One of the biggest challenges with the new Regulation B appraisal notice requirements is implementing a process to ensure the notice is given even when no other disclosures may be triggered. Specifically, when it comes to commercial loans and prequalification/preapproval applications. Prequalification/ preapproval applications? Even if no property is identified? Yes, you heard me right.
The appraisal notice under Regulation B is triggered by the receipt of an application for credit to be secured by a first lien on a dwelling. Thus, we have to look at the definition of “application”, which can differ depending on which regulation you’re looking at. Under RESPA, for example, you have an application when you have specific pieces of information; which includes a property address. However, under Regulation B, an application is an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. Since we are talking about the Regulation B appraisal notice we have to defer to that definition of application. This means you don’t need a property address to have an application and therefore the appraisal notice can be triggered by a preapproval or prequalification request.
The fact that the Regulation B appraisal notice must be provided within 3 business day of receiving an application indicates that the CFPB was trying to align the delivery requirements with those of other early disclosures (Early TIL, GFE, etc.). In fact, the preamble to the final rule supports this as well, stating the time period allows lenders to align ECOA appraisal disclosures with TILA-RESPA early disclosures in transactions that are covered by TILA and RESPA…. We think the key portion of this excerpt is in transactions that are covered by TILA and RESPA. While the CFPB aligned the timing requirements for those transactions, there are additional transactions you need to consider. As we discussed above, the requirements extend to transactions beyond those covered by TILA and RESPA.
These requirements are still fairly new so now is a good time to ensure your delivery process includes all applicable applications including prequalification/preapproval requests.