```

[Federal Register Volume 77, Number 162 (Tuesday, August 21, 2012)]
[Proposed Rules]
[Pages 50390-50404]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20422]

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 77, No. 162 / Tuesday, August 21, 2012 / 
Proposed Rules

[[Page 50390]]

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1002

[Docket No. CFPB-2012-0032]
RIN 3170-AA26

Equal Credit Opportunity Act (Regulation B)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule; request for public comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
proposing to amend Regulation B, which implements the Equal Credit 
Opportunity Act (ECOA), and the official interpretation to the 
regulation, which interprets the requirements of Regulation B. The 
proposed revisions to Regulation B would implement an ECOA amendment 
concerning appraisals that was enacted as part of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act). In general, 
the proposed revisions to Regulation B would require creditors to 
provide free copies of all written appraisals and valuations developed 
in connection with an application for a loan to be secured by a first 
lien on a dwelling. The proposal also would require creditors to notify 
applicants in writing of the right to receive a copy of each written 
appraisal or valuation at no additional cost.

DATES: Comments must be received on or before October 15, 2012, except 
that comments on the Paperwork Reduction Act analysis in part VIII of 
the Supplementary Information must be received on or before October 22, 
2012.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2012-
0032 or RIN 3170-AA26, by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, 
DC 20552
     Hand Delivery/Courier in Lieu of Mail: Monica Jackson, 
Office of the Executive Secretary, Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington, DC 20552.
    All submissions must include the agency name and docket number or 
Regulatory Information Number (RIN) for this rulemaking. In general, 
all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public 
inspection and copying at 1700 G Street NW., Washington, DC 20552, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
Time. You can make an appointment to inspect the documents by 
telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: John H. Brolin, Counsel, or William W. 
Matchneer, Senior Counsel, Division of Research, Markets, and 
Regulations, Bureau of Consumer Financial Protection, 1700 G Street 
NW., Washington, DC. 20552, at (202) 435-7000.

SUPPLEMENTARY INFORMATION:

I. Summary of the Proposed Rule

    In response to the recent mortgage crisis, Congress amended the 
Equal Credit Opportunity Act (ECOA) to require creditors to 
automatically provide applicants with a copy of appraisal reports and 
valuations prepared in connection with certain mortgage loans. The 
Consumer Financial Protection Bureau (Bureau) is now proposing a rule 
to implement those changes, which were enacted in the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act).\1\ 
Specifically, the proposed rule would amend the regulations 
implementing ECOA to:
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    \1\ Public Law 111-203, 124 Stat. 1376, section 1474 (2010).
---------------------------------------------------------------------------

     Cover applications for credit to be secured by a first 
lien on a dwelling.
     Require creditors to notify applicants within three 
business days of receiving an application of their right to receive a 
copy of written appraisals and valuations developed.
     Require creditors to provide applicants a copy of all 
written appraisals and valuations promptly after receiving an appraisal 
or valuation, but in no case later than three business days prior to 
consummation of the mortgage.
     Permit applicants to waive the timing requirement to 
receive copies three days prior to consummation. However, applicants 
who waive the timing requirement must still be given a copy of all 
written appraisals and valuations at or prior to closing.
     Prohibit creditors from charging additional fees for 
providing a copy of written appraisals and valuations, but permit 
creditors to charge applicants a reasonable fee to reimburse the 
creditor for the cost of the appraisal or valuation unless otherwise 
required by law.

II. Statutory Background

A. The Equal Credit Opportunity Act

    The ECOA \2\ makes it unlawful for creditors to discriminate in any 
aspect of a credit transaction on the basis of sex, race, color, 
religion, national origin, marital status, age (provided the applicant 
has the capacity to contract), because all or part of an applicant's 
income derives from public assistance, or because the applicant has in 
good faith exercised any right under the Consumer Credit Protection 
Act. ECOA applies to all credit--commercial as well as consumer--
without regard to the nature or type of the credit or the creditor.
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    \2\ 15 U.S.C. 1691 et seq.
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    Historically, section 701(e) of ECOA has provided that a credit 
applicant has the right to request copies of appraisal reports used in 
connection with his or her application for mortgage credit. The right 
to request copies of appraisals was added to ECOA in December 1991 as 
part of the Federal Deposit Insurance Corporation Improvement Act 
(FDICIA).\3\ The Senate report on FDICIA suggests that one purpose of 
ECOA section 701(e) was to make it easier for loan applicants to 
determine whether a

[[Page 50391]]

loan was denied due to a discriminatory appraisal.\4\
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    \3\ Public Law 102-242, 105 Stat. 2236 (1991).
    \4\ For additional legislative history on the appraisal 
provision as originally added by the FDICIA see S. Rep. No. 167, 
102d Cong., 1st Sess.; S. Rep. No. 461, 101st Cong. 2d Sess.; 137 
Cong. Rec. S2519 (daily ed. February 28, 1991); 136 Cong. Rec. 
S14592, 14598-99 (daily ed. October 5, 1990).
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    With the enactment of the Dodd-Frank Act,\5\ general rulemaking 
authority for ECOA transferred from the Board of Governors of the 
Federal Reserve System (Board) to the Bureau on July 21, 2011. Pursuant 
to the Dodd-Frank Act and ECOA, as amended, the Bureau published for 
public comment an interim final rule establishing a new Regulation B, 
12 CFR part 1002, implementing ECOA (except with respect to persons 
excluded from the Bureau's rulemaking authority by section 1029 of the 
Dodd-Frank Act). 76 FR 79442 (Dec. 21, 2011). This rule did not impose 
any new substantive obligations but did make technical and conforming 
changes to reflect the transfer of authority and certain other changes 
made by the Dodd-Frank Act. The Bureau's Regulation B took effect on 
December 30, 2011.
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    \5\ Public Law 111-203, 124 Stat. 1376, section 1474 (2010).
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B. Dodd-Frank Act Amendments Concerning Appraisals

    Congress enacted the Dodd-Frank Act after a cycle of unprecedented 
expansion and contraction in the mortgage market sparked the most 
severe U.S. recession since the Great Depression.\6\ The Dodd-Frank Act 
created the Bureau and consolidated various rulemaking and supervisory 
authorities in the new agency, including the authority to implement 
ECOA.\7\ At the same time, Congress imposed new statutory requirements 
governing mortgage practices with the intent to restrict the practices 
that contributed to the crisis and provide additional protections to 
consumers.
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    \6\ For more discussion of the mortgage market, the financial 
crisis, and mortgage origination generally, see the Bureau's 2012 
TILA-RESPA Proposal, available at http://www.consumerfinance.gov/regulations/.
    \7\ Sections 1011 and 1021 of title X of the Dodd-Frank Act, the 
``Consumer Financial Protection Act,'' Public Law 111-203, sections 
1001-1100H, codified at 12 U.S.C. 5491, 5511. The Consumer Financial 
Protection Act is substantially codified at 12 U.S.C. 5481-5603.
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    Sections 1471 through 1474 of the Dodd-Frank Act established a 
number of new requirements for appraisal activities, including 
requirements relating to appraisal independence, appraisals for higher-
risk mortgages, regulation of appraisal management companies, automated 
valuation models, and providing copies of appraisals and valuations.\8\ 
Many of the Dodd-Frank Act appraisal provisions are required to be 
implemented through joint rulemakings involving several federal 
agencies. The amendment to ECOA section 701(e), however, does not 
require a joint rulemaking. As discussed below, the amendments to 
section 701(e) overlap with the notice and copy requirements of a Dodd-
Frank Act amendment to the Truth in Lending Act (TILA) applicable to 
higher-risk mortgage loans. The Dodd-Frank Act amendment to TILA, which 
adds section 129H, is required to be implemented through joint 
rulemaking. See TILA section 129H(b)(4)(A); 15 U.S.C. 1639h(b)(4)(A).
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    \8\ See TILA sections 129H and 129E as established by Dodd-Frank 
Act sections 1471 and 1472, 15 U.S.C. 1639h; sections 1124 and 1125 
of the Financial Institutions Reform, Recovery, and Enforcement Act 
of 1989 (FIRREA) as established by Dodd-Frank Act sections 
1473(f)(2), 12 U.S.C. 3353, and 1473(q), 12 U.S.C. 3354; and 
sections 701(e) of ECOA as amended by Dodd-Frank Act section 1474, 
15 U.S.C. 1691(e).
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ECOA Appraisal Requirements

    Section 1474 of the Dodd-Frank Act \9\ amended ECOA section 701(e) 
to require that creditors provide copies of appraisals and valuations 
to loan applicants at no additional cost and without requiring 
applicants to affirmatively request such copies. Amended ECOA section 
701(e) generally provides that:
---------------------------------------------------------------------------

    \9\ Public Law 111-203, 124 Stat. 1376, section 1474 (2010).
