We have been getting a lot of questions lately regarding the Regulation B appraisal rules and what to do when an existing appraisal or other written evaluation is used. Regulation B states, in 1002.14(a)(1), you must provide a copy of any appraisal or other written valuation developed in connection with an application that is to be secured by a first lien on a 1-4 family dwelling. The key here is “developed in connection with”. In other words, if you receive an application and will rely on an existing appraisal that was developed for another loan, you don’t have a covered application. This means the appraisal notice isn’t technically required under 1002.14(a)(2) and neither is the free copy under 1002.14(a)(1).
The Commentary to 1002.14(a)(1) helps us to further understand the “developed in connection with” requirement and also provides clarification as to how this section applies to loan renewals. It states, if a new appraisal is developed in connection with an application for a renewal, it is a covered application (meaning the notice and free copy are required). However, when an application for a renewal includes reliance on a previously developed appraisal, it is not a covered application (meaning no notice and no free copy).
So what’s our take? We believe the requirements of 1002.14 only apply when a new appraisal or written valuation is developed in connection with an application that is to be secured by a first lien on a 1-4 family dwelling. Reliance on a prior appraisal or written valuation in connection with an application that is to be secured by a 1-4 family dwelling is not subject to the requirements of section 1002.14.