An industry commenter also was concerned that applicants might think they could order their own appraisals directly from the creditor, because the creditor was providing the disclosure. While one commenter suggested the disclosure could be better timed as part of the application process itself, other commenters said it would be burdensome for lenders to provide the disclosure at that time. Thus the final rule does not generally apply a fixed time of 30 days.[40]. On July 21, 2011, section 1061 of the Dodd-Frank Act transferred to the Bureau all of the consumer financial protection functions previously vested in certain other Federal agencies, including the Board. Amended ECOA section 701(e) generally provides that: Amended ECOA section 701(e)(6) defines the term valuation as including any estimate of the value of a dwelling developed in connection with a creditor's decision to provide credit, including those values developed pursuant to a policy of a government sponsored enterprise or by an automated valuation model, a broker price opinion, or other methodology or mechanism..
The specific reporting requirements depend upon the size of the bank and whether it has any foreign offices. 1639h(d). For purposes of 1002.14(a)(1), the reference to all appraisals and other written valuations does not refer to all versions of the same appraisal or other Start Printed Page 7250valuation. As noted above, section 1400(c) of the Dodd-Frank Act requires that some provisions of the Title XIV Rulemakings take effect no later than one year after the Bureau issues them. from 50 agencies. v. Even if the transaction will not be consummated (for closed-end credit) or the account will not be opened (for open-end credit), the copy must be provided promptly upon completion as provided for in 1002.14(a)(1), unless the applicant has waived that deadline as provided under 1002.14(a)(1), in which case as provided for in 1002.14(a)(1) the copy must be provided to the applicant no later than 30 days after the creditor determines the transaction will not be consummated or the account will not be opened. 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 other written valuation provided to the applicant three or more business days prior to consummation or account opening. The frequency of response is on-occasion. See, e.g., John Beshears et al., The Importance of Default Options for Retirement Savings Outcomes: Evidence from the United States, Social Security Policy in a Changing Environment 169 (Jeffrey Brown et al. ECOA section 701(e)(3) affirms that creditors may require applicants to pay reasonable fees to reimburse the creditor for the cost of the appraisal, except where otherwise required in law. Finally, notwithstanding any other provision of law, no person is required to comply with, or is subject to any penalty for failure to comply with, a collection of information does not display a currently valid OMB control number (44 U.S.C. A large lending institution opposed a per se time limit, such as 30 days, however. Because the final rule, which largely codifies existing practice relating to appraisals, is limited to relatively low-cost clerical tasks and does not require the creditor to obtain any additional goods or services, the final rule is not likely to have an appreciable impact on the cost of credit for consumers or on loan volumes. [FR Doc.
One commenter also suggested the deadline for the disclosure be extended to 10 business days. For example, a lender may obtain a waiver from a borrower through an email, phone call, or some other means, prior to the three-day period, and then have that waiver recorded in writing at the settlement table or at some other time.); see also Freddie Mac, Appraiser Independence Requirements Frequently Asked Questions, Questions 45-46. Section 1002.14 covers applications for credit to be secured by a first lien on a dwelling, as that term is defined in 1002.14(b)(2), whether the credit is for a business purpose (for example, a loan to start a business) or a consumer purpose (for example, a loan to purchase a home). [20] The Bureau is finalizing inclusion of valuations developed by AVMs in the list of examples because they are included in the statutory list of valuation types in section 701(e)(6). 80. 72. These costs are discussed further below. Thus, adopting some of those amendments without also adopting certain other, closely-related provisions would create significant technical issues, e.g., new provisions containing cross-references to other provisions that do not yet exist, which could undermine the ability of creditors and other parties subject to the rules to understand their obligations and implement appropriate systems changes in an integrated and efficient manner. The Bureau, as a matter of discretion, has chosen to describe a broader range of potential effects to inform the rulemaking more fully. For additional legislative history on the appraisal provision as originally added by the FDICIA, see S. Rept.167, 102nd Cong. 1.
The Bureau is not at this time finalizing proposals concerning various disclosure requirements that were added by title XIV of the Dodd-Frank Act, integration of mortgage disclosures under TILA and RESPA, or a simpler, more inclusive definition of the finance charge for purposes of disclosures for closed-end mortgage transactions under Regulation Z. In contrast, the Bureau received some industry comments indicating that implementing so many new requirements at the same time would create a significant cumulative burden for creditors. The final rule does not adopt special or different requirements, and therefore uniformly uses the term credit..