---------------------------------------------------------------------------

     A creditor shall furnish to an applicant a copy of any and 
all written appraisals and valuations developed in connection with the 
applicant's application for a loan that is or would be secured by a 
first lien on a dwelling. The appraisal documentation must be provided 
promptly, and in no case later than three days prior to closing of the 
loan, whether the creditor grants or denies the applicant's request for 
credit or the application is incomplete or withdrawn. However, the 
applicant may waive the timing requirement that such appraisals or 
valuations be provided three days prior to closing, except where 
otherwise required by law.
     The creditor shall provide a copy of each written 
appraisal or valuation at no additional cost to the applicant, though 
the creditor may impose a reasonable fee on the applicant to reimburse 
the creditor for the cost of the appraisal.
     At the time of application, the creditor shall notify 
applicants in writing of the right to receive a copy of each written 
appraisal and valuation under ECOA section 701(e).
    Amended ECOA section 701(e)(6) defines the term ``valuation'' as 
including ``any estimate of the value of a dwelling developed in 
connection with a creditor's decision to provide credit, including 
those values developed pursuant to a policy of a government sponsored 
enterprise or by an automated valuation model, a broker price opinion, 
or other methodology or mechanism.''

Higher-Risk Mortgage Appraisal Requirements

    On the same day that this proposal is released by the Bureau, the 
Bureau is also releasing a proposal to implement section 1471 of the 
Dodd-Frank Act, which added new appraisal requirements for higher-risk 
mortgages that are subject to joint implementation by the Board, 
Bureau, Federal Deposit Insurance Corporation (FDIC), Federal Housing 
Finance Agency (FHFA), National Credit Union Administration (NCUA), and 
Office of the Comptroller of the Currency, Treasury (OCC). This 
provision, which is codified in new TILA section 129H(d), contains 
disclosure requirements that are similar to ECOA section 701(e) in that 
creditors must provide consumers, at least three days prior to closing, 
a copy of any appraisal prepared in connection with a higher-risk 
mortgage. 15 U.S.C. 1639h(c). Creditors must also provide consumers, at 
the time of the initial mortgage application, a statement that any 
appraisal prepared for the mortgage is for the creditor's sole use and 
that the consumer may choose to have a separate appraisal conducted at 
his or her own expense. Id. 1639h(d). Section 1471 of the Dodd-Frank 
Act defines the term ``higher-risk mortgage'' generally as a 
residential mortgage loan, other than a reverse mortgage, that is 
secured by a principal dwelling with an annual percentage rate (APR) 
that exceeds the average prime offer rate (APOR) for a comparable 
transaction by a specified percentage. Id. 1639h(f).

C. Other Rulemakings

    In addition to this proposal and the higher-risk mortgage 
rulemaking discussed above, the Bureau currently is engaged in six 
other rulemakings relating to mortgage credit to implement requirements 
of the Dodd-Frank Act:
     TILA-RESPA Integration: On July 9, 2012, the Bureau 
released a proposed rule and forms combining the TILA mortgage loan 
disclosures with the Good Faith Estimate (GFE) and settlement statement 
required under RESPA pursuant to Dodd-Frank Act section 1032(f) as well 
as sections 4(a) of RESPA and 105(b) of TILA, as amended by Dodd-Frank 
Act sections 1098 and 1100A, respectively (2012

[[Page 50392]]

TILA-RESPA Proposal).\10\ 12 U.S.C. 2603(a); 15 U.S.C. 1604(b).
---------------------------------------------------------------------------

    \10\ Available at http://www.consumerfinance.gov/notice-and-comment/.
---------------------------------------------------------------------------

     HOEPA: On the same day that the Bureau released the 2012 
TILA-RESPA Proposal, the Bureau also released a proposal to implement 
Dodd-Frank Act requirements expanding protections for ``high-cost'' 
mortgage loans under HOEPA, pursuant to TILA sections 103(bb) and 129, 
as amended by Dodd-Frank Act sections 1431 through 1433 (2012 HOEPA 
Proposal).\11\ 15 U.S.C. 1602(bb) and 1639.
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    \11\ Id.
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     Servicing: The Bureau is in the process of developing a 
proposal to implement Dodd-Frank Act requirements regarding force-
placed insurance, error resolution, and payment crediting, as well as 
forms for mortgage loan periodic statements and ``hybrid'' adjustable-
rate mortgage reset disclosures, pursuant to sections 6 of RESPA and 
128, 128A, 129F, and 129G of TILA, as amended or established by Dodd-
Frank Act sections 1418, 1420, 1463, and 1464. The Bureau has publicly 
stated that in connection with the servicing rulemaking the Bureau is 
considering proposing rules on reasonable information management, early 
intervention for troubled and delinquent borrowers, and continuity of 
contact, pursuant to the Bureau's authority to carry out the consumer 
protection purposes of RESPA in section 6 of RESPA, as amended by Dodd-
Frank Act section 1463. 12 U.S.C. 2605; 15 U.S.C. 1638, 1638a, 1639f, 
and 1639g.
     Loan Originator Compensation: The Bureau is in the process 
of developing a proposal to implement provisions of the Dodd-Frank Act 
requiring certain creditors and mortgage loan originators to meet duty 
of care qualifications and prohibiting mortgage loan originators, 
creditors, and the affiliates of both from receiving compensation in 
various forms (including based on the terms of the transaction) and 
from sources other than the consumer, with specified exceptions, 
pursuant to TILA section 129B as established by Dodd-Frank Act sections 
1402 and 1403. 15 U.S.C. 1639b.
     Ability to Repay: The Bureau is in the process of 
finalizing a proposal issued by the Board to implement provisions of 
the Dodd-Frank Act requiring creditors to determine that a consumer can 
repay a mortgage loan and establishing standards for compliance, such 
as by making a ``qualified mortgage,'' pursuant to TILA section 129C as 
established by Dodd-Frank Act sections 1411 and 1412 (Ability to Repay 
Rulemaking). 15 U.S.C. 1639c.
     Escrows: The Bureau is in the process of finalizing a 
proposal issued by the Board to implement provisions of the Dodd-Frank 
Act requiring certain escrow account disclosures and exempting from the 
higher-priced mortgage loan escrow requirement loans made by certain 
small creditors, among other provisions, pursuant to TILA section 129D 
as established by Dodd-Frank Act sections 1461 and 1462 (Escrows 
Rulemaking). 15 U.S.C. 1639d.
    With the exception of the requirements being implemented in the 
TILA-RESPA proposal, the Dodd-Frank Act requirements referenced above 
generally will take effect on January 21, 2013, unless final rules 
implementing those requirements are issued on or before that date and 
provide for a different effective date. To provide an orderly, 
coordinated, and efficient comment process, the Bureau is generally 
setting the deadlines for comments on this and other proposed mortgage 
rules based on the date the proposal is issued, instead of the date the 
notice is published in the Federal Register. Because the precise date 
of publication cannot be predicted in advance, this method will allow 
interested parties that intend to comment on multiple proposals to plan 
accordingly and will ensure that the Bureau receives comments with 
sufficient time remaining to issue final rules by January 21, 2013. 
However, consistent with the requirements of the Paperwork Reduction 
Act, the comment period for the proposed analysis under that Act will 
end 60 days after publication of this notice in the Federal Register.
    The Bureau regards the foregoing rulemakings as components of a 
larger undertaking; many of them intersect with one or more of the 
others. Accordingly, the Bureau is coordinating carefully the 
development of the proposals and final rules identified above. Each 
rulemaking will adopt new regulatory provisions to implement the 
various Dodd-Frank Act mandates described above. In addition, each of 
them may include other provisions the Bureau considers necessary or 
appropriate to ensure that the overall undertaking is accomplished 
efficiently and that it ultimately yields a regulatory scheme for 
mortgage credit that achieves the statutory purposes set forth by 
Congress, while avoiding unnecessary burdens on industry.
    Thus, many of the rulemakings listed above involve issues that 
extend across two or more rulemakings. In this context, each rulemaking 
may raise concerns that might appear unaddressed if that rulemaking 
were viewed in isolation. For efficiency's sake, however, the Bureau is 
publishing and soliciting comment on proposed answers to certain issues 
raised by two or more of its mortgage rulemakings in whichever 
rulemaking is most appropriate, in the Bureau's judgment, for 
addressing each specific issue. Accordingly, the Bureau urges the 
public to review this and the other mortgage proposals identified 
above, including those previously published by the Board, together. 
Such a review will ensure a more complete understanding of the Bureau's 
overall approach and will foster more comprehensive and informed public 
comment on the Bureau's several proposals, including provisions that 
may have some relation to more than one rulemaking but are being 
proposed for comment in only one of them.

