy of each appraisal and other written valuation under ECOA section 701(e). 8-9, C (describing valuation standards for certain manufactured home transactions); U.S. Dep't of Hous. ), Dec. 2012, n.6. Section 703(a) further states that such regulations may containbut are not limited tosuch classifications, differentiation, or other provision, and may provide for such adjustments and exceptions for any class of transactions as, in the judgment of the Bureau, are necessary or proper to effectuate the purposes of ECOA, to prevent circumvention or evasion thereof, or to facilitate or substantiate compliance. provide legal notice to the public or judicial notice to the courts. 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. iv. The Bureau therefore declines to alter the sample disclosure to instruct applicants on how they can order appraisals. 5481(12) (defining enumerated consumer laws to include ECOA). Finally, in the 10 percent of first lien closed-end, forward mortgage transactions where only a non-appraisal valuation is prepared, the cost of generating the copy and transmission will be new. Although the creditor has determined the appraisal is complete, the creditor waits to provide a copy to the applicant until day 42, when the creditor schedules the consummation (or account opening) to occur on day 50. 40. Public comment. The Bureau believes these benefits outweigh the cost to the creditor of providing copies of documentation that the creditor already has received. One industry commenter suggested the term would be confusing in the case of a rescindable transaction, and also queried whether consummation would occur when the lender issues a loan commitment. Section 1474 of the Dodd-Frank Act amended ECOA section 701(e) to mandate that creditors provide copies of appraisals and other written valuations regardless of whether the consumer affirmatively requests such copies. As noted in comment 14(a)(3)-2, the prohibition against charging for copies is designed to prevent an increase of charges within a specific transaction based upon the copies that must be provided. This commenter believed that without this exception, the applicant could receive multiple versions of the same document, with only non-substantive differences. A creditor shall furnish to an applicant a copy of any and all appraisals and other written valuations developed in connection with the applicant's application for a loan that is or would be secured by a first lien on a dwelling. While copies of appraisals are routinely provided in first lien transactions that are consummated, it is unclear that copies of other types of valuations are provided. the official SGML-based PDF version on govinfo.gov, those relying on it for [95] This time period allows lenders to align ECOA appraisal disclosures with TILA-RESPA early disclosures in transactions that are covered by TILA and RESPA. The copies required by 1002.14(a)(1) may be provided to the applicant in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. Form C-9. Section 1405(b) of the Dodd-Frank Act provides that, [n]otwithstanding any other provision of [title XIV of the Dodd-Frank Act], in order to improve consumer awareness and understanding of transactions involving residential mortgage loans through the use of disclosures, the [Bureau] may, by rule, exempt from or modify disclosure requirements, in whole or in part, for any class of residential mortgage loans if the [Bureau] determines that such exemption or modification is in the interest of consumers and in the public interest. 15 U.S.C. Nonetheless, as noted above, it is standard industry practice to provide copies of appraisals in first lien transactions that are consummated. Discussion. edition of the Federal Register. The Bureau also proposed a new comment 14(a)(1)-4 that would clarify that waivers under 1002.14(a)(1) are permitted if the applicant makes an affirmative oral or written statement (which can be made by any one applicant in the case of a multiple-applicant transaction) and if the creditor provides the copies of all appraisals and other written valuations at or before consummation. 121. In addition, some commenters suggested that non-appraisal valuations would be difficult for consumers to understand. Finally, as discussed above, several industry commenters requested clarification that preliminary, draft, or other non-final documents be excluded. In the absence of a statutory timeframe applicable to this situation, the Bureau is exercising its authority under ECOA section 703(a) to adopt a reasonable period for providing copies. The number of first lien HELOCs is calculated by multiplying the number of HELOCs for depository institutions (242,710) and non-depository institutions (76,790) by the proportion of HELOCs that are first liens in the 2010 SCF (0.26). Attachments and exhibits. These comments stated, for example, that the mortgage credit industry cannot keep up with the all the regulations being issued under the Dodd-Frank Act and that rules requiring creditors to provide copies of appraisals are already in place. Other laws also may limit the ability to recover these fees, as indicated by the phrase unless otherwise provided by law in 1002.14(a)(3).