order an appraisal for the customer before disclosure

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    Here is a question that came up at the bank.
    If a customer was not sure if the loan they wanted to apply for a loan until they knew the value of their home. The customer was trying to decide whether to do it commercial or consumer purpose. The property that they wanted the appraisal on was their primary residence. They requested the Bank to order an appraisal prior to application. The Bank obtained the appraisal. After the appraisal arrived the customer decided – consumer loan personal residence. An application was taken and disclosures were given with the appraisal fee on the Loan estimate

    Will you please explain this to me in detail so that I can give the answer to the person that is confused about this scenario.

    Thank you very much


    There is a prohibition on imposing/collecting a fee before you provide the LE disclosure to the consumer and they have given their intent to proceed. If your bank is allowing appraisals to be ordered before the LE is given/intent to proceed is received, but then the LE is never provided and/or the consumer never provides intent to proceed, your bank will be responsible for that fee (you can not require the borrower to pay for it without those criteria being met). Whether the bank wants to take that risk is a business decision it needs to make. Most banks I hear from will not order an appraisal until the LE is provided and intent to proceed with the transaction is received from the consumer, because they do not want to be left paying for the appraisal if the transaction never reaches the point where they can charge the appraisal fee.

    If the appraisal fee is associated with the transaction, which it is, then it should be listed on the LE, but again you can’t collect the fee until you provide the LE and receive intent to proceed.

    1026.19(e)(2) Predisclosure activity.

    (i) Imposition of fees on consumer.

    (A) Fee restriction. Except as provided in paragraph (e)(2)(i)(B) of this section, neither a creditor nor any other person may impose a fee on a consumer in connection with the consumer’s application for a mortgage transaction subject to paragraph (e)(1)(i) of this section before the consumer has received the disclosures required under paragraph (e)(1)(i) of this section and indicated to the creditor an intent to proceed with the transaction described by those disclosures. A consumer may indicate an intent to proceed with a transaction in any manner the consumer chooses, unless a particular manner of communication is required by the creditor. The creditor must document this communication to satisfy the requirements of ยง 1026.25.

    I hope I’ve understood your question correctly. If not, or if you have additional questions, please let us know.

    • This reply was modified 1 year, 5 months ago by rcooper. Reason: reworded for clarity
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