III. Outreach and Consumer Testing

    The Bureau has conducted consumer testing relating to 
implementation of ECOA section 701(e) requirements in conjunction with 
the 2012 TILA-RESPA Proposal. A more detailed discussion of the 
Bureau's overall testing and form design can be found in the report 
Know Before You Owe: Evolution of the Integrated TILA-RESPA 
Disclosures, which is available on the Bureau's Web site.\12\
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    \12\ Kleimann Communication Group, Inc., Know Before You Owe: 
Evolution of the Integrated TILA-RESPA Disclosures (July 9, 2012), 
http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf.
---------------------------------------------------------------------------

    In January 2011, the Bureau contracted with a communication, 
design, consumer testing, and research firm, Kleimann Communication 
Group, Inc. (Kleimann), which specializes in consumer financial 
disclosures. The Bureau and Kleimann developed a plan to conduct 
qualitative usability testing, consisting of one-on-one cognitive 
interviews, over several iterations of prototype integrated disclosure 
forms. Between January and May 2011, the Bureau and Kleimann worked 
collaboratively on developing a qualitative testing plan, and several 
prototype integrated forms for the disclosure to be provided in 
connection with a consumer's application (i.e., a form integrating the 
RESPA good faith estimate and the early TILA disclosure).\13\ The 
qualitative testing

[[Page 50393]]

plan developed by the Bureau and Kleimann was unique with respect to 
qualitative testing performed by other federal agencies in that the 
Bureau planned to conduct qualitative testing with industry 
participants as well as consumers. Each round of qualitative testing 
included at least two industry participants, including lenders from 
several different types of depository (including credit unions) and 
non-depository institutions, mortgage brokers, and closing agents.
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    \13\ This discussion is limited to the testing of the disclosure 
to be provided in connection with a consumer's application, which is 
the portion of the testing relevant to the appraisal-related 
disclosure in proposed Sec.  1002.14(a)(2). As discussed in the 
supplementary information to the 2012 RESPA-TILA Proposal, the 
Bureau and Kleimann also tested prototype designs for the integrated 
disclosure forms to be provided in connection with the closing of 
the mortgage loan and real estate transaction. See the Bureau's 2012 
TILA-RESPA Proposal, available at http://www.consumerfinance.gov/regulations/.
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    In addition, the Bureau launched an initiative to obtain public 
feedback on each round of prototype disclosures at the same time it 
conducted the qualitative testing of the prototypes, which it titled 
``Know Before You Owe.'' \14\ This initiative consisted of publishing 
and obtaining feedback on the prototype designs through an interactive 
tool on the Bureau's Web site or through posting the prototypes to the 
Bureau's blog on its Web site and providing an opportunity for the 
public to email feedback directly to the Bureau.
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    \14\ See http://www.consumerfinance.gov/knowbeforeyouowe.
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    From May to October 2011, Kleimann and the Bureau conducted a 
series of five rounds of qualitative testing on revised iterations of 
integrated disclosure prototype forms. This testing was conducted in 
five different cities across different U.S. Census regions and 
divisions: Baltimore, Maryland; Los Angeles, California; Chicago, 
Illinois; Springfield, Massachusetts; and Albuquerque, New Mexico. 
After each round, Kleimann analyzed and reported to the Bureau on the 
results of the testing. Based on these results and feedback received 
from the Bureau's Know Before You Owe public outreach project, the 
Bureau revised the prototype disclosure forms for the next round of 
testing.
    As part of the larger Know Before You Owe public outreach project, 
the Bureau tested two versions of the new appraisal-related disclosures 
required by both TILA section 129H and ECOA section 701(e).\15\ The 
Bureau believed that it was important to test both appraisal-related 
disclosures together in order to determine how best to provide these 
two overlapping but separate disclosures in a manner that would 
minimize consumer confusion and improve consumer comprehension. Testing 
showed that consumers tended to find the TILA and ECOA disclosures 
confusing when they were given together using, in both cases, the 
specific language set forth in the statute.\16\ Consumer comprehension 
improved when the Bureau developed a slightly longer plain language 
disclosure that was designed to incorporate the elements of both 
statutes. Based on the results of that testing, the Bureau has 
developed the following appraisal disclosure language: ``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.''
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    \15\ Kleimann Communication Group, Inc., Know Before You Owe: 
Evolution of the Integrated TILA-RESPA Disclosures 254-256 (July 9, 
2012),  http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf.
    \16\ Id.
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IV. Legal Authority

    The Bureau is issuing this proposed rule pursuant to its authority 
under ECOA, and the Dodd-Frank Act. On July 21, 2011, section 1061 of 
the Dodd-Frank Act transferred to the Bureau all of the ``consumer 
financial protection functions'' previously vested in certain other 
Federal agencies, including the Board.\17\ The term ``consumer 
financial protection function'' is defined to include ``all authority 
to prescribe rules or issue orders or guidelines pursuant to any 
Federal consumer financial law, including performing appropriate 
functions to promulgate and review such rules, orders, and 
guidelines.'' \18\ ECOA and title X of the Dodd-Frank Act are Federal 
consumer financial laws.\19\ Accordingly, the Bureau has authority to 
issue regulations pursuant to ECOA, as well as title X of the Dodd-
Frank Act.
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    \17\ Public Law 111-203, 124 Stat. 1376, section 1061(b)(7); 12 
U.S.C. 5581(b)(7).
    \18\ 12 U.S.C. 5581(a)(1).
    \19\ Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) 
(defining ``Federal consumer financial law'' to include the 
``enumerated consumer laws'' and the provisions of title X of the 
Dodd-Frank Act); Dodd-Frank Act section 1002(12), 12 U.S.C. 5481(12) 
(defining ``enumerated consumer laws'' to include ECOA).
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    Section 1022(b)(1) of the Dodd-Frank Act authorizes the Bureau to 
prescribe rules ``as may be necessary or appropriate to enable the 
Bureau to administer and carry out the purposes and objectives of the 
Federal consumer financial laws, and to prevent evasions thereof[.]'' 
12 U.S.C. 5512(b)(1). Section 1022(b)(2) of the Dodd-Frank Act 
prescribes certain standards for rulemaking that the Bureau must follow 
in exercising its authority under section 1022(b)(1). 12 U.S.C. 
5512(b)(2).
    Section 1405(b) of the Dodd-Frank Act provides that, 
``[n]otwithstanding any other provision of [title XIV of the Dodd-Frank 
Act], in order to improve consumer awareness and understanding of 
transactions involving residential mortgage loans through the use of 
disclosures, the [Bureau] may, by rule, exempt from or modify 
disclosure requirements, in whole or in part, for any class of 
residential mortgage loans if the [Bureau] determines that such 
exemption or modification is in the interest of consumers and in the 
public interest.'' 15 U.S.C. 1601 note. Section 1401 of the Dodd-Frank 
Act, which amended TILA section 103(cc), 15 U.S.C. 1602(cc), generally 
defines residential mortgage loan as any consumer credit transaction 
that is secured by a mortgage on a dwelling or on residential real 
property that includes a dwelling other than an open-end credit plan or 
an extension of credit secured by a consumer's interest in a timeshare 
plan. Notably, the authority granted by section 1405(b) applies to 
``disclosure requirements'' generally, and is not limited to a specific 
statute or statutes.
    Section 703(a) of ECOA authorizes the Bureau to prescribe 
regulations to carry out the purposes of ECOA. Section 703(a) further 
states that such regulations may provide for such adjustments and 
exceptions for any class of transactions, that in the judgment of the 
Bureau are necessary or proper to effectuate the purposes of ECOA, to 
prevent circumvention or evasion thereof, or to facilitate or 
substantiate compliance. 15 U.S.C. 1691b(a). Pursuant to this 
authority, the Bureau proposes to implement the amended ECOA appraisal 
provision. 15 U.S.C 1691(e). The proposed rule would amend existing 
Sec.  1002.14 of Regulation B.

V. Section-by-Section Analysis

Section 1002.14 Rules on Providing Appraisals and Valuations

Overview
    This proposal would implement amendments made by the Dodd-Frank Act 
to ECOA that require, among other things, that creditors provide 
applicants with free copies of any and all written appraisals and 
valuations developed in connection with an application for a loan to be 
secured by a first lien on a dwelling. The Bureau is proposing to 
implement these new requirements through amendments to existing Sec.  
1002.14 of Regulation B.
14(a) Providing Appraisals and Valuations
    Currently, Sec.  1002.14(a) of Regulation B sets forth the general 
requirement that

[[Page 50394]]

a creditor shall provide a copy of the appraisal report used in 
connection with an application for credit that is to be secured by a 
lien on a dwelling. Section 1002.14(a) states that a creditor must 
comply with either Sec.  1002.14(a)(1), which provides for routine 
delivery of copies of appraisal reports to an applicant, or Sec.  