[65]. The creditor has not provided the copy of the appraisal promptly upon completion. However, applicants who waive the timing requirement must be given a copy of all appraisals and other written valuations at or prior to consummation or account opening, or, if the transaction is not consummated or the account is not opened, no later than 30 days after the creditor determines the transaction will not be consummated or the account will not be opened. [FR Doc. In addition, many commenters also acknowledged the advantages of implementing multiple revisions to the regulations in a coordinated fashion. This approach is consistent with the 2013 Interagency Appraisals Final Rule being adopted under section 129H of TILA. Several commenters in the manufactured housing industry also requested that the definition of dwelling exclude residential structures that are not attached to the real property, such as recreational vehicles and house boats, as well as manufactured homes when titled as chattel. The Bureau does not believe that Congress intended these phrases to have different meanings. documents in the last year, 32 601(4). Unlike the prior provisions of section 701(e), section 701(e) as amended requires creditors to provide copies of all valuations, and not only appraisals; section 701(e) also requires that creditors provide these copies automatically, rather than allowing them to be provided upon request. See 12 CFR 1026.42(c)(3) (describing permitted actions that do not conflict with appraisal independence standards in 1026.42(a)-(b)). The Bureau believes that the list of materials that must be provided will be easier for creditors to understand if it refers simply to the reports themselves. The commenter therefore has not articulated a basis for treating copies of appraisals and other written valuations as falling outside the scope of Section 101(c). It does not specify the content of valuations or otherwise supply standards regarding what they should contain. The Senate Report stated as follows: Regulations by the National Credit Union Administration (NCUA) currently require credit unions to make appraisals available without regard to who has paid for the appraisal;[] test[sic] this legislation is not intended to modify those NCUA regulations. Rec. While this change was not proposed in the proposal, this revision is necessary to maintain the consistency of cross-references in Regulation B and its existing approach to electronic disclosure of the consumer notice required under 1002.14. One of the commenters argued that the Bureau should maintain the Start Printed Page 7235exemption in order to allow the NCUA to amend its regulations to conform to section 701(e) of ECOA. The final rule adopts the language in 1002.14(a)(1) discussed above as proposed, with a minor clarification. The copy must be provided promptly upon completion, and in no case later than three days prior to closing of the loan, whether the creditor grants or denies the applicant's request for credit or the application is incomplete or withdrawn. With respect to the example raised by a creditor and two national creditor associationsthree four-unit buildings operated as a 12-unit apartment complex, the text of the rule makes clear that a four-unit residential building would be a dwelling, but a 12-unit apartment complex is not. [2] ] 12 U.S.C. documents in the last year, 19 We will promptly give you a copy of any appraisal, even if your loan does not close. Upon further consideration, and in light of the public comments received, the Bureau believes that a time period of 30 days of receipt may not result in promptly providing copies to applicants in many instances. 1. The final rule also retains the language from the proposed ruledeveloped in connection with an application for creditfor determining which appraisals and other written valuations must be disclosed. This revision also should help to clarify the type of GSE automated tools whose output would be considered valuations. 113. Collectively, these proposed and final rules are referred to as the Title XIV Rulemakings. Further, appraisals are considered to be of inadequate quality 10 percent of the time, necessitating a second appraisal. Creditors also must provide applicants, at the time of the initial mortgage application, a statement that any appraisal prepared for the mortgage is for the creditor's sole use and that the consumer may choose to have a separate appraisal conducted at his or her own expense. The definition of dwelling in Regulation B, 1002.14(c), currently includes a residential structure whether or not * * * attached to real property, and lists as an example a mobile or other manufactured home. Industry commenters reported that a significant number of consumers in the United States reside in manufactured homes. 7001(c)(1). The regressions are run separately for each category of depository institution. 31. ECOA[1] As a result of this change, the third proposed exampleinternal review documents reflecting the creditor valuationwas removed as largely duplicative. 46. Accordingly, the Bureau proposed to revise 1002.14(a)(1) in two important ways: to specify the types of materials that must be provided to consumers (i.e., copies of appraisals and other written valuations developed in connection with the application), and to specify the types of transactions for which these copies must be provided (i.e., applications for credit to be secured by a first lien on a dwelling). iv. 01/28/2013 at 4:15 pm. At the same time, Congress imposed new statutory requirements governing mortgage practices with the intent to restrict the practices that Start Printed Page 7217contributed to the crisis and to provide additional protections to consumers. The Consumer Financial Protection Act is substantially codified at 12 U.S.C. For the reasons discussed below, the Bureau is revising this language to provide a simpler rule: The copy must be provided promptly upon completion of the appraisal or other written valuation, or three business days before consummation (for closed-end credit) or account opening (for open-end credit), whichever is earlier. [123] See 77 FR 54722 (Sept. 5, 2012). While a large internet lender specifically agreed with the proposed prohibition, a few lending institutions objected to the proposed prohibition on the grounds that it would force them to absorb additional costs. An appraisal industry group also noted that the sixth proposed valuation examplebroker price opinionshould clarify that they would not necessarily be permitted to be used in the credit transaction. 