June 7, 2013 at 9:13 am #3440carriekParticipant
Can you advise on current and upcoming regulations / requirements relating to when an appraisal is required. Our loan policy states: A new formal appraisal or evaluation will not be required when the transaction involves an existing extension of credit, and: a) new money being advanced does not exceed the amount necessary to cover reasonable closing cost, or b) there has been no obvious and material change in the market conditions or physical aspects of the property that threatens the adequacy of the banks colletaral protection.
We have a pool of portfolio loans that we originated and are servicing and we would like to market for refinances into current market rates given there good pay history. We’d like to offer somewhat of a streamline type refi no different than what fha does or even fannie/freddie with HARP. Are we required to obtain an appraisal for a refinance (both current regs and upcoming) and how would we comply with appraisal delivery requirements if we do NOT obtain a new appraisal or evaluation?June 7, 2013 at 12:36 pm #3442rcooperKeymaster
There are three pieces of guidance/regulation to consider in regard to appraisals/valuations: 1) Reg Z’s appraisal rules for HMPLs and valuation independence rules; 2) Regulation B’s notice and delivery requirements in 12 CFR 1002.14 and its commentary; and 3) the Interagency Appraisal and Evaluation Guidelines. Both Reg Z and Reg B have notice and delivery
requirements. If the loan is an HPML you’ll need to look to Reg Z for requirements (there are many) under 1026.35(c). Finally, the Interagency Guidance details what is required for appraisals and valuations. There isn’t anything, that I’m aware of, that says you automatically need a new appraisal for each transaction.
My question is, how do you verify there hasn’t been any changes in the market conditions or physical aspect of the property that would affect the collateral (as required by your policy)? If this is through a valuation of the property, then you would need to disclose that per Reg B’s rules.
Since the refinancing is a new transaction rather than a renewal of the existing loan (in which case the borrower would have already received the Reg B disclosure and copy of appraisal for that transaction) I believe the safest approach is to give a new disclosure and copy of the appraisal that you are using in connection with the refinance.
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