1002.14(a)(2), which sets forth rules for providing copies of appraisal 
reports upon request (for creditors that do not choose to routinely 
provide appraisal reports to applicants). As discussed in more detail 
below, the Bureau is proposing to amend Sec.  1002.14(a) to implement 
changes to the appraisal delivery requirements set forth in the Dodd-
Frank Act. Because the Dodd-Frank Act amendments to ECOA section 701(e) 
eliminate the option for a creditor to provide copies of appraisals or 
valuations only upon written request, the Bureau is proposing to 
renumber portions of proposed Sec.  1002.14(a) for clarity.
    As discussed in more detail below, proposed Sec.  1002.14(a)(1) 
would set forth the general requirement to provide copies of written 
appraisals and valuations to applicants for credit to be secured by a 
first lien on a dwelling, and would set forth the timing and waiver 
requirements for providing such copies. Proposed Sec.  1002.14(a)(2) 
would require that a creditor provide a written disclosure of the 
applicant's right to receive a copy of such written appraisals and 
valuations. Proposed Sec.  1002.14(a)(3) would prohibit creditors from 
charging the applicant for providing a copy of written appraisals and 
valuations, but would permit creditors to require applicants to pay a 
reasonable fee to reimburse the creditor for appraisals and valuations. 
Proposed Sec.  1002.14(a)(4) would clarify that the requirements of 
Sec.  1002.14(a)(1) apply regardless of whether credit is extended or 
denied, or if the application is incomplete or withdrawn. Proposed 
Sec.  1002.14(a)(5) would allow for the copies required by Sec.  
1002.14(a)(1) to be provided in electronic form. As is discussed in 
more detail below, proposed Sec.  1002.14(b) would define certain terms 
used in proposed Sec.  1002.14(a).
    Current comment 14(a)(2)(i)-1 addresses the notice requirements if 
the application subject to Sec.  1002.14 involves more than one 
applicant. The Bureau is proposing to renumber current comment 
14(a)(2)(i)-1 as proposed comment 14(a)-1, and to make a conforming 
change so that the comment accurately refers to the disclosure about 
copies of written appraisals and valuations rather than to a notice 
about the appraisal report. In addition, the proposed comment would be 
amended to clarify that the comment also applies to the requirement to 
provide copies of written appraisals and valuations. Accordingly, the 
proposed comment would clarify that if there is more than one 
applicant, the notice about the written appraisals and valuations, and 
the copies of written appraisals and valuations, need only be given to 
one applicant, but it must be given to the primary applicant where one 
is readily apparent.

14(a)(1) In General

Scope
    Consistent with ECOA section 701(e)(1), proposed Sec.  
1002.14(a)(1) would require a creditor to provide an applicant a copy 
of all written appraisals and valuations developed in connection with 
an application for credit that is to be secured by a first lien on a 
dwelling. The scope of proposed Sec.  1002.14(a)(1) differs in several 
important respects from current Sec.  1002.14(a). First, consistent 
with new ECOA section 701(e)(1), the proposed amendments to Sec.  
1002.14(a)(1) would broaden scope of the current requirement to provide 
copies of ``an appraisal report'' to include ``all written appraisals 
and valuations developed.'' Thus, more types of documents developed to 
value properties would be covered.
    At the same time, the amendments made to ECOA section 701(e)(1) 
also narrow the types of transactions that are covered by subsection 
(e). Specifically, the proposed rule would apply to applications for 
credit to be secured by a first lien on a dwelling. In contrast, 
current Sec.  1002.14(a) applies to applications for credit secured by 
a first lien or a subordinate lien on a dwelling. Accordingly, proposed 
Sec.  1002.14(a)(1) would also add the word ``first'' to Sec.  
1002.14(a) to narrow the scope of the proposed rule to cover only loans 
secured by a first lien on a dwelling, consistent with the Dodd-Frank 
Act amendments to section 701(e) of ECOA.
    Current comments 14(a)-1 and 14(a)-2 clarify the applicability of 
the appraisal delivery requirements to credit for business purposes and 
renewals. The proposal would generally retain comments 14(a)-1 and 
14(a)-2 (renumbered as comments 14(a)(1)-1 and 14(a)(1)-2), with 
several conforming and technical changes. Specifically, proposed 
comment 14(a)(1)-1 would include an updated cross-reference to the 
definition of ``dwelling'' that, as discussed below, is proposed to be 
moved to Sec.  1002.14(b)(2). In addition, proposed comment 14(a)(1)-1 
would be narrowed to cover only loans secured by a first lien on a 
dwelling, consistent with proposed Sec.  1002.14(a)(1). Thus, proposed 
comment 14(a)(1)-1 would provide that Sec.  1002.14(a)(1) covers 
applications for credit to be secured by a first lien on a dwelling, as 
that term is defined in Sec.  1002.14(b)(2), whether the credit is 
business credit (see Sec.  1002.2(g)) or consumer credit (see Sec.  
1002.2(h)).
    Proposed comment 14(a)(1)-2 would generally be consistent with 
current comment 14(a)-2. However, proposed comment 14(a)(1)-2 would use 
the statutory term ``developed'' provided in new ECOA section 701(e)(1) 
in place of the term ``obtained'' throughout the comment. Thus, 
proposed comment 14(a)(1)-2 would provide that Sec.  1002.14(a)(1) 
applies when an applicant requests the renewal of an existing extension 
of credit and the creditor develops a new written appraisal or 
valuation. In addition, the proposed comment would also provide that 
Sec.  1002.14(a) does not apply when a creditor uses the appraisals or 
valuations that were previously developed in connection with the prior 
extension of credit in order to evaluate the renewal request.
    The Bureau requests comment on whether additional guidance is 
needed on the application of the requirements of proposed Sec.  
1002.14(a)(1) in the case of renewals for consumer or business purpose 
transactions.
    The Bureau is proposing to adopt a new comment 14(a)(1)-3 that 
would clarify that for purposes of Sec.  1002.14, a ``written'' 
appraisal or valuation includes, without limitation, an appraisal or 
valuation received or developed by the creditor: in paper form (hard 
copy); electronically, such as by CD or email; or by any other similar 
media. In addition, the proposed comment clarifies that creditors 
should look to Sec.  1002.14(a)(5) regarding the provision of copies of 
appraisals and valuations to applicants via electronic means. The 
Bureau believes that its proposed interpretation of the term 
``written'' best serves the purposes of the statute, because consumers 
would receive free copies of appraisals and valuations regardless of 
whether the creditor receives, prepares or stores these materials in 
paper or electronic form.

Timing

    Proposed Sec.  1002.14(a)(1) would clarify that a creditor must 
provide a copy of each written appraisal or valuation subject to Sec.  
1002.14(a)(1) promptly (generally within 30 days of receipt by the 
creditor), but not later than three business days prior to

[[Page 50395]]

consummation of the transaction, whichever is first to occur. This 
aspect of the proposal implements ECOA section 701(e)(1), which 
requires that creditors provide the copies of each written appraisal or 
valuation promptly, but in no case later than three days prior to the 
closing of the loan. The statute does not define the term ``promptly.'' 
However, current Sec.  1002.14(a)(2)(ii) states that ``promptly'' means 
generally within 30 days. For consistency with existing Sec.  
1002.14(a)(2)(ii), under proposed Sec.  1002.14(a)(1) the provision of 
a copy of written appraisals and valuations will generally be 
considered prompt if the written appraisals and valuations are provided 
within 30 days of receipt thereof by the creditor. Thus, under the 
proposed rule a creditor would be required to provide a copy of all 
appraisals and valuations within 30 days of receipt or three days prior 
to consummation of the transaction, whichever is first to occur.
    In addition, for clarity and to be consistent with other similar 
regulatory requirements under TILA and RESPA, the proposed rule would 
use the term ``consummation'' in place of the statutory term 
``closing'' and clarify that the statutory term ``days'' means 
``business days.''

Waiver

    ECOA section 701(e)(2) provides that an applicant may waive the 
three-day requirement provided in ECOA section 701(e)(1), except where 
otherwise required in law. The Bureau believes that the ``3 day 
requirement'' referenced in the statute refers to the timing 
requirement to provide a copy of an appraisal or valuation three 
business days prior to closing, as opposed to the general requirement 
to provide copies of all appraisals and valuations. Specifically, the 
Bureau believes that a creditor is required to provide a copy of an 
appraisal or valuation developed promptly (generally within 30 days) 
even if the application is denied, incomplete, withdrawn, or the 
applicant waives the three day requirement. In addition, because 
creditors who order or conduct an appraisal or valuation require it to 
be completed before consummation of the transaction, the Bureau 
believes that a creditor should always be required to provide an 
applicant a copy of written appraisals and valuations by the date of 
consummation of the transaction. Accordingly, proposed Sec.  