4. Multiple applicants. For purposes of 1002.14, an appraisal or other written valuation includes, without limitation, an appraisal or other valuation received or developed by the creditor in paper form (hard copy); electronically, such as CD or email; or by any other similar media. Accordingly, the Bureau proposed to remove current 1002.14(a)(1) and (2), which permitted creditors to choose between the routine delivery and delivery upon request methods of complying with the requirements of 1002.14. The intent to proceed standard governs whether fees can be charged to applicants under Regulation X, which implements RESPA, and not when applicants have a protected interest against discrimination under ECOA. 111. Completion occurs when the last version is received by the creditor, or when the creditor has reviewed and accepted the appraisal or other written valuation to include any changes or corrections required, whichever is later. This feature is not available for this document. Many commenters offered general support for the proposed rule, with some Start Printed Page 7221comments, for example by a large trade association for real estate brokers and agents, offering strong support for its potential to educate and inform consumers about appraisals and other valuations and their role in the real estate transaction. Under the final rule, these transactions would not be subject to 1002.14 and creditors in these transactions would not otherwise be required to provide copies of appraisals if the transaction is not a higher-priced-mortgage that is a closed-end transaction subject to the requirements of TILA section 129H and its implementing regulations in the 2013 Interagency Appraisals Final Rule. In the absence of regulatory action to harmonize the two provisions, creditors would be required to provide two appraisal-related disclosures to consumers for certain loans (i.e., a TILA and an ECOA disclosure for higher-risk mortgage loans secured by a first lien on a consumer's principal dwelling) and just one for certain others (i.e., an ECOA disclosure for first-lien, dwelling-secured loans that are not higher-risk mortgage loans, or a TILA disclosure for higher-risk mortgage loans secured by a subordinate lien). State law governs. 65. In the context of interpreting the requirement of Regulation B that there be a notice of an adverse action on an application, for example, the Federal Reserve Board Consumer Affairs Letter CA 09-13 (Dec. 4, 2009), noted that loan modifications can involve an application for an extension of credit within the meaning of Regulation B. (4) Withdrawn, denied, or incomplete applications. The Bureau's 2012 ECOA Proposal on Providing Copies of Appraisals and Other Written Valuations, Coordinated Implementation of Title XIV Rulemakings, Section 1002.14Rules on Providing Copies of Appraisals and Other Written Valuations, 4(d) General Rules on Providing Disclosure in Electronic Form, 14(a) Providing Copies of Appraisals and Other Written Valuations, Delivery of Copies of Appraisals and Other Written Valuations, 14(a)(4) Withdrawn, Denied, or Incomplete Applications, VII. Section 701(e)(4) provides, however, that creditors shall provide a free copy of each appraisal or other written valuation at no additional cost to the applicant. This change is made based upon the same exercise of the exception authority used to develop form C-9, discussed above. The final rule also requires creditors to notify applicants in writing of the right to receive a copy of each written appraisal at no additional cost. Under the final rule, however, even if the waiver is obtained, creditors are still required to provide the required copies at or before consummation or account opening. amended ECOA section 701(e) to require that creditors provide copies of all appraisals and other written valuations to loan applicants, in credit transactions to be secured by a first lien on a dwelling, at no additional cost and without requiring applicants to request such copies affirmatively. Calculations from the Experian Oliver-Wyman analysis of credit bureau data in the Q3 2012 Market Intelligence Reports[98] Section 1002.14(a)(3) does not, however, legally obligate the applicant to pay such fees. The Board's 1993 Final Rule on Providing Appraisal Reports (1993 Final Rule) provided in 1002.14(b) that credit unions were exempt from the requirements in 1002.14(a) to provide copies of appraisals upon request, if not provided routinely. If not otherwise provided under other applicable disclosure requirements, creditors may design their own form, add to, or modify the model form to reflect their individual policies and procedures. Valuations lists that are publically available (such as published sales prices or mortgage amounts, tax assessments, and retail price ranges) and valuations such as manufacturers' invoices for mobile homes. The Bureau believes that there are multiple reasonable approaches for conducting the consideration called for by section 1022(b)(2)(A) and that the approach it has taken in this analysis is reasonable and that, particularly in light of the difficulties of reliably estimating certain benefits and costs, it has discretion to decline to undertake additional or different forms of analysis. Reasonable fee for reimbursement. Such information could detract from consumer comprehension of the disclosure, and in any event is not required by ECOA section 701(e). The Bureau considered comments seeking clarification that the final rule does not require lenders to conduct appraisals or other written valuations. Based upon the foregoing assumptions and estimates, costs from the final ruleincluding one-time costs and one year of