CFPB’s New Rule on Real Estate Appraisals and Other Written Valuations under the Equal Credit Opportunity Act

• When you receive a mortgage loan application, you have three business days to notify the applicant of the right to receive a copy of appraisals and other written valuations.
• You must promptly share copies of appraisals and other written valuations with the applicant.  “Promptly” means upon completion of the application, or at least three business days before consummation (for closed-end credit) or account opening (for open-end credit), whichever is earlier.  
• The applicant can waive the right to receive copies of the appraisal or other written valuations in advance of the closing (except if the transaction involves a higher-priced mortgage loan – see discussion below).  If the applicant waives the right to receive advance copies, you must still deliver the copies at or prior to consummation or account opening.
• If you decide not to consummate the loan or open the account, and the applicant has provided a waiver, you must send the applicant a copy of the appraisal and other written valuations within 30 days after your decision.

What Constitutes an Appraisal or Other Written Valuation?

A “valuation” is any estimate of the value of a dwelling developed in connection with an application for credit.  A nonexclusive list of valuations includes:

• An appraiser’s report, whether or not the appraiser is licensed or certified, including the estimate or opinion of the property’s value
• A document your staff prepares that assigns value to the property
• A report approved by a government-sponsored enterprise for describing to the applicant an estimate developed by the enterprise’s proprietary methodology or mechanism
• Automated valuation model reports used to estimate the property’s value
• A broker price opinion prepared by a real estate broker, agent, or salesperson to estimate the property’s value

You must also share with the applicant any attachments or exhibits that are an integrated part of the valuation.  If a valuation is developed in connection with the application, you must provide a copy to the applicant, even if you do not use the valuation or you use it only for a limited purpose.

Not all documents that discuss or restate a property’s value are valuations.  Documents that discuss property value but are not valuations for purposes of the rule include:

• Internal documents that merely restate the estimated value of the dwelling contained in an appraisal or other written valuation you are providing to the applicant
• Government agency statements of appraised value that are publicly available
• Publicly available lists of valuations such as published sales prices or mortgage amounts, tax assessments, and retail price ranges
• Manufacturers’ invoices for manufactured homes
• Reports reflecting property inspections that do not provide an estimate or opinion of the value of the property and are not used to develop an estimate or opinion of the value of the property

How Do I Comply with the Rule?

To comply with the ECOA Valuations Rule:

• You must notify the applicant in writing within three business days of application of the right to receive a copy of any appraisal developed in connection with the application. Appendix C to the rule includes sample text for this disclosure.
• If you have an application that was not originally going to be secured by a first lien on a dwelling and you later determine that it will be secured by a first lien on a dwelling, then you have three business days after you determine the change has occurred to notify the applicant about the right to receive appraisals. 
• When processing an application for a closed-end loan, you must deliver copies of appraisals and other written valuations “promptly upon completion,” or three business days before consummation, whichever is earlier. 
• When processing an application for an open-end loan, you must deliver copies of appraisals and other written valuations “promptly upon completion,” or three business days before account opening, whichever is earlier. 
• You cannot charge the applicant for fees for photocopying or to cover the cost of postage to mail copies of appraisals or other written valuations you provide.  However, you can charge a reasonable fee to reimburse the cost of developing an appraisal or other written valuation, unless applicable federal⁵  or state law prohibits or otherwise restricts it.  You cannot condition providing copies on payment of this fee.
• For applicants who waive the right to receive the required copies at least three business days before consummation or account opening, you must provide the copies either at, or prior to, consummation or account opening.

When and How Do I Deliver Valuation Copies to Applicants?

You must send valuations promptly upon completion.  The “promptly upon completion” standard involves when you receive the appraisal or other written valuation and the extent of any review or revisions you complete after receiving it.  “Completion” of an appraisal or other written valuation occurs when you get the last version of that appraisal or other written valuation, or when it is apparent to you that there will be only one version of that appraisal or other written valuation.

Appendix C provides examples where the “promptly upon completion” standard would be satisfied.

If you determine that you are not going to close a loan or open a credit line, you still have to give the applicant a copy of the appraisal and other written valuations promptly upon completion.  If the applicant has waived that deadline, you must provide copies of the appraisal and other written valuations to the applicant 30 days after you determine the transaction will not close.

You should send the copies to the applicant’s last-known physical or electronic address.  Delivery is assumed to occur three business days after mailing or transmitting the copies, or whenever you have evidence indicating that the applicant received the copies. 

If there is more than one applicant, you may give the disclosure and copies to only one applicant.  However, if it is readily apparent that one of the applicants is the primary applicant, the disclosure and copies should be given to that applicant.

If you get multiple versions of an appraisal or other written valuation, you have to give the applicant only the latest version.  If you give the applicant a copy of an appraisal or other written valuation, and then you get a revised version of the same appraisal or written valuation, you must send the updated version to the applicant as well.  You cannot charge a fee for providing the copy of an updated valuation.

An applicant may waive, in writing or orally, the timing requirements of the ECOA Valuations Rule and agree to receive copies of valuations at or before loan consummation or account opening.  The waiver must take place at least three business days prior to consummation or account opening.  If the transaction is a higher-priced mortgage loan covered by the 2013 Interagency Higher-Priced Mortgage Loans Appraisal Rule (HPML Appraisal Rule), there is no waiver option and you must provide copies of written appraisals no later than three business days before consummation.⁶

When a clerical correction is made in an appraisal or other written valuation that you have already given the applicant, to avoid interrupting transactions at the last minute, you can have the applicant waive the right to receive the revision three business days before consummation. This exemption requires that the revisions must be solely to correct clerical errors in the appraisal or other written valuation and must have no impact on the estimated value, or calculation or methodology used to derive the estimate.  In addition, the applicant must have already received the valuation that is being corrected (pre-correction) either promptly upon completion or three business days before consummation, whichever is earlier, and the applicant must receive the revised appraisal or other written valuation at or prior to consummation.

How Does the ECOA Valuation Rule Relate to the HPML Appraisal Rule?

On January 18, 2013, NCUA and five other federal financial institution regulators issued the HPML Appraisal Rule which requires you to obtain appraisals for a subset of loans called Higher-Priced Mortgage Loans (HPMLs); provide free copies of the appraisal; and provide the applicant with a statement that any appraisals prepared for the mortgage loan are for the sole use of the creditor and that the applicant may have a separate appraisal conducted at his or her own expense.⁷  The requirements of the HPML Appraisal Rule are likewise effective on January 18, 2014. 

In addition, the HPML Appraisal Rule requires that you provide the applicant with a disclosure, within three business days of receiving the application for a HPML, indicating that you will provide a copy of any appraisal report. 

For transactions covered by both the ECOA Valuation and HPML Appraisal Rules, you may use the ECOA Valuations Rule disclosure to comply with this notice.  Also, when both rules apply, you should follow the rule that provides the earlier deadline for delivering appraisal copies. 

What Guidance is Available?

The full text of the final rule published in the Federal Register is available at:  http://files.consumerfinance.gov/f/201301_cfpb_final-rule_tila-appraisals-preamble.pdf.

CFPB resources to help you understand the final rule and its implications, information about any subsequent adjustments to the final rule⁸ and compliance materials are available at: http://www.consumerfinance.gov/regulations/disclosure-and-delivery-requirements-for-copies-of-appraisals-and-other-written-valuations-under-the-equal-credit-opportunity-act-regulation-b/.

If you have questions, please contact NCUA’s Office of Consumer Protection (703-518-1140 or OCPMail@NCUA.gov), your regional office, or state supervisory authority.