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Good Afternoon,
I’m having trouble figuring out if the Reg. B Appraisal Rule applies when we have commercial transactions that have more than one 1st lien 1-4 family residential structure on the same piece of land. For example a loan to purchase a property that has 5 homes on it, or a mobile home park with 20 mobile homes that will be taken as collateral.
Reg. B defines a dwelling as a residential STRUCTURE that contains one to four units. But, in the CFPB May 14, 2020 Fact Sheet: Transaction Coverage Under The ECOA Valuations Rule (and footnotes of the federal register) it states: “three four-unit buildings operated as a twelve-unit apartment complex is used as security for a loan. Because the twelve-unit apartment complex exceeds the one-to-four-unit requirement for a dwelling, this transaction is not covered under the Rule.” – This seems contradictory as each structure aligns with the definition in Reg. B.
Any guidance would be appreciated. Thank you!
The rules for Reg. B do apply to both consumers and commercial loan transaction. In general the rules do say “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.”
You are correct that the CFPB contradicted itself and has not clarified their definitions of dwelling vs structure and like to use them interchangeably. When they created the factsheet in 2020 they still had not expressly addressed whether they and thus the rule interprets the ECOA Valuations Rule to apply when a loan is secured by a first lien on more than four units in a residential structure that contains more than four units. As a result, the revised factsheet continues to create confusion as to the ECOA Valuation Rule’s coverage. IMO so not to confusion your FI, I would follow the definition of a dwelling as it relates to HMDA if you are a HMDA reporter and if not the definition in the Flood rules. That would in my opinion eliminate confusion and keep it consistent in your FI.
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