Bureau of Consumer Financial Protection Final Rule August 26, 2013
Bureau of Consumer Financial Protection Final Rule TABLE OF CONTENTS Summary Analysis of the Final Rule 1 Detailed Analysis of the Final Rule 2 Compliance Implementation Checklist 5 Sample Policy 6 Model Form / Notice Language 8 DISCLAIMER THE INFORMATION PROVIDED IS GENERAL INFORMATION AND IS NOT TO BE CONSIDERED LEGAL ADVICE ABOUT THE SUBJECT MATTERS COVERED OR ANY SPECIFIC LEGAL ISSUE. THE ADVICE OF AN ATTORNEY SHOULD BE OBTAINED AS APPROPRIATE TO SPECIFIC ISSUES AND FACTUAL SITUATIONS
Bureau of Consumer Financial Protection Final Rule Effective Date: January 18, 2014 12 C.F.R. 1002.14 78 F.R. 7216 (January 31, 2013) The Consumer Financial Protection Bureau (CFPB) is amending Regulation B, which implements the with amendments concerning appraisals and other valuations. In general, the rule requires credit unions to notify applicants in writing that copies of appraisals will be provided promptly, and to provide a free copy of all appraisals and other written valuations developed in connection with an application for a first lien on a dwelling. ECOA applies to consumer credit as well as to business and commercial credit except as provided in Regulation B 1002.3(a)-(d) Dwelling The term DWELLING means a residential structure that contains one to four units whether or not that structure is attached to real property. Valuation VALUATION means any estimate of value of a dwelling developed in connection with an application for credit. CFPB Final Rule- ECOA Valuations Page 1
Bureau of Consumer Financial Protection Final Rule Effective Date: January 18, 2014 12 C.F.R. 1002.14 78 F.R. 7216 (January 31, 2013) I. Definitions a. CONSUMATION means the time that the member becomes contractually obligated on a closed-end credit transaction, or in which the account is being opened for open-end credit. b. 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, a mobile home or other manufactured home. Motor vehicle is not included in this definition. c. VALUATION means any estimate of value of a dwelling developed in connection with an application for credit. i. Valuation examples include (this is not an all-inclusive list) 1. Report of appraiser s estimate/opinion of property value (whether or not appraiser is licensed or certified) 2. Document prepared by credit union staff that assigns property value 3. Report approved by a government-sponsored enterprise that describes the estimate of the property value developed pursuant to the proprietary methodology of the government-sponsored enterprise 4. Report generated by an automated valuation model (AVM) to estimate property value 5. Broker price opinion prepared by a real estate broker, agent, or sales staff that estimates the property value ii. Valuation examples not included (this is not an all-inclusive list) 1. Internal documents that merely restate the estimated value of the property 2. Government agency statements of property value that are publically available 3. Publically available lists of property valuations (such as sales prices, tax assessments, or retail price ranges) 4. Manufacturers invoices for manufactured homes 5. Inspection reports that do not provide an estimate/opinion of property value CFPB Final Rule- ECOA Valuations Page 2
II. Early disclosure appraisal-related notice. The credit union must provide the following appraisal-related notice for all applications to be secured by a first lien on a dwelling: We may order an appraisal to determine the property s value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost. a. Timing of appraisal-related notice i. At the time of the application for a first lien on a dwelling ii. Delivered or mailed not later than the third business day after receipt of application for a first lien on a dwelling iii. If an application is not a first lien on a dwelling when the application is received, but later becomes a request for a first lien on a dwelling subject to the appraisal-related notice, the disclosure shall be delivered or mailed not later than the third business day after the credit union determines the application is for a first lien on a dwelling. b. Delivery of appraisal-related notice i. If there are multiple applicants, the credit union must give notice to at least one of the applicants. If there is a readily apparent primary applicant, notice must be given to the primary applicant. ii. Electronic delivery is permissible if the credit union appropriately administers Electronic Signatures in Global and National Commerce Act (E-Sign Act). III. Copy of appraisal and other written valuations. a. The credit union must promptly provide to the borrower a i. Free copy of any appraisal or other written valuation A credit union may charge a reasonable fee to recover actual costs of obtaining an appraisal or other written valuation, but is prohibited from charging a fee for any copy or delivery of the appraisal or other written valuation ii. Developed in connection with an application for credit to be secured by a first lien on a dwelling iii. Whether or not the credit union closes the loan b. Timing of each written appraisal or other valuation is: i. Promptly upon completion Completion is deemed to have occurred when the last version is received by the credit union, or when the credit union has reviewed and accepted the appraisal or other written valuation, whichever is last. OR ii. Three business days prior to consummation of the transaction, CFPB Final Rule- ECOA Valuations Page 3