annualized costsare estimated to be approximately $39 million, or approximately $5.05 for each loan originated. Thus amended section 701(e) guarantees that applicants will receive copies of valuations that are performed, including non-appraisal valuations, and regardless of whether applicants specifically request the copies. In addition, neither section 1474 of the Dodd-Frank Act nor its legislative history refers to an exception for credit unions subject to, and complying with, the provisions of the NCUA regulations relating to making appraisals available upon request. Sections 1011 and 1021 of title X of the Dodd-Frank Act, the Consumer Financial Protection Act, Public Law 111-203, sections 1001-1100H, codified at 12 U.S.C. One commenter also requested that disclosure required under section 14(a)(2) inform the consumer of the ability of the creditor to withhold these copies. Accordingly, the Bureau is setting earlier effective dates for those final rules or certain aspects thereof, as applicable. Industry commenters asked the Bureau to clarify several aspects of the definition of dwelling. For example, several commenters asked the Bureau to clarify in the final rule whether the definition of dwelling refers only to an owner-occupied dwelling, or to any residential Start Printed Page 7236dwelling regardless of the applicant's residence in the building. 1639h(b)(2)(B). A value developed pursuant to a methodology or mechanism required by a government sponsored enterprise, including written comments and other documents submitted to the creditor in support of the estimate of the property's value. Because the final rule, which largely codifies existing practice relating to appraisals, is limited to relatively low-cost clerical tasks and does not require the creditor to obtain any additional goods or services, the final rule is not likely to have an appreciable impact on the cost of credit for consumers or on loan volumes. Gp., Inc., Know Before You Owe: Evolution of the Integrated TILA-RESPA Disclosures 254-256 (July 9, 2012), available at http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf. If the waiver resulted in Start Printed Page 7227an applicant not receiving an appraisal or other written valuation at all or until after consummation or account opening, a more prescriptive approach might be warranted. Robert B. Avery et al., The Mortgage Market in 2011: Highlights from the Data Reported under the Home Mortgage Disclosure Act, 98 Fed. 5481-5603. Under the final rule, creditors will be required to provide applicants with copies of these documents, such as appraisals developed in transactions that are not consummated or where the account is not opened, and non-appraisal valuations developed for first lien transactions (including both the estimated 10 percent of first lien transactions that involve a valuation other than an appraisal, as well as a portion of the other 90 percent of first lien transactions where a valuation is obtained in addition to an appraisal). Thus, many costs and benefits of the final rule considered below would arise largely or entirely from the statute, not from the final rule. Accordingly, the Bureau has addressed the basis for the commenter's concern over a potential for a higher cost. In addition, an industry commenter requested clarification on whether the rule applies to an annual renewal clause under which a creditor makes a unilateral decision each year whether or not to renew a line of credit. 103. We may order an appraisal to determine the property's value and charge you for this appraisal. Of the roughly 17,462 depository institutions, credit unions, and IMBs, 12,568 are below the relevant small entity thresholds. TILA specifically defines its rescission right as arising following the consummation of the transaction, 15 U.S.C. In addition, the costs of the final rule may be indirectly passed on to consumers through very small increases in the cost of credit, largely associated with the costs of mailing copies to consumers who have not consented to receive them electronically under the E-Sign Act. The Bureau's information collection requirements contained in this final rule, and identified as such, have been submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. i. the Bureau assumes that one appraisal or other written valuation beyond what is current standard practice will be provided.[111]. The final rule also does not adopt other changes industry commenters suggested for the sample consumer disclosure, as consumer testing did not suggest these changes are necessary. For additional legislative history on the appraisal provision as originally added by the FDICIA, see S. Rept.167, 102nd Cong. This final rule contains revised information collection requirements that have not been approved by the OMB and, therefore, are not effective until OMB approval is obtained. Although the Bureau has not received comments from consumers on the proposed rule indicating any concerns, the Bureau believes that some consumers may not be interested in receiving copies of appraisals or other written valuations. Only official editions of the This revision also is intended to focus this example on GSE valuation methods, and to distinguish this example from appraisals and other written valuations prepared by other third parties. of the issuing agency. Section 1002.14(a)(3) does not prohibit a creditor from imposing a reasonable fee to reimburse the creditor's costs of the appraisal or other written valuation, so long as the fee is not increased to cover the costs of providing copies of such appraisals or other written valuations under 1002.14(a)(1). Discussion. Finally, one commenter suggested the definition of dwelling be harmonized with the definition in Regulation C promulgated under the Home Mortgage Disclosure Act (HMDA), which