1002.14(a)(1) provides that, notwithstanding the other requirements in 
Sec.  1002.14(a)(1), an applicant may waive the timing requirement to 
receive a copy of an appraisal or valuation three business days prior 
to consummation and agree to receive the copy at or before 
consummation, except as otherwise prohibited by law.
    Proposed comment 14(a)(1)-4 would clarify that Sec.  1002.14(a)(1) 
permits the applicant to waive the timing requirement that written 
appraisals and valuations be provided no later than three business days 
prior to consummation if the creditor provides the copy at or before 
consummation, except as otherwise provided by law. In addition, the 
proposed comment would provide that an applicant's waiver is effective 
under Sec.  1002.14(a)(1) if the applicant provides the creditor an 
affirmative oral or written statement waiving the 3-day timing 
requirement. Finally, the proposed comment would provide that if there 
is more than one applicant for credit in the transaction, any applicant 
may provide the statement.

Delivery Upon Request No Longer Permitted

    Section 1474 of the Dodd-Frank Act amended ECOA section 701(e) to 
mandate that copies of appraisals and valuations be provided regardless 
of whether the consumer affirmatively requests such copies. 
Accordingly, for consistency with the statute, the Bureau is proposing 
to delete current Sec.  1002.14(a)(1) and (a)(2), which permit 
creditors to choose between the ``routine delivery'' and ``delivery 
upon request'' methods of complying with the requirements of Sec.  
1002.14.

Exemption for Credit Unions Removed

    The Board's 1993 Final Rule on Providing Appraisal Reports (1993 
Final Rule) provided an exemption from the appraisal delivery 
requirements in Sec.  1002.14 for credit unions. See 58 FR 65657, 65660 
(Dec. 16, 1993). In the 1993 Final Rule the Board cited to the 
legislative history of the 1991 ECOA amendments as the basis for the 
exemption for credit unions. The reasoning behind this exemption 
appears to have been that credit unions were already required to comply 
with substantially similar requirements under the regulations of the 
National Credit Union Administration (NCUA).\20\ The Board also cited 
to a section of the legislative history noting that Congress intended 
no change to the NCUA's regulations in adding the requirement to 
provide appraisals in ECOA.\21\
---------------------------------------------------------------------------

    \20\ See 12 CFR 701.31(c)(5) providing that each Federal credit 
union shall make available, to any requesting member/applicant, a 
copy of the appraisal used in connection with that member's real 
estate-related loan application. The appraisal shall be available 
for a period of 25 months after the applicant has received notice 
from the Federal credit union of the action taken by the Federal 
credit union on the real estate-related loan application.
    \21\ The legislative history to the 1991 ECOA amendments cited 
to in the Board's 1993 Final Rule on Providing Appraisals notes that 
the NCUA already requires credit unions to make appraisals 
available, and that the legislation is not intended to modify those 
NCUA regulations. See S. Rep. No. 102-167, at 90 (102nd Cong. 1st 
Sess. 1991).
---------------------------------------------------------------------------

    Under 12 CFR 701.31(c)(5), Federal credit unions are still required 
to make available to any requesting member/applicant a copy of the 
appraisal used in connection with that member's real estate-related 
loan application. However, the Dodd-Frank Act amendments to ECOA 
section 701(e) substantially alter the requirements on creditors to 
provide appraisals. Specifically, section 1474 of the Dodd-Frank Act 
expanded the scope of the requirements of ECOA section 701(e) to 
require creditors to provide copies of all valuations, and to eliminate 
the need for applicants to request copies. In addition, neither section 
1474 of the Dodd-Frank Act nor the legislative history refers to an 
exception for credit unions subject to, and complying with, the 
provisions of the NCUA regulations relating to making appraisals 
available upon request. Accordingly, as proposed, Sec.  1002.14 would 
delete the exemption for credit unions in current Sec.  1002.14(b).
    The Bureau requests comment on the removal of this exemption and 
whether there are additional factors the Bureau should take into 
consideration relating to the application of proposed Sec.  1002.14 to 
credit unions.

14(a)(2) Disclosure

    Consistent with ECOA section 701(e)(5), proposed Sec.  
1002.14(a)(2) provides that for applications subject to Sec.  
1002.14(a)(1), a creditor shall provide an applicant with a written 
disclosure, not later than the third business day after the creditor 
receives an application, of the applicant's right to receive a copy of 
all written appraisals and valuations developed in connection with such 
application.
Content
    Title XIV of the Dodd-Frank Act added two new appraisal related 
disclosure requirements for consumers. New section 701(e)(5) of ECOA, 
which is implemented in this proposed rule provides: ``At the time of 
application, the creditor shall notify an applicant in writing of the 
right to receive a copy of each written appraisal and valuation under 
this subsection.'' 15 U.S.C. 1691(e)(5). Similarly, section 129H(d) of 
TILA provides:

[[Page 50396]]

    At the time of the initial mortgage application, the applicant 
shall be provided with a statement by the creditor that any 
appraisal prepared for the mortgage is for the sole use of the 
creditor, and that the applicant may choose to have a separate 
appraisal conducted at the expense of the applicant.
    15 U.S.C. 1639h(d). In the absence of regulatory action to 
harmonize the two provisions, creditors would be required to provide 
two appraisal-related disclosures to consumers for certain loans 
(i.e., a TILA and an ECOA disclosure for higher-risk mortgage loans 
secured by a first lien on a consumer's principal dwelling) and just 
one for others (i.e., an ECOA disclosure for first-lien, dwelling-
secured loans that are not higher-risk mortgage loans, or a TILA 
disclosure for higher-risk mortgage loans secured by a subordinate 
lien).

    The Bureau believes that Congress intended the ECOA and TILA 
disclosures to work together to provide consumers a better 
understanding of their rights in the appraisal process. Accordingly, 
the Bureau is proposing to exercise its authority under section 703(a) 
of ECOA and section 1405(b) of the Dodd-Frank Act to amend form C-9 in 
Regulation B to include the language developed to satisfy the new 
appraisal-related disclosure requirements of both ECOA and TILA. The 
proposed sample disclosure language differs from the express statutory 
language provided in section 701(e)(5). However, based on the results 
of the testing described above, the Bureau believes that the additional 
explanatory text is necessary to promote consumer comprehension and to 
reduce any confusion associated with the TILA appraisal notification 
that will also have to be given to applicants for higher-risk mortgage 
loans. The Bureau believes this approach will also reduce compliance 
burden for industry by allowing a single disclosure to satisfy both 
statutory requirements. Accordingly, the Bureau believes that the 
proposed sample notice language developed to satisfy the disclosure 
requirements of both TILA and ECOA serves the interests of consumers, 
the public, and creditors. The Bureau requests comment on the proposed 
language and whether additional changes should be made to the text of 
the notification to further enhance consumer comprehension.
    In addition, the Bureau notes that the model language in proposed 
Form C-9 refers only to appraisals, while proposed Sec.  1002.14(a)(2) 
refers to ``all written appraisals and valuations.'' The Bureau 
solicits comment on what, if any, adjustments or clarifications to Form 
C-9 would be appropriate for creditors that perform valuations rather 
than, or in addition to, appraisals.
Timing and Method of Delivery
    ECOA section 701(e)(5) requires creditors to notify applicants in 
writing, at the time of application, of the right to receive a copy of 
each written appraisal and valuation. The Bureau proposes to interpret 
the phrase ``at the time of application'' to require creditors to 
provide the ECOA appraisal disclosure no later than three business days 
after receiving an application. Proposed Sec.  1002.14(a)(2) would 
require creditors to notify applicants in writing, not later than the 
third business day after a creditor receives such application, of the 
right to receive a copy of all written appraisals and valuations 
developed in connection with such application.
    This approach is consistent with the disclosure requirements of 
TILA and RESPA.\22\ Currently, creditors are required to provide 
disclosures under TILA and RESPA no later than the third business day 
after receiving a consumer's written application.\23\ The Bureau has 
also proposed as part of the 2012 TILA-RESPA Proposal that the ECOA 
disclosure be provided as part of the Loan Estimate disclosure to be 
delivered not later than the third business day after application, to 
eliminate the need for a separate disclosure.\24\
---------------------------------------------------------------------------

    \22\ See, e.g., 2012 TILA-RESPA Proposal, at 12 CFR 
1026.19(e)(1)(iii) (``Timing. The creditor shall deliver the 
disclosures required under paragraph (e)(1)(i) of this section not 
later than the third business day after the creditor receives the 
consumer's application.'') available at http://www.consumerfinance.gov/regulations/.
