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Thursday, January 9, 2014

Provision of Appraisals under ECOA Valuation Rule

QUESTION: 
Under the new appraisal rules, when must the appraisal be provided to the residential mortgage loan applicant? Also, must all versions of the appraisal be provided or just the last or “final” version? 

ANSWER: 
With respect to loan applications received on or after January 18, 2014, under the ECOA Valuation Rule, a creditor must provide an applicant with a copy of the appraisal and other written valuations “upon completion, or three business days prior to consummation of the transaction, whichever is earlier”. [12 CFR 1002.14(a)] 

“Completion” of an appraisal or written valuation occurs when the creditor receives the last version of the appraisal or when it is apparent that there will only be one version of the appraisal.

The creditor does not need to give the applicant copies of all versions of the appraisal or written valuation; only a copy of the latest version must be provided. However, if the applicant is given a copy of an appraisal or written valuation which is then revised, a copy of the updated version must be sent to the applicant. [Supplement 1 to Part 1002 - Official Interpretations, Comment 14(a)(1)] The appraisal or written valuation must automatically be provided, regardless if credit is extended, denied, incomplete or withdrawn.

Note that in order to avoid a last minute delay of closing, if there is a clerical error in the appraisal or valuation already provided to the applicant, the creditor can have the applicant waive the right to receive the revision three business days prior to consummation of the transaction. Such waiver may be oral or written.  However, in order to use this exemption, all of the following criteria must be met:
  1. The revision must be solely to correct clerical errors in the appraisal;
  2. The revisions must have no impact on the estimated value;
  3. The revisions must have no impact on the calculation or methodology used to derive the estimate;
  4. The applicant must receive the revised appraisal or valuation at or prior to the closing;
  5. The applicant must have already received the appraisal or valuation being corrected either promptly upon completion or three business days prior to consummation of the transaction. [12 CFR 1002.14(a)(1)]
Joyce Pollison
Director/Legal and Regulatory Compliance
Lenders Compliance Group