[Christopher]

Question regarding valuation. After a loan application is approved, but before consummation, we purchase a fraud research report from a vendor. The report gives us a risk analysis of both the applicant and the property. Included in the property portion of the report are comments about the valuation, how it compares to an AVM run by the vendor, provides information on comparable sales and comments on whether our appraised value is high or low compared with their information. Under the new rules, does this report have to be given to the applicant? If so, are we allowed to redact information not pertinent to the value?

Topic

[Mary Frances]

My understanding is that you must give the borrower anything that is used in connection with an application. From the January 2014 Small Entity Guide page 12 – 13 the last paragraph says:
Keep in mind that if a valuation is developed in connection with the application, then you must provide a copy to the applicant, even if you do not use the valuation or you use it only for a limited purpose.

[rcooper]

Look at the definition of valuation and its commentary – I think that will help you determine if what you have is a valuation falling under the Reg B valuation rules.

(3) Valuation. The term “valuation” means any estimate of the value of a dwelling developed in connection with an application for credit.

14(b)(3) Valuation.

1. Valuations—examples. Examples of valuations include but are not limited to:

i. A report prepared by an appraiser (whether or not licensed or certified) including the appraiser’s estimate of the property’s value or opinion of value.

ii. A document prepared by the creditor’s staff that assigns value to the property.

iii. A report approved by a government-sponsored enterprise for describing to the applicant the estimate of the property’s value developed pursuant to the proprietary methodology or mechanism of the government-sponsored enterprise.

iv. A report generated by use of an automated valuation model to estimate the property’s value.

v. A broker price opinion prepared by a real estate broker, agent, or sales person to estimate the property’s value.

2. Attachments and exhibits. The term “valuation” includes any attachments and exhibits that are an integrated part of the valuation.

3. Other documentation. Not all documents that discuss or restate a valuation of an applicant’s property constitute a “valuation” for purposes of § 1002.14(b)(3). Examples of documents that discuss the valuation of the applicant’s property or may reflect its value but nonetheless are not “valuations” include but are not limited to:

i. Internal documents that merely restate the estimated value of the dwelling contained in an appraisal or written valuation being provided to the applicant.

ii. Governmental agency statements of appraised value that are publically available.

iii. Publicly-available lists of valuations (such as published sales prices or mortgage amounts, tax assessments, and retail price ranges).

iv. Manufacturers’ invoices for manufactured homes.

v. Reports reflecting property inspections that do not provide an estimate of the value of the property and are not used to develop an estimate of the value of the property.

vi. Appraisal reviews that do not include the appraiser’s estimate of the property’s value or opinion of value.

[Author]

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