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Which appraisal/valuation to provide?

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  • #4000
    BNach
    Member

    We are working through the process of revising our policies and procedures to implement this rule in January. During our last project meeting, we came across this question that we can’t seem to agree upon. We are using the tools on the CFPB website, such as the Small Entity Compliance Guide, the Consumer Summary, the rule itself and the Official Interpretations. Even so, at times the information appears to contradict.

    In reference to Section 1002.14, it says: “A creditor shall 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. A creditor shall provide a copy of each such appraisal or other written valuation promptly upon completion…

    In a situation where an Home Value Estimator (HVE) is ordered and isn’t “reviewed and accepted” by the underwriter (because of various reasons, such as the confidence score is either medium or low, there are no comparable sales data or not enough comparable sales data, etc.), we have two other HVE types we can order. Sometimes these HVEs come back with usable data and sometimes they don’t, in which case an appraisal is then ordered. In all HVE cases, we also prepare an internal “Loan Evaluation with Photos” to assess the condition of the property.

    Our question is this:

    1. Do we have to send the HVEs that we didn’t use to the customer? If you read it one way, I would say yes – we have to send copies of ALL appraisals or valuations. But on the other hand, I would say no – the underwriter didn’t “accept” the unused valuations. Something was wrong with it and it didn’t provide us with an adequate value. In other words, it wasn’t a “complete” valuation and we only have to send “complete” valuations to the customer.
    2. Do we have to send the internal “Loan Evaluation with Photos” to the customer? It doesn’t contain any valuation of the property – it just assesses the condition of the property via pictures, basically to ensure that the data contained in the HVE is reasonable.

    Thank you in advance for your time and assistance,

    #4005
    rcooper
    Keymaster

    If a valuation is developed in connection with the application, then you must provide a copy to the applicant, even if you do not use the valuation or you use it only for a limited purpose. If it there are multiple versions of the same valuation then you send the latest version, but what you are talking about sounds like different valuations so I think a copy of each would have to be sent to the applicant regardless of whether or not it was used.

    As for your Loan Evaluation with Photos, if it doesn’t assign a value then IMO it wouldn’t be a valuation. If, on the other hand, it is an internal valuation of the subject property then a copy should be provided to the applicant. I’m just wondering how you can use the Loan Evaluation to determine if the HVE is reasonable if some sort of value isn’t assigned as part of the evaluation. It sounds similar to an appraisal review, is it? The SMEG states that an appraisal review that does not itself state a different estimate from the appraisal would not be a valuation you must provide to the applicant. It depends on what your Loan Evaluation does/contains in regards as to whether a copy should be sent.

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