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Here is a question that came up at the bank.
If a customer was not sure if the loan they wanted to apply for a loan until they knew the value of their home. The customer was trying to decide whether to do it commercial or consumer purpose. The property that they wanted the appraisal on was their primary residence. They requested the Bank to order an appraisal prior to application. The Bank obtained the appraisal. After the appraisal arrived the customer decided – consumer loan personal residence. An application was taken and disclosures were given with the appraisal fee on the Loan estimateWill you please explain this to me in detail so that I can give the answer to the person that is confused about this scenario.
Thank you very much
There is a prohibition on imposing/collecting a fee before you provide the LE disclosure to the consumer and they have given their intent to proceed. If your bank is allowing appraisals to be ordered before the LE is given/intent to proceed is received, but then the LE is never provided and/or the consumer never provides intent to proceed, your bank will be responsible for that fee (you can not require the borrower to pay for it without those criteria being met). Whether the bank wants to take that risk is a business decision it needs to make. Most banks I hear from will not order an appraisal until the LE is provided and intent to proceed with the transaction is received from the consumer, because they do not want to be left paying for the appraisal if the transaction never reaches the point where they can charge the appraisal fee.
If the appraisal fee is associated with the transaction, which it is, then it should be listed on the LE, but again you can’t collect the fee until you provide the LE and receive intent to proceed.
1026.19(e)(2) Predisclosure activity.
(i) Imposition of fees on consumer.
(A) Fee restriction. Except as provided in paragraph (e)(2)(i)(B) of this section, neither a creditor nor any other person may impose a fee on a consumer in connection with the consumer’s application for a mortgage transaction subject to paragraph (e)(1)(i) of this section before the consumer has received the disclosures required under paragraph (e)(1)(i) of this section and indicated to the creditor an intent to proceed with the transaction described by those disclosures. A consumer may indicate an intent to proceed with a transaction in any manner the consumer chooses, unless a particular manner of communication is required by the creditor. The creditor must document this communication to satisfy the requirements of § 1026.25.
I hope I’ve understood your question correctly. If not, or if you have additional questions, please let us know.
Thanks!Question for you…. I gave my client an LE and a Intent to proceed they signed and acknowledged and then I ordered my appraisal. I was under the impression if I order my appraisal after my ITP I am in compliance?
Help please advise I don’t want to reorder my appraisal
msrelax12 – Seems like what you did was fine. The customer had the LE and gave their intent to proceed before you even ordered the appraisal. If I missed some details or didn’t understand correctly please let me know.
Mr. R. Cooper,
So, if I understand this correctly, it looks like the mortgage company is not able to get reimbursed for the appraisal fee ONLY in the case if the ITP & the LE was never provided to the borrower even if it’s after the appraisal was ordered? And as long as we paid for the fee upfront and provided the LE/ITP to the borrower(s) after the fact, and the loan has cancelled after all signatures – we should be able to ask for reimbursement, correct?
“Here’s our scenario: The appraisal was ordered 12/5, ITP signed 12/6, but Mortgage Co. paid for it upfront.
So, we can have borrower reimburse us then for the appraisal.”
Can you please also advise if the borrower(S) have to sign the ITP/LE OR just receive it from us… in order for the statement above to be valid.
Thank you so much!!
According to 1026.19(e)(2)(i)(A), neither a creditor nor any other person may impose a fee on a consumer in connection with the consumer’s application for a mortgage transaction subject to paragraph (e)(1)(i) of this section before the consumer has received the disclosures required under paragraph (e)(1)(i) of this section and indicated to the creditor an intent to proceed with the transaction described by those disclosures. It appears you provided the disclosure and the borrower provided the intent to proceed. Regulation Z clearly permits you to order an appraisal at that point.
Regulation Z does not require a signature on the Loan Estimate or the intent to proceed, but many banks require a signature on one, the other, or on both of the forms.
@jholzknecht Thank you so much for a quick response. Could you please just advise if we are in compliance based on the scenario below, and if we can ask the borrower for appraisal fee re-imbuement.
“The appraisal was ordered 12/5, ITP signed 12/6, and the Mortgage Co. paid for the appraisal upfront.
I’m just confused at your answer because we have already ordered the appraisal before the ITP was sent and received by the borrower: “It appears you provided the disclosure and the borrower provided the intent to proceed. Regulation Z clearly permits you to order an appraisal at that point.”
Thank you so much again!
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