To the extent that an appraisal or other written valuation is developed in connection with an application received before January 18, 2014, it would not be subject to the final rule. Given that the ECOA and TILA disclosures were both created by the same legislation (the Dodd-Frank Act) to address overlapping subject matter (provision of copies of appraisals) in many of the same transactions (first liens secured by dwellings), the Bureau believes that Congress did not intend the disclosure requirements to be implemented in a disjointed manner that might cause consumer confusion and compliance burden for creditors. The affordable housing advocacy group commenter generally supported the proposal and suggested changes to strengthen consumer protections. 1635(a), such that the existence of a rescission period after consummation under TILA would not affect the pre-consummation timing standards in this final rule. Creditors also could charge for valuationsthough this is not a consequence of the rule because creditors could charge for valuations now. See 12 CFR 701.31(c)(5), which currently provides: Each Federal credit union shall make available, to any requesting member/applicant, a copy of the appraisal used in connection with that member's real estate-related loan application. 45. 65. Attachments and exhibits.
See Fannie Mae, Appraiser Independence Requirements Frequently Asked Questions (Nov. 2010) (question 45 stating that Fannie Mae does not specify what form the waiver must take or whether it be oral or written. Some commenters addressed certain aspects of the timing requirement, including the waiver provision. other structures such as boats and recreational vehicles are not enumerated as examples. eds., Univ. Some of these commenters raised these concerns over potential liability as part of an overall concern with the potential burden of the regulation, and some urged the Bureau to include provisions in the final rule protecting creditors and preparers of appraisals and other valuations against liability. In addition, as part of the rulemaking process for this rule, as described in the proposal, 77 FR 53090, at 50400 n.39, 50402 n.48 (Aug. 21, 2012), the Bureau considered information obtained during pre-proposal outreach to industry regarding its practices in providing copies of written appraisals to applicants. Similarly, the Dodd-Frank Act amendment of section 701(e)(1) also requires that the creditor provide applicants with copies of appraisals and other valuations promptly upon their completion, even if the application is incomplete, withdrawn, or denied. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation. Comment 14(a)(1)-4.v clarifies that in the absence of a waiver (see discussion below), the promptly upon completion requirement governs even if no consummation or account opening occurs. (5) Copies in electronic form. This clarification also should prevent situations in which the creditor mails copies of appraisals or other written valuations to the applicant three business days before consummation or account opening, and the applicant does not receive these materials until after the consummation or account opening. Gp., Inc., Know Before You Owe: Evolution of the Integrated TILA-RESPA Disclosures 254-256 (July 9, 2012), available at http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf. For the same reasons that the Board cited, the Bureau believes that permitting the disclosure required in 1002.14(a)(2) to be provided without regard to the consumer consent or other provisions of the E-Sign Act when the disclosure accompanies an application the consumer accesses electronically eliminates a a potential significant burden on electronic commerce without increasing the risk of harm to consumers. 72 FR 63445, 63448 (Nov. 9, 2007).
The Bureau is therefore not exercising its exception authority to exempt loss mitigation transactions from 1002.14 if those transactions would otherwise be covered by Regulation B.[33].
Multiple applicants. Accordingly, the Bureau is establishing January 10, 2014, one year after issuance of the Bureau's 2013 ATR, Escrows, and HOEPA Final Rules (i.e., the earliest of the title XIV final rules), as the baseline effective date for most of the Title XIV Rulemakings. The Bureau did not, however, seek comment in the proposal on whether structures that are motor vehicles can be covered by or should be excluded from the scope of ECOA and Regulation B more broadly, including the information collection requirements of 1002.13. Regulation Z does not use the term consummation for open-end credit secured by a dwelling. The statute did not distinguish between withdrawals that occur before or after declaring an intent to proceed with the transaction. In addition, some industry commenters requested clarification on whether the final rule would cover certain multiple residence situations involving a single lot, such as three four-unit buildings situated on a single land parcel and operated as one small 12-unit apartment complex. Gp., Inc., Know Before You Owe: Evolution of the Integrated TILA-RESPA Disclosures 254-256 (July 9, 2012), available at http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf. Nothing in the text of the disclosure required by 1002.14(a)(2) should be construed to affect, modify, limit, or supersede the operation of any legal, regulatory, or other requirements or standards relating to independence in the conduct of appraisers or the use of applicant-ordered appraisals by creditors. Each round of qualitative testing included at least two industry participants, including lenders from several different types of depository (including credit unions) and nondepository institutions, mortgage brokers, and closing agents.
