Regarding the Regulation B Appraisal Notice, we frequently get the question of whether it’s necessary if the application is denied or withdrawn. Reg B {§ 1002.14} is not very clear on this issue; and you may think the answer is crazy. I think we all know that sometimes regulations just don’t make sense!
The lending folks in your bank know that the following Appraisal Notice should be mailed or delivered to an applicant, not later than the third business day after the bank receives an application for credit secured by a 1-4 family where you are taking a first lien on the dwelling.
Model Notice: We may order an appraisal to determine the property’s value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost.
Most of the time the bank delivers the applicant a Loan Estimate (LE) within three days after the date of application. The LE includes this language on page three; therefore, a separate notice is not required. But what if the bank denies the applicant or the application is withdrawn the same day of application, or even within three business days, do you still need to provide the Appraisal Notice?
The answer is YES, you are still required to send it.
There are two things to remember:
- If the loan application is denied or withdrawn within three business days, the LE is not required; however, the appraisal disclosure is, so you need to remember to send it.
- Commercial loan applications do not require an LE and often we find the “real” application date is not documented in the file. Commercial lenders and support staff need to be trained to document the application date and also the date the appraisal notice was sent in order to prove compliance with the appraisal rules.
Jerod Moyer, with Banker’s Compliance Consulting, recently discussed this same topic. Here is a link on his take: https://www.bankerscompliance.com/regulation-b-denials/