whichever is earlier iii. In the case of a loan not closing, not later than 30 days after the credit union determines the loan will not be consummated c. Waiver of timing of each written appraisal or other valuation Applicants may waive the timing requirements established for receiving a copy of an appraisal or other written valuation, except where otherwise prohibited by law, IF i. The credit union provides copies of any appraisals and other written valuations at or before consummation or account opening AND ii. The waiver is received no later than three days prior to consummation or account opening with an affirmative oral or written statement iii. From at least one of the applicants AND iv. If there are multiple applicants with one as the readily apparent primary applicant, the credit union must receive the waiver statement from the readily apparent primary applicant. d. Delivery of appraisal or other written valuation i. If there are multiple applicants, the credit union must give a copy of the appraisal to at least one of the applicants. If there is a readily apparent primary applicant, notice must be given to the primary applicant. ii. Any attachment or exhibit that is an integrated part of the valuation must be included with the delivery of any appraisal or other written valuation iii. Electronic delivery is permissible if the credit union appropriately administers Electronic Signatures in Global and National Commerce Act (E-Sign Act). IV. Renewal of existing credit. This ECOA must be followed IF a. The applicant requests a renewal of existing credit secured by a first lien on a dwelling AND b. The credit union develops a new appraisal or other written valuation CFPB Final Rule- ECOA Valuations Page 4
Bureau of Consumer Financial Protection Final Rule Effective Date: January 18, 2014 12 C.F.R. 1002.14 78 F.R. 7216 (January 31, 2013) Establish the credit union s process for delivering the early disclosure notification, including o procedures for determining if a primary applicant is readily apparent o that the early disclosure will be delivered to all applicants o Special note: If the 2012 TILA-RESPA Proposal becomes final as proposed, this ECOA Appraisal early notification may be satisfied by using the appropriate language in the Loan Estimate. Until that time, a separate disclosure must be provided. Evaluate the credit union s other written valuation methods used, so that appropriate delivery can be established Determine the credit union s process for delivering appraisals and other written valuations, including o procedures for determining if a primary applicant is readily apparent o that all appraisals and other written valuations will be delivered to all applicants Create a review system to ensure appraisals and other written valuations are delivered appropriately o As prescribed in policy o To the appropriate applicant (or apparent primary applicant) AND o Promptly upon completion o At least three business days prior to consummation CFPB Final Rule- ECOA Valuations Page 5
Sample Policy for the Bureau of Consumer Financial Protection Final Rule Effective Date: January 18, 2014 12 C.F.R. 1002.14 78 F.R. 7216 (January 31, 2013) APPRAISAL and VALUATION POLICY Regulation B Dwelling: 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 home or other manufactured home. It includes credit that is used for a business or a consumer purpose. Notice to Members XYZ Credit Union will mail or deliver to [all applicants] / [readily apparent primary applicant] not later than the third business day after we receive an application for credit that is to be secured by a first lien on a dwelling, a notice in writing of the member s right to receive a copy of all written appraisals developed in connection with the application. If at the time of application, the loan is not to be secured by a first lien on a dwelling and it is later determined the credit will be secured by a first lien on a dwelling, we will mail or deliver the required notice in writing to [all applicants] / [readily apparent primary applicant]. This notice will be mailed or delivered not later than the third business day after we determine the loan is to be secured by a first lien on a dwelling. The notice may be provided to the member 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). Copy of Appraisals to Members XYZ Credit Union will provide [all applicants] / [readily apparent primary applicant] a copy of all appraisals and other written valuations developed in connection with the member s application for credit that is to be secured by a first lien on a dwelling. This applies to applications that were approved, denied, incomplete and withdrawn. Once the appraisal or valuation is completed and reviewed by the credit union it will be promptly provided to the member. If the member has waived this timing requirement, we will deliver the appraisal(s) and other valuation(s) within 3 business days prior to consummation of the CFPB Final Rule- ECOA Valuations Page 6
transaction for closed-end loans or account opening for open end loans. We will not charge the member for providing a copy of the appraisal or other written valuations. We will require the member to reimburse us for the cost of the appraisal or other written valuation as allowed by law. CFPB Final Rule- ECOA Valuations Page 7
Model Forms for the Bureau of Consumer Financial Protection Final Rule Effective Date: January 18, 2014 12 C.F.R. 1002.14 78 F.R. 7216 (January 31, 2013) The credit union must provide the following appraisal-related notifications for applications secured by a first lien on a dwelling. The notice may be provided at the time of application or within three business days after the receipt of a first lien on a dwelling application. We may order an appraisal to determine the property s value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost. CFPB Final Rule- ECOA Valuations Page 8