The Bureau has loan counts for credit unions and HMDA-reporting DIs and IMBs.
The copy must be provided promptly upon completion, and in no case later than three days prior to closing of the loan, whether the creditor grants or denies the applicant's request for credit or the application is incomplete or withdrawn. In that instance, the copy must be provided no later than 30 days after the creditor determines the transaction will not be consummated or the account will not be opened. iii. Specifically, creditors would be required to provide copies of appraisals and other written valuations even in situations where an applicant provides only an incomplete application. This approach is consistent with existing comment 14(a)(1)-2 concerning the application of 1002.14 to renewals, which is maintained in the final rule. [35] 5519(f)(1), the term motor vehicle means(A) Any self-propelled vehicle designed for transporting persons or property on a street, highway, or other road; (B) recreational boats and marine equipment; (C) motorcycles; (D) motor homes, recreational vehicle trailers, and slide-in campers, as those terms are defined in sections 571.3 and 575.103(d) of title 49, Code of Federal Regulations, or any successor thereto; and (E) other vehicles that are titled and sold through dealers.. For example, if a creditor receives a valuation from an AVM earlier in the application process, and the fixed time period were to elapse before the appraisal is complete, then the creditor would be required to send the copy of the AVM out before the copy of the appraisal. Motor vehicles not covered. Consummation does not occur when the consumer becomes contractually committed to a sale transaction, unless the consumer also becomes legally obligated to accept a particular credit arrangement. The documents posted on this site are XML renditions of published Federal 5581(b)(7). 102. While the Bureau does not believe that the term reasonable fee could be equated in all cases with fees disclosed to and agreed by the applicant, the commenter highlights the relevance of the applicant's agreement to pay the fee. 36. A FRFA is not required for this final regulation because the rule will not have a significant economic impact on a substantial number of small entities. See U.S. Gov't Accountability Office, GAO-11-653, Residential Appraisals: Opportunities to Enhance Oversight of an Evolving Industry, at 22 (2011). This clarification thus should ensure that applicants have at least the minimum amount of time contemplated by section 701(e) to review these copies before the transaction is consummated or the account is opened. makes it unlawful for creditors to discriminate in any aspect of a credit transaction on the basis of sex, race, color, religion, national origin, marital status, or age (provided the applicant has the capacity to contract), or because all or part of an applicant's income derives from public assistance, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. Section 1474 of the Dodd-Frank Act amended ECOA section 701(e) to mandate that creditors provide copies of appraisals and other written valuations regardless of whether the consumer affirmatively requests such copies. The final rule does not regulate, or purport to regulate, the use of valuations such as broker price opinions by creditors. Some commenters expressed concern that applicants could mistakenly believe that such a valuation was used by the creditor. Proposed 1026.19(e)(1)(iii) provides as follows: Timing. The creditor has provided the copy of the appraisal promptly upon completion. The prohibition against charging for copies only applies to copies that are required under the final rule. Because the final rule does not require that creditors provide more than one copy, there is no suggestion in the final rule that creditors are prohibited from charging for duplicates or additional copies.
The final rule does not affect the ability of creditors to request up-front payment from applicants before appraisals or other written valuations are ordered (which would protect creditors even if the application is withdrawn, incomplete, or denied), to collect payment at consummation or account opening, or to undertake other efforts to collect the fee if the transaction is not consummated or the account is not opened. The Bureau has a continuing interest in the public's opinions of our collections of information. The Consumer Financial Protection Act is substantially codified at 12 U.S.C. and Econ. Other laws also may limit the ability to recover these fees, as indicated by the phrase unless otherwise provided by law in 1002.14(a)(3).[65]. In particular, existing 1002.4(d)(2) allows the creditor to provide written disclosures required by certain specified provisions of existing Regulation B, including existing 1002.14(a)(2)(i), electronically without regard to consumer consent or provisions of the E-Sign Act, if the disclosure accompan[ies] an application accessed by the applicant in electronic form. The Bureau believes this cross-reference in 1002.4(d)(2) to the notice requirement in 1002.14(a)(2) should be maintained, for the same reasons the Board did not apply the E-Sign Act requirements to disclosures provided with the application. Otherwise, an appraisal received earlier in the application process potentially would need to be disclosed before a valuation received later. Consumer comprehension improved when the Bureau developed a slightly longer plain language version that was designed to incorporate the elements of both statutes. [112] A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation. [114] 16. 1.