    \23\ See, e.g., 12 CFR 1026.19(a)(1)(i) providing in relevant 
part that in a mortgage transaction subject to the Real Estate 
Settlement Procedures Act that is secured by the consumer's dwelling 
* * * the creditor shall make good-faith estimates of the 
disclosures required by Sec.  226.18 and shall deliver or place them 
in the mail not later than the third business day after the creditor 
receives the consumer's written application.
    \24\ 2012 TILA-RESPA Proposal, at 12 CFR 1026.19(e)(1)(iii) and 
1026.37(m)(1) available at http://www.consumerfinance.gov/regulations/.
---------------------------------------------------------------------------

    The Bureau believes this approach is warranted because providing 
the disclosure to applicants at the same time as other similar 
disclosures--and possibly as part of a broader integrated disclosure 
document--would allow consumers to read the notification in context 
with other important information that must be delivered not later than 
the third business day after the creditor receives the application. 
Such an approach could reduce the number of pieces of paper that 
consumers receive and facilitate compliance by creditors.
    The Bureau requests comment on whether providing the disclosure at 
some other time would be more beneficial to consumers, and how the 
disclosure should be provided where an application is submitted by 
phone, fax or electronically. For example, the Bureau solicits comment 
on whether it would be appropriate to require that creditors provide 
the disclosure at the same time the application is received, or even as 
part of the application.
    The Bureau also seeks comment on the effective date if the Bureau 
were to finalize the proposal to include the new appraisal disclosure 
in the TILA-RESPA Loan Estimate. Because the 2012 TILA-RESPA Proposal 
likely will not be finalized on the same timeline as this proposal, 
creditors would likely have to revise their current ECOA disclosures to 
reflect the new language and distribute the disclosures as standalone 
forms until such time as the TILA-RESPA integrated disclosures must be 
provided. The Bureau believes that the burden involved would be modest 
since the forms are currently typically provided as standalone 
documents and do not require complicated dynamic systems programming to 
generate. The Bureau believes it is important for consumers to begin 
receiving information about their rights under ECOA with respect to 
receiving copies of appraisals. The Bureau therefore is not proposing 
to delay implementation of the disclosure requirement, as it is with 
some other mortgage-related disclosures required by the Dodd-Frank Act 
that the Bureau is proposing to implement as part of the integrated 
TILA-RESPA forms.\25\ The Bureau seeks comment on the burden and time 
involved in implementing the proposed revisions to the ECOA notice.
---------------------------------------------------------------------------

    \25\ See 2012 TILA-RESPA Proposal, available at http://www.consumerfinance.gov/regulations/.
---------------------------------------------------------------------------

14(a)(3) Reimbursement

    Consistent with ECOA sections 701(e)(3) and 701(e)(4), the proposed 
rule would remove current comment 14(a)(2)(ii)-1, which permits 
creditors to charge photocopy and postage costs incurred in providing a 
copy to the applicant. ECOA sections 701(e)(3) and 701(e)(4) address 
creditors' ability to charge certain fees relating to appraisals and 
valuations. Section 701(e)(3) affirms that creditors may require 
applicants to pay reasonable fees to reimburse the creditor for the 
cost of the appraisal, except where otherwise required in law. Section 
701(e)(4) provides that notwithstanding this ability, however, 
creditors shall provide a copy of each written appraisal or valuation 
at no additional cost to the applicant.
    The Bureau interprets the two provisions to permit creditors to 
charge

[[Page 50397]]

applicants reasonable fees to reimburse the creditor for costs of the 
appraisal or valuation itself, but not for photocopying, postage, or 
similar costs associated with providing one written copy to the 
applicant. Accordingly, proposed Sec.  1002.14(a)(3) generally 
implements sections 701(e)(3) and 701(e)(4), and provides additional 
details for clarity.
    In addition, the proposed regulation affirms that creditors may 
impose fees to reimburse the costs of both valuations and appraisals. 
Although ECOA section 701(e)(3) does not expressly refer to valuations, 
the reference to both appraisals and valuations in 701(e)(4) regarding 
the provision of copies creates ambiguity as to congressional intent. 
The Bureau believes that there is both consumer and industry benefit to 
affirming that creditors may charge reasonable fees for reimbursement 
for all types of property valuations. Absent such clarification, the 
statutory language might be read as implicitly forbidding creditors 
from charging reimbursement fees for obtaining valuations, such as 
broker-price opinions or automated valuation models. The Bureau does 
not believe that Congress intended such a result, which could create an 
incentive for creditors to favor full appraisals over less costly forms 
of valuation that may be equally appropriate in particular 
circumstances.\26\ Such a result would impose needless costs on loan 
applicants.
---------------------------------------------------------------------------

    \26\ According to estimates for the average cost of an appraisal 
provided by the U.S. Government Accountability Office (GAO), 
consumers on average pay $300-450 for full interior appraisal. See 
Residential Appraisals: Opportunities to Enhance Oversight of an 
Evolving Industry GAO-11-653, pg. 22 (July 2011). Other forms of 
valuation, however, tend to cost less than appraisals. Broker Price 
Opinions typically cost $65-125; valuations derived from an 
automated valuation model typically cost $5-25. See Id., pgs. 17-18; 
see also Real Estate Appraisals: Appraisal Subcommittee Needs to 
Improve Monitoring Procedures-12-147, pg. 39 (Jan. 2012).
---------------------------------------------------------------------------

    To the extent necessary, the Bureau relies on the authority 
provided in ECOA section 703(a) to provide adjustments and exceptions 
for any class of transactions in proposing to interpret section 
701(e)(3) of ECOA as permitting creditors to charge applicants a 
reasonable fee to reimburse the creditor for the cost of developing an 
appraisal or valuation, except as otherwise provided by law. Such an 
adjustment effectuates the purposes of ECOA by permitting creditors to 
charge applicants for less costly forms of valuations that may be 
utilized in certain low dollar value transactions, and then pass those 
savings on to loan applicants. For example, the Federal banking 
agencies do not require federally insured financial institutions to 
obtain an appraisal in low risk real estate-related financial 
transactions in which the transaction value is $250,000 or less.\27\
---------------------------------------------------------------------------

    \27\ See, e.g., 12 CFR 323.3(a)(1) exempting real estate-related 
financial transactions with a transaction value of less than 
$250,000 from the FDIC's rule requiring FDIC insured institutions to 
obtain an appraisal performed by a State certified or licensed 
appraiser for all real estate-related financial transactions.
---------------------------------------------------------------------------

    Proposed comment 14(a)(3)-1 would provide examples of the specific 
types of charges that are prohibited under the regulation, such as 
photocopying fees and postage for mailing a copy of written appraisals 
or valuations.
    Proposed comment 14(a)(3)-2 would clarify that Sec.  1002.14(a)(3) 
does not prohibit creditors from imposing fees that are reasonably 
designed to reimburse the creditor for costs incurred in connection 
with obtaining actual appraisal or valuation services, so long they are 
not increased to cover the costs of providing documentation under Sec.  
1002.14. The Bureau does not read ECOA section 701(e)(3) as an attempt 
to create a proscriptive rate regime for all valuation-related 
activities. The Bureau notes that where Congress believed direct 
regulation of the amount of fees in connection with appraisal 
activities was required, it specified standards in the Dodd-Frank Act. 
See Dodd-Frank Act section 1472 (requiring under TILA, with regard to 
residential mortgage loans, that creditors and their agents pay 
independent appraisers fees that are ``reasonable and customary'' for 
the market area where the property is located, and specifying various 
sources for determining whether fees meet the standard). The Bureau 
does not believe that Congress intended ECOA section 701, which focuses 
on the provision of documentation to loan applicants rather than the 
substantive performance of appraisal and valuation services, to 
function in such a manner. Accordingly, the Bureau believes that 
sections 701(e)(3) and 701(e)(4) are simply designed to prevent direct 
or indirect upcharging related to the documentation provision that is 
the focus of the statute.
    To further clarify the statutory language stating that creditors' 
ability to seek reimbursement for the cost of the appraisal does not 
apply ``where otherwise required in law,'' proposed comment 14(a)(3)-2 
also notes that other sources of law may separately prohibit creditors 
from charging fees to reimburse the costs of appraisals, and are not 
overridden by section 701(e)(3). For instance, section 1471 of the 
Dodd-Frank Act requires creditors to obtain a second interior appraisal 
in connection with certain higher-risk mortgage loans, but prohibits 
creditors from charging applicants for the cost of the second 
appraisal. TILA section 129H(b)(2)(B); 15 U.S.C. 1639h(b)(2)(B).
