Appraisal rules in Regulations B and Z were revised effective January 18, 2014. Now that the rules have been in place for a year reports of violations are filtering in from examiners and auditors. The results are as expected - most creditors are complying with the new rules, but some creditors seemed to be a little confused by the requirements. Reported violations generally result from a lack of mastery of the fine details of the requirements.
Some creditors had problems with coverage rules. They comply fully with certain loan types, but fail to comply on other transactions, such as certain business loans secured by a dwelling.
Other violations result from a failure to understand that the requirements apply not only to appraisals, but also to other written valuations. Other written valuations can include an AVM, a broker price opinion or a document prepared by the creditor's staff that assigns value to the property.
Timing requirements for delivering the notice and the copy of the appraisal caused numerous problems. Both regulations require delivery of the notice within three business days after receiving an application. The timing requirements for the copy of the appraisal differ from one regulation to the other. Regulation B requires delivery promptly upon completion or three business days prior to consummation/account opening, whichever is earlier. Regulation Z requires delivery three business days prior to consummation.
Apparently some creditors grant waivers of the delay before closing in cases where waivers are not allowed.
Make sure you have mastered the nuances of these two regulations. Reports from examiners and auditors indicate that a number of creditors are struggling with the requirements. Neither the requirements of Regulation B nor the requirements of Regulation Z are particularly complicated. The complexity arises from the near duplication of requirements from one regulation to the other. If the requirements were exactly the same there would not be an issue. But when the requirements are similar, but not quite the same, confusion reigns.
Upon completion of the program participants understand:
- What transactions are covered by the appraisal requirements in Regulation B and Regulation Z and the differences in coverage between the two regulations;
- What transactions are exempt from coverage;
- The requirement to provide a disclosure of the right to receive a copy of the appraisal;
- The requirement to provide an appraisal or other written valuation;
- What is or is not considered to be an appraisal or other written valuation;
- The timing requirement for delivering the disclosure and the copy of the appraisal;
- When and how the consumer may waive the delay in closing the transaction;
- When the regulations require an appraisal;
- When the regulations require a second appraisal; and
- When the requirement to get a second appraisal is exempt.
WHO SHOULD ATTEND
The program is designed for compliance officers, management of departments that originate loans secured by a dwelling, auditors and others involved in originating loans secured by a dwelling.
B & Z Appraisal Rules - Getting Them Right
Questions and Answers
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