Discussion. 1474, 124 Stat. The estimates provided here are based upon data and statistical analyses performed by the Bureau.
One large lending institution requested that the Bureau exercise its exception authority to allow creditors to provide copies of non-substantive changes to appraisals and other written valuations, such as typographical errors, at consummation. While every effort has been made to ensure that For purposes of paragraph (a) of this section: (1) Consummation. Other forms of valuation, however, tend to cost less than appraisals. The creditor has provided the appraisal copy promptly upon completion. Otherwise, ECOA section 701(e)(3) might be interpreted as distinguishing between one type of valuation (an appraisal) whose cost may be reimbursed by applicants, and all other types of valuations whose cost may not be reimbursed by the applicant. 1. endstream
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[4] Another industry commenter suggested the time period for providing copies should not begin until the application is complete within the meaning of Regulation B, 1002.2(f). 12 U.S.C. 5481-5603. Rept. Because of their smaller size, fixed training and reviewing costs are spread over fewer applications and originations, and as a result the proportion of costs due to one-time burdens increases slightly to 3.0 percent of total cost. The commenter suggests that recoverability of AMC fees was left in doubt by the proposed comment 14(a)(3)-2, referring to fees reasonably designed to reimburse creditor costs incurred in connection with obtaining appraisal and other valuation services. One commenter suggested the term is not plain English.
The Bureau also proposed changes to the Regulation B commentary further clarifying the types of transactions subject to the requirement to deliver copies of appraisals and other written valuations. q4 GH00;@l~g` e` c3
In addition, this approach is generally consistent with the proposed approach to the three-business-day timing requirement in the 2012 TILA-RESPA Proposal. The Bureau believes that providing a clear rule will reduce compliance burden and risks for creditors, while ensuring that consumers receive copies in a timely fashion. 13. Finally, covered persons would incur some costs in updating Regulation B disclosures provided to applicants concerning appraisals. In the context of the final rule, covered persons includes depository institutions such as banks, credit unions, and thrifts, as well as non-depository creditors such as IMBs. Other documentation. The application and meaning of the promptly upon completion standard depends upon the facts and circumstances, including but not limited to when the creditor receives the appraisal or other written valuation, and the extent of any review or revision after the creditor receives it. Similarly, questions about the rule's coverage of temporary loans, such as bridge or construction loans, and renewals of credit, relate to the overall scope of Regulation B.
1601 note. Testing of the first version showed that consumers tended to find the TILA and ECOA disclosures confusing when they were given together using the specific language set forth in the respective statutes. New comments 14(a)(1)-4 and 5 clarify that the promptly upon completion standard is applied based upon the facts and circumstances and provide illustrative examples of situations in which the timing requirement would or would not be met. While 1002.4(d)(2) refers to written disclosures, the E-Sign Act also applies more broadly to information relating to a transaction that is required to be made available in writing. In outreach to creditors prior to the proposal, all respondents reported providing copies of written appraisals to borrowers as a matter of course if a first lien loan is originated. If a creditor has received multiple versions of an appraisal or other written valuation, the creditor is required to provide only a copy of the latest version received. 66. 51. the official SGML-based PDF version on govinfo.gov, those relying on it for 5481(14) (defining Federal consumer financial law to include the enumerated consumer laws and the provisions of title X of the Dodd-Frank Act); Dodd-Frank Act section 1002(12), 12 U.S.C. For construction loans, this commenter also asserted that applicants are more interested in receiving copies of valuations when the permanent financing begins, after the construction is complete and therefore factored into the valuation.
Further, proposed comment 14(a)(1)-1 clarified that if there is more than one applicant, the disclosure about appraisals and the provision of copies of appraisals need only be given to one applicant, but they must be given to the primary applicant where one is readily apparent. 5519(f)(1).
The Bureau requested comment on the effective date of the final rule, particularly given the likelihood that the TILA-RESPA Loan Estimate containing the ECOA appraisal disclosure would not be finalized on the same timeline as this final rule. Written. 59. For example, a creditor may want to add: i. See HUD, TI-481, App. The term consumer financial protection functions is defined to include all authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law, including performing appropriate functions to promulgate and review such rules, orders, and guidelines.[24]
50. Section 1002.14(a)(1) requires that the creditor provide copies of appraisals and other written valuations to the applicant promptly upon completion, or no later than three business days before consummation (for closed-end credit) or account opening (for open-end credit), whichever is earlier.
