Compliance Blog

Written by Bernadette Clair, Regulatory Compliance Counsel

Earlier this week, Steve mentioned NCUA’s Regulatory Alert on the Regulation B Appraisal Disclosure and Delivery Requirements. The alert summarizes requirements under the CFPB’s Equal Credit Opportunity Act (ECOA) Valuations Rule (effective January 18, 2014).

Some of the areas highlighted by the alert include the types loans covered by the rule, what is or isn’t considered a “valuation” and sending valuation copies promptly upon completion. The alert also provides the following steps for complying with the 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. (Footnote omitted)

Refer to the alert  for complete details.

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Regulatory Relief. In a letter sent to NCUA on Monday regarding the agency’s 2013 regulatory review, NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt raised numerous issues that deserve the agency’s immediate attention.

Related to today's blog post, one area addressed is the need for NCUA to update its appraisal regulations in light of the CFPB’s ECOA Valuations Rule.  Currently, federal credit unions are exempt from the appraisal requirements of Regulation B, as current section 1002.14 contains an exemption from these requirements for credit unions subject to NCUA’s regulation section 701.31(c)(5) regarding the provision of appraisal copies.

The ECOA Valuations Rule removes this exemption. Here is from the letter:

"Starting on January 18, 2014, credit unions will be required by Regulation B to provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. Unless NCUA section 701.31(c)(5) is amended, credit unions will also have a duty to make, at the request of the member, copies of appraisals used for that member’s real-estate related loan application available for up to 25 months, regardless of whether the credit is secured by a first lien on a dwelling.

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In order to update NCUA regulations to reflect a new world where credit unions are under the rule of Regulation B starting January 18, 2014, NCUA should, at a minimum, change the scope of 701.31(c)(5) to include only subordinate lien loans that fall outside the scope of Regulation B's requirements. This would ensure that for all first lien loans on a dwelling, a member would receive an appraisal provided by the credit union pursuant to section 1002.14 as amended. For all subordinate lien loans, the member would still be able to request a copy of the appraisal from the credit union."

Click here to download NAFCU's comment letter.