    The Bureau requests comment on the proposed text and whether 
additional guidance is needed to comply with the requirements of 
proposed Sec.  1002.14(a)(3).

14(a)(4) Withdrawn, Denied or Incomplete Applications

    Consistent with ECOA section 701(e)(1), proposed Sec.  
1002.14(a)(4) would provide that the requirements of Sec.  
1002.14(a)(1) apply whether credit is extended or denied or if the 
application is incomplete or withdrawn. This language would expand on 
the language in current Sec.  1002.14(a)(1), which already requires 
that creditors using the routine delivery option of compliance provide 
copies of appraisal reports ``whether credit is granted or denied or 
the application is withdrawn.'' Specifically, under the proposed rule 
creditors would also be required to provide copies of appraisals and 
valuations in situations where an applicant provides only an incomplete 
application.

14(a)(5) Copies in Electronic Form

    Section 1002.4(d)(2) of Regulation B currently provides that the 
disclosures required to be provided in writing by this part may be 
provided to the applicant in electronic form, subject to compliance 
with the consumer consent and other applicable provisions of the 
Electronic Signatures in Global and National Commerce Act (E-Sign Act) 
(15 U.S.C. 7001 et seq.). The Bureau believes that it is appropriate to 
allow creditors to provide applicants with copies of written appraisals 
and valuations in electronic form if the applicant consents to 
receiving the copies in such form. Accordingly, proposed Sec.  
1002.14(a)(5) would provide that the copies of written appraisals and 
valuations required by Sec.  1002.14(a)(1) may be provided to the 
applicant in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the E-Sign Act.

14(b) Definitions

    Proposed Sec.  1002.14(b) would set forth three definitions, 
discussed below. The Bureau requests comment on whether there are 
additional terms that should be defined for purposes of this rule, and 
how best to define those terms in a manner consistent with ECOA section 
701(e).

[[Page 50398]]

14(b)(1) Consummation
    As discussed above, for clarity and to be consistent with other 
similar regulatory requirements under TILA and RESPA, proposed Sec.  
1002.14(a)(1) would use the term ``consummation'' in place of the 
statutory term ``closing.'' In addition, the proposed rule would define 
the term ``consummation'' in a manner that mirrors the definition of 
the term provided in Sec.  1026.2(a)(13) of Regulation Z. 12 CFR 
1026.2(a)(13). Accordingly, proposed Sec.  1002.14(b)(1) would define 
the term ``consummation'' as the time that a consumer becomes 
contractually obligated on a credit transaction.
    Proposed comment 14(b)(1)-1 would clarify that when a contractual 
obligation on the consumer's part is created is a matter to be 
determined under applicable law; Sec.  1002.14 does not make this 
determination. A contractual commitment agreement, for example, that 
under applicable law binds the consumer to the credit terms would be 
consummation. Consummation, however, does not occur merely because the 
consumer has made some financial investment in the transaction (for 
example, by paying a nonrefundable fee) unless, of course, applicable 
law holds otherwise.
    Proposed comment 14(b)(1)-2 would clarify that consummation does 
not occur when the consumer becomes contractually committed to a sale 
transaction, unless the consumer also becomes legally obligated to 
accept a particular credit arrangement.
14(b)(2) Dwelling
    Proposed Sec.  1002-1.14(b)(2) would retain the definition of the 
term ``dwelling'' in current Sec.  1002.14(c). Specifically, proposed 
Sec.  1002.14(b)(2) would define the term ``dwelling'' as a residential 
structure that contains one to four units whether or not that structure 
is attached to real property. Proposed paragraph (b)(2) further 
provides that the term ``dwelling'' includes, but is not limited to, an 
individual condominium or cooperative unit, and a mobile or other 
manufactured home.
14(b)(3) Valuation
    Consistent with ECOA section 701(e)(6), proposed Sec.  
1002.14(b)(3) defines ``valuation'' as any estimate of the value of a 
dwelling developed in connection with a creditor's decision to provide 
credit. The commentary to the proposed rule would include the list of 
examples provided in ECOA section 701(e)(6).
    Proposed comment 14(b)(3)-1 would amend current comment 14(c)-1 to 
provide the following examples of valuations:
     A report prepared by an appraiser (whether or not 
certified and licensed), including written comments and other documents 
submitted to the creditor in support of the person's estimate or 
opinion of the property's value.
     A document prepared by the creditor's staff that assigns 
value to the property, if a third-party appraisal report has not been 
used.
     An internal review document reflecting that the creditor's 
valuation is different from a valuation in a third party's appraisal 
report (or different from valuations that are publicly available or 
valuations such as manufacturers' invoices for mobile homes).
     Values developed pursuant to a methodology or mechanism 
required by a government sponsored enterprise, including written 
comments and other documents submitted to the creditor in support of 
the estimate of the property's value.
     Values developed by an automated valuation model, 
including written comments and other documents submitted to the 
creditor in support of the estimate of the property's value.
     A broker price opinion prepared by a real estate broker, 
agent, or sales person, including written comments and other documents 
submitted to the creditor in support of the estimate of the property's 
value.
    The Bureau requests comment on whether this list should include 
other examples of valuations. In addition, the Bureau requests comments 
on whether additional clarification is needed about what types of 
information would not constitute a valuation for purposes of Sec.  
1002.14.
    The Bureau understands that many documents prepared in the course 
of a mortgage transaction may contain information regarding the value 
of a dwelling, but are not themselves a written appraisal or valuation. 
The Bureau does not believe that consumers would benefit from being 
given duplicative information concerning written appraisals and 
valuations. Additionally, it is important for creditors to be able to 
easily distinguish between documents that must be provided to 
applicants and those that are not required to be provided. Accordingly, 
proposed comment 14(b)(3)-2 would amend current comment 14(c)-2 to 
clarify that not all documents that discuss or restate a valuation of 
an applicant's property constitute ``written appraisals and 
valuations'' for purposes Sec.  1002.14(a)(1). In addition, the 
proposed comment would provide the following list of examples of 
documents that discuss the valuation of the applicant's property but 
nonetheless are not ``written appraisals and valuations:''
     Internal documents, that merely restate the estimated 
value of the dwelling contained in a written appraisal or valuation 
being provided to the applicant.
     Governmental agency statements of appraised value that are 
publically available.
     Valuations lists that are publically available (such as 
published sales prices or mortgage amounts, tax assessments, and retail 
price ranges) and valuations such as manufacturers' invoices for mobile 
homes.
    The Bureau requests comment on whether this list of examples is too 
broad or whether additional examples should be included and why.

V. Section 1022(b)(2) of the Dodd-Frank Act

    In developing the proposed rule, the Bureau has considered 
potential benefits, costs, and impacts to consumers and covered 
persons,\28\ and has consulted or offered to consult with the Federal 
banking agencies, FHFA, the Department of Housing and Urban 
Development, and the Federal Trade Commission, including regarding 
consistency with any prudential, market, or systemic objectives 
administered by such agencies.
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    \28\ Specifically, Section 1022(b)(2)(A) calls for the Bureau to 
consider the potential benefits and costs of a regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Act; and 
the impact on consumers in rural areas.
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    The proposed rule would amend Regulation B, which implements the 
Equal Credit Opportunity Act, and the official interpretation to the 
regulation, which interprets the requirements of Regulation B. The 
proposed revisions to Regulation B would implement an Equal Credit 
Opportunity Act amendment concerning appraisals and other valuations 
that was enacted as part of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. In general, the proposed revisions to 
Regulation B would require creditors to provide free copies of all 
written appraisals and valuations developed in connection with an 
application for a loan to be secured by a first lien on a dwelling. The 
proposal also would require creditors to notify applicants in writing 
of the right to receive a copy of each written appraisal or valuation 
at no additional cost.

[[Page 50399]]

    Section 1022 permits the Bureau to consider the benefits, costs, 
and impacts of the proposed rule solely compared to the state of the 
world in which the statute takes effect without an implementing 
regulation. To provide the public better information about the benefits 
and costs of the statute, however, the Bureau has chosen to consider 
the benefits, costs, and impacts of the major provisions of the 
proposed rule against a pre-statutory baseline (i.e., the benefits, 
costs, and impacts of the relevant provisions of the Dodd-Frank Act and 
the regulation combined).\29\
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    \29\ The Bureau has discretion in any rulemaking to choose an 
appropriate scope of analysis with respect to potential benefits and 
costs and an appropriate baseline. The Bureau, as a matter of 
discretion, has chosen to describe a broader range of potential 
effects to more fully inform the rulemaking.
