VIDEO: When must a borrower receive the appraisal?
In this Compliance Clip (video), Adam breaks down the requirements in Regulation B as to when a borrower must get a copy of the appraisal used in their loan. Not only is the timeframe for delivering the appraisal discussed, Adam also covers when the appraisal delivery requirements of Regulation B apply.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to answer the question: When must a borrower receive a copy of the appraisal?
The answer, of course, to this question comes from Regulation B and, specifically, it comes from Section 1002.14, which is the section of Regulation B that covers these rules. What 1002.14 says is a number of things. It starts out by saying this, “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.” So, first of all, this answers the question of when do the appraisal delivery rules apply? Well, the answer is when you have an application that is going to be secured by a first lien on a dwelling. That does not mean a consumer loan, that does not mean a commercial loan, it could be both. It means when you have an application that's going to be secured by a first lien on a dwelling. This could be a HELOC, this could be a commercial loan, or it could be a residential mortgage. Whenever there's a first lien on dwelling. So that's when it applies.
As far as the timing, 1002.14 also tells us this, “A creditor shall provide a copy of each appraisal or written valuation promptly upon completion, or three business days prior to consummation of the transaction, for closing credit or account opening for opening credit, whichever is earlier.” It's a little bit confusing because it says promptly upon completion or three business days prior to consummation or account opening. Now, what does it mean to act promptly, to be delivered promptly upon completion? The commentary to Regulation B tells us the 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. So, either when you get the last version with the final corrections or when the appraisal is reviewed by your appraisal review process, whether it's an underwriter or an appraisal reviewer, whatever that process is, once it's reviewed, that's when completion occurs. So then you have to deliver it promptly upon completion. I didn't put it on this slide but the commentary gives some examples of what promptly upon completion is, and they explain that delivering the appraisal a week later is prompt. So I would do it within a week's period of time because the other examples they give are waiting maybe 30 days or 25 days, 20 days, seem to be not promptly. Examples of the commentaries say within a week, and I would stick to that. So it's within a week of affirming the final appraisal. That's really what we're talking about here.
1002.14 goes on and also says that an applicant may waive the timing requirement in this paragraph and agree to receive a copy at or before consummation or account opening, except where otherwise prohibited by law. Any such waiver must be obtained at least three business days prior to consummation or account opening, unless the waiver pertains solely to the applicant's receipt of a copy of an appraisal or other written valuation that contains only clerical changes from a previous version of the appraisal or written valuation provided to the applicant three or more business days prior to consummation or account opening. There's a mouthful there, but the bottom line is there is a waiver option.
All of these, let's try to put this in layman's terms. Basically, what the rule says is if an application is to be secured by a first lien on a dwelling, a creditor must provide a copy of the appraisal, either one of two things. Number one, at the earlier of promptly upon completion, we talked about promptly upon completion being the final version of the appraisal within a week period of time or so, or three business days prior to consummation of the transaction for closing credit or account opening for opening credit. That's your first option. The second option is if you have a waiver, the appraisal must be delivered at, or before consummation or account opening, when you have the waiver obtained in accordance to Regulation B. So you have to make sure you comply with Regulation B if you're obtaining a waiver. That is when the appraisal must be delivered to an applicant under Regulation B.
That's all I have for you for this Compliance Clip.