The CFPB ECOA Valuations Rule
What is the ECOA Valuations Rule?
The new ECOA Valuations Rule amends the appraisal provisions of ECOA’s Regulation B. It updates current ECOA rules to say that you must provide applicants for first-lien loans on a dwelling with copies of appraisals, as well as other written valuations, developed in connection with the application, whether or not the applicants request copies.
Under the ECOA Valuations Rule:
- When you receive an applicant’s application, you have three business days to notify the applicant of the right to receive a copy of appraisals;
- You must promptly share copies of appraisals and other written valuations with the applicant. Promptly means promptly upon completion, or at least three business days before consummation (for closed- end credit) or account opening (for open-end credit), whichever is earlier. As summarized below, the Official Interpretations of the regulation provide examples for guidance.
- The applicant can waive the right to receive copies of the appraisal or other written valuations in advance of the closing, but in those cases, you must still deliver the copies at or prior to consummation or account opening;
- If you do not consummate the loan or open the account and the applicant has provided a waiver, you have 30 days after you determine that the loan will not consummate or open to send the applicant a copy of the appraisal and other written valuations.
NOTE: You cannot charge for copies of appraisals or other written valuations, but you can charge the applicant a reasonable fee to reimburse you for the cost of preparing appraisals and other written valuations, unless applicable law prohibits it or otherwise restricts it. You may not upcharge consumers by adding fees to the cost of preparing the appraisal or other written valuations.
Which loans are covered?
The rule covers applications for closed-end or open-end credit secured by a first lien on a dwelling. These include:
- Loans for business purposes (for example, a loan to start a business), investment or leisure purposes (such as a vacation home or investment property), or consumer purposes (for example, a loan to purchase a home);
- Loss-mitigation transactions, such as loan modifications, short sales, and deed-in- lieu transactions, if they are credit transactions covered by Regulation B;
- Loans secured by mobile or manufactured homes;
- Reverse mortgages; and
- Time-share loans if they are credit transactions covered by Regulation B (and if, as in each of the above examples, they are secured by a first lien on a dwelling).
If you are unsure whether a transaction is covered, consider whether there is an “applicant” or “application” for an “extension of credit” as required by Regulation B.
NOTE: The ECOA Valuations Rule does not cover second liens and other subordinate loans and loans that are not secured by a dwelling (such as loans secured solely by land).
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.
- 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. For example, if a loan will close on Friday, April 4, you must deliver the valuation no later than Tuesday, April 1.
- 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 copies of any appraisal or written valuation you provide; however, you can charge a reasonable fee to reimburse the cost of the appraisal or other written valuation if not otherwise prohibited by law.
- 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.
If the loan is a closed-end, higher-priced transaction, you must also determine whether it is covered by the TILA appraisal requirements in the Appraisals for Higher-Priced Mortgage Loans Rule (HPML Appraisal Rule) under Regulation Z.