3507(a), (a)(2) and (a)(3)) requires that a Federal agency may not conduct or sponsor a collection of information unless OMB approved the collection under the PRA and the OMB control number obtained is displayed. Based on each and all of these considerations, the Bureau has concluded that the rule is appropriate as an implementation of the Dodd-Frank Act. Another industry commenter suggested that the final rule interpret reasonable fee to mean a fee that was disclosed and agreed to by the applicant. This change is designed to ensure that in multiple applicant transactions, the individual providing the waiver generally is the same individual who would be receiving the documents. Section 1002.14(a)(3) in the final rule and associated commentary are generally adopted as proposed, with some minor clarifications as discussed below. Thus, the final rule covers applications for business credit to be secured by a first lien on a dwelling.
Nonetheless, as noted above, it is standard industry practice to provide copies of appraisals in first lien transactions that are consummated.
On August 15, 2012, the Bureaualong with the Board, the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC)jointly issued for public comment a proposal to implement new section 129H of TILA relating to appraisals for higher-risk mortgages (2012 Interagency Appraisals Proposal).
This outreach was carried out in the context of the development of the 2012 Interagency Appraisals Proposal and involved a large bank, a trade group of smaller depository institutions, and an independent mortgage bank (IMB). Consistent with the purpose of ECOA section 701(e) and ECOA more broadly, if an AVM develops a valuation in connection with the application that is provided to the creditor, then the creditor has a duty under the final rule to disclose a copy to the applicant. on %%EOF
It is assumed that the regulation is reviewed by one lawyer and by one compliance officer at each institution, on average. 47. In response to industry comments, the Bureau has added new comment 14(a)(1)-7, which clarifies what copies must be provided in the event there are multiple versions of an appraisal or other written valuation. [106] The Bureau interprets the phrase at the time of application to require creditors to provide the ECOA appraisal disclosure not later than three business days after receiving an application. Many commenters expressed support for the three-business-day time frame for the disclosure to be made, consistent with the current and proposed TILA-RESPA approach. TILA section 129H(b)(2)(B), 15 U.S.C. As some commenters noted, the earlier these copies are received in the loan process, the more helpful they are to consumers in analyzing the transaction. The final rule amends Regulation B, which implements ECOA, and the official interpretations to the regulation, which interpret and clarify the requirements of Regulation B. 107. Newly designated Section 1002.14 is revised. This initiative consisted of publishing and obtaining feedback on the prototype designs through an interactive tool on the Bureau's Web site or through posting the prototypes to the Bureau's blog on its Web site and providing an opportunity for the public to email feedback directly to the Bureau. This repetition of headings to form internal navigation links (4) Withdrawn, denied, or incomplete applications. TILA section 129H includes certain requirements that are similar to ECOA section 701(e). The cost of reviewing the regulation at each institution is assumed to be the time cost of reading and reviewing the regulation, which is assumed to be 3 minutes per page for 9 pages. Section 1002.14(a)(1) permits the applicant to waive the timing requirement if the creditor provides the copies at or before consummation or account opening, except where otherwise prohibited by law. 5.
The Bureau's Regulation B took effect on December 30, 2011. Consumer comprehension improved when the Bureau developed a slightly longer plain language disclosure that was designed to incorporate the elements of both statutes. rendition of the daily Federal Register on FederalRegister.gov does not Prior to this final rule, comments 14(a)-1 and 2 had clarified that Regulation B appraisal delivery requirements applied to credit for business purposes and to renewals of credit secured by a dwelling. A creditor shall furnish to an applicant a copy of any and all appraisals and other written valuations developed in connection with the applicant's application for a loan that is or would be secured by a first lien on a dwelling. 601(6). These potential benefits and costs, and these impacts, however, are not generally susceptible to particularized or definitive calculation in connection with this rule. Press); Eric Johnson & Daniel Goldstein. The term includes an individual condominium unit, cooperative unit, or mobile or manufactured home. 12 CFR 1003.2. Industry commenters asked the Bureau to clarify several aspects of the definition of dwelling. For example, several commenters asked the Bureau to clarify in the final rule whether the definition of dwelling refers only to an owner-occupied dwelling, or to any residential Start Printed Page 7236dwelling regardless of the applicant's residence in the building.