is not limited to one-to-four-family structures, while another commenter suggested the definition be limited to single-family housing. One industry commenter suggested, however, that the 30-day limit should apply in the case of an incomplete application. The Bureau has considered the observations from manufactured housing industry commenters that data from the manufacturers' invoice for manufactured homes is sometimes included as a factor in the lender's calculation of the loan amount or maximum loan amount. eds., Univ. 45. There may be a small additional burden for privately insured credit unions estimated to originate mortgages. An organization advocating for affordable housing suggested a deadline of three days after the creditor's approval, while a real estate agent trade association suggested 10 days after receipt, and an appraisal group suggested 20 days after receipt. Several lending and appraisal industry groups commented on the fifth proposed valuation examplevaluations developed by AVMs. 1. In addition, a significant part of the annualized costs is attributable to the minority of institutions that are assumed not to provide copies electronically. Where possible, the Bureau has made quantitative estimates based on these principles and the data that are available; these estimates are primarily with regard to the costs of the rule. In considering the relevant potential benefits, costs, and impacts, the Bureau has utilized the available data discussed in this preamble, where the Bureau has found it informative, and applied its knowledge and expertise concerning consumer financial markets, potential business and consumer choices, and economic analyses that it regards as most reliable and helpful, to consider the relevant potential benefits and costs, and relevant impacts. This practice also aligns with pre-existing requirements of certain GSEs to provide copies of appraisals promptly and no later than three business days before closing, as discussed in the section-by-section analysis above. Note that costs per-loan differ by institution class because the number of loans nd loan officers per-institution differ across institution classes. 1602(cc), generally defines residential mortgage loan as any consumer credit transaction that is secured by a mortgage on a dwelling or on residential real property that includes a dwelling other than an open-end credit plan or an extension of credit secured by a consumer's interest in a timeshare plan. These methods may not lead a consumer to an accurate valuation of a property. (2) Disclosure. The Bureau further proposed timing requirements for providing such copies and standards governing any waiver of the timing requirements. Section 1474 of the Dodd-Frank Act replaces the existing section 701(e) with a new provision that imposed several new requirements concerning appraisals as well as other valuations, as described below. Some commenters also noted this language could result in burdensome disclosures to consumers who would be confused by voluminous information including background materials. The Bureau has discretion in any rulemaking to choose an appropriate scope of analysis with respect to potential benefits and costs and an appropriate baseline. The list of examples that do not qualify as valuations, finalized in comment 14(b)(3)-3, is revised to refer to a manufacturer's invoice for a manufactured home instead of a mobile home, consistent with the comment indicating that the term Start Printed Page 7240manufactured home is current industry usage. [118] Comment 14(a)-1 is revised to clarify that the waiver must be provided by the primary applicant where one is readily apparent. Potential Reduction in Access by Consumers to Consumer Financial Products or Services, C. Impact of the Final Rule on Depository Institutions and Credit Unions With $10 Billion or Less in Total Assets, as Described in Section 1026 of the Dodd-Frank Act, and the Impact of the Final Rule on Consumers in Rural Areas, C. Summary of Estimated Burden for Bureau Respondents, PART 1002EQUAL CREDIT OPPORTUNITY ACT (REGULATION B), Appendix C to Part 1002Sample Notification Forms, Form C-9Sample Disclosure of Right To Receive a Copy of Appraisals, Supplement I To Part 1002Official Interpretations, Section 1002.14Rules on Providing Appraisals and Valuations, https://www.federalregister.gov/d/2013-01384, MODS: Government Publishing Office metadata, http://www.consumerfinance.gov/regulations/, http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf, http://www.consumerfinance.gov/knowbeforeyouowe, http://www.federalreserve.gov/boarddocs/caletters/2009/0913/caltr0913.htm, https://www.fanniemae.com/content/fact_sheet/air.pdf, http://www.fhfa.gov/webfiles/2302/HVCCFinalCODE122308.pdf, https://www.fanniemae.com/content/faq/appraiser-independence-requirements-faqs.pdf, http://www.freddiemac.com/singlefamily/appraiser_independence_faq.html#52, http://consumerfinance.gov/regulations/, http://www.hud.gov/pub/chums/f17fvc/hecm.cfm. In addition, the final rule requires that copies of other written valuations be provided to the applicant, and that copies of written appraisals be sent in the event that an application is received but does not result in a loan being originated. 9. See 12 CFR 701.31(c)(5), which currently provides: Each Federal credit union shall make available, to any requesting member/applicant, a copy of the appraisal used in connection with that member's real estate-related loan application. The exception under 1002.4(d)(2) would not be triggered by a Loan Estimate disclosed after the application, rather than accompanying the application. 79. %%EOF 67. iii. The final rule would provide substantial benefits compared to allowing the amendment to ECOA section 701(e) to take effect alone.
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