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    The Bureau has relied on a variety of data sources to analyze the 
potential benefits, costs, and impacts of the proposed rule. However, 
in some instances, the requisite data are not available or quite 
limited. Data with which to quantify the benefits of the proposed rule 
are particularly limited. As a result, portions of this analysis 
provide a qualitative discussion of the benefits, costs, and impacts of 
the proposed rule, relying instead in part on general economic 
principles to provide insight into these benefits, costs, and impacts.
    The primary source of data used in this analysis comes from data 
collected under the Home Mortgage Disclosure Act (HMDA).\30\ Because 
the latest wave of complete data available is for loans made in 
calendar year 2010, the empirical analysis generally uses the 2010 
market as the baseline. Data from fourth quarter 2010 bank and thrift 
Call Reports,\31\ fourth quarter 2010 credit union call reports from 
the National Credit Union Administration (NCUA), and de-identified data 
from the National Mortgage Licensing System (NMLS) Mortgage Call 
Reports (MCR) \32\ for the first and second quarter of 2011 were also 
used to identify financial institutions and their characteristics. The 
unit of observation in this analysis is the entity: if there are 
multiple subsidiaries of a parent company then their originations are 
summed and revenues are total revenues for all subsidiaries. The Bureau 
seeks comment on the use of these data sources, the appropriateness to 
this purpose, and alternative or additional sources of information.
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    \30\ The Home Mortgage Disclosure Act (HMDA), enacted by 
Congress in 1975, as implemented by the Bureau's Regulation C 
requires lending institutions annually to report public loan-level 
data regarding mortgage originations. For more information, see 
http://www.ffiec.gov/hmda. It should be noted that not all mortgage 
lenders report HMDA data. The HMDA data capture roughly 90-95 
percent of lending by the Federal Housing Administration and 75-85 
percent of other first-lien home loans. Depository institutions 
(including credit unions) with assets less than $39 million (in 
2010), for example, and those with branches exclusively in non-
metropolitan areas and those that make no purchase money mortgage 
loans are not required to report to HMDA. Reporting requirements for 
non-depository institutions depend on several factors, including 
whether the company made fewer than 100 purchase money or refinance 
loans, the dollar volume of mortgage lending as share of total 
lending, and whether the institution had at least five applications, 
originations, or purchased loans from metropolitan areas. Robert B. 
Avery, Neil Bhutta, Kenneth P. Brevoort & Glenn B. Canner, The 
Mortgage Market in 2010: Highlights from the Data Reported under the 
Home Mortgage Disclosure Act, 97 Fed. Res. Bull., December 2011, at 
1, 1 n.2.
    \31\ Every national bank, State member bank, and insured 
nonmember bank is required by its primary Federal regulator to file 
consolidated Reports of Condition and Income, also known as Call 
Report data, for each quarter. as of the close of business on the 
last day of each calendar quarter (the report date). The specific 
reporting requirements depend upon the size of the bank and whether 
it has any foreign offices. For more information, see http://www2.fdic.gov/call_tfr_rpts/.
    \32\ The Nationwide Mortgage Licensing System is a national 
registry of non-depository financial institutions including mortgage 
loan originators. Portions of the registration information are 
public. The Mortgage Call Report data are reported at the 
institution level and include information on the number and dollar 
amount of loans originated, the number and dollar amount of loans 
brokered.
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Potential Benefits and Costs to Covered Persons and Consumers

    Consumers. Since the proposed rule requires creditors to deliver 
copies of valuations, including appraisals, to consumers and creditors 
are explicitly prohibited from charging consumers for these copies, 
consumers do not bear any direct costs from the proposed rule. The 
provision of the free copy of the valuation provides consumers with 
details about the valuation and the condition of the property. Although 
most consumers receive much of this information from a home inspection 
and although the appraisal is done for the creditor, each valuation 
provides the consumer with another independent evaluation. This 
detailed information may be particularly valuable to the consumer when 
the appraised value is less than the buyer's offer.\33\
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    \33\ The value of the information may vary depending on when in 
the home purchase and loan origination process he or she receives 
the information.
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    The proposed rule would change the process of obtaining a copy from 
one where the consumer must request one to one where the copy is given 
as the default. This would likely result in more consumers obtaining 
copies of their valuations since, despite low transaction costs, there 
is evidence that default rules can have significant effects on outcomes 
in various settings.\34\ Consumers who previously may have requested 
copies of valuations in the absence of the amendment save the time and 
effort required to make requests.
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    \34\ John Beshears, James Choi, David Laibson, & Brigitte 
Madrian. ``The Importance of Default Options for Retirement Savings 
Outcomes: Evidence from the United States.'' Chap. 5 In Social 
Security Policy in a Changing Environment, Jeffrey Brown, Jeffrey 
Liebman & David A. Wise eds. (Chicago, IL: University of Chicago 
Press), 169-195. Eric Johnson and Daniel Goldstein. ``Do Defaults 
Save Lives?'' Science 302 (2003) 1338-1139.
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    Individual consumers engage in real estate transactions 
infrequently, so developing the expertise to value real estate is 
costly and consumers often rely on experts, such as real estate agents, 
and list prices to make price determinations. These methods may not 
lead a consumer to an accurate valuation of a property. For example, 
there is evidence that real estate agents sell their own homes for 
significantly more than other houses, which suggests that sellers may 
not be able to accurately price the homes that they are selling.\35\ 
Other research, this time in a laboratory setting, provides evidence 
that individuals are sensitive to anchor values when estimating home 
prices.\36\ In such cases, an independent signal of the value of the 
home should benefit the consumer. Having a professional valuation as a 
point of reference may help consumers gain a more accurate 
understanding of the home's value and improve overall market 
efficiency, relative to the case where the knowledge of true valuations 
is more limited.\37\
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    \35\ Steven Levitt and Chad Syverson. ``Market Distortions When 
Agents are Better Informed: The Value of Information In Real Estate 
Transactions.'' The Review of Economics and Statistics 90 no.4 
(2008): 599-611.
    \36\ Peter Scott and Colin Lizieri. ``Consumer House Price 
Judgments: New Evidence of Anchoring and Arbitrary Coherence.'' 
Journal of Property Research 29 no. 1 (2012): 49-68.
    \37\ For example, in Quan and Quigley's theoretical model where 
buyers and seller have incomplete information, trades are 
decentralized, and prices are the result of pairwise bargaining, 
``[t]he role of the appraiser is to provide information so that the 
variance of the price distribution is reduced.'' Daniel Quan and 
John Quigley. ``Price Formation and the Appraisal Function in Real 
Estate Markets.'' Journal of Real Estate Finance and Economics 4 
(1991): 127-146.
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    Covered Persons. In the context of the proposed rule, ``covered 
persons'' includes depository institutions such as banks, credit 
unions, and thrifts, as well as non-depository lenders such as 
independent mortgage banks. The Bureau estimates that of the roughly 
15,000 depository institutions, just fewer than 12,000 originate 
mortgage loans. Another 2,500 non-depository institutions engage in 
real estate credit, based on data from the NMLS MCR. The

[[Page 50400]]

proposed rule codifies the common practice of sending copies of all 
written appraisals to consumers who obtain loans secured by a first 
lien on a dwelling. In outreach calls to industry, all respondents 
reported providing copies of appraisals to borrowers as a matter of 
course if a loan is originated.\38\ In addition, the proposed rule 
requires that copies of appraisals and valuations be sent in the event 
that an application is received but does not result in a loan being 
originated. Note that while the proposed rule prohibits creditors from 
charging consumers for these copies, the cost of compliance is offset 
in part by the costs saved by no longer having to respond to consumer 
requests for copies. Because responding to a request involves querying 
a loan file, finding the appraisal, and then going through the process 
of sending copies of valuations to the consumer, the cost of responding 
to a single consumer request may be higher than the cost of routinely 
providing a copy of valuations for a given loan.
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    \38\ Respondents include a large bank, a trade group of smaller 
depository institutions, and an independent mortgage bank.
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    Under the proposed rule, covered persons would incur the paperwork 
costs, for a set of applications and originations, of replicating and 
sending (either electronically or physically) copies of the appraisals 
and valuations.\39\ Based on outreach to industry the Bureau assumes 
that appraisals and copies of other valuations are currently sent to 
consumers for 100% of first lien transactions that result in an 
origination and that copies of appraisals and valuations conducted for 
applications that do not result in a loan are not sent to consumers. As 
a result, the paperwork costs result from those applications that do 
not result in originations. The Bureau also believes that a second 
appraisal is conducted, and is sent, for any property with a loan size 
equal to or above $600,000. Further, appraisals are considered to be of 
inadequate quality 10% of the time, necessitating a second appraisal.
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    \39\ Based on its outreach and research, the Bureau assumes that 
the average appraisal is 20 pages long and that printing a copy of 
an appraisal costs $0.10 per page. The Bureau assumes that 84% of 
appraisals are sent via email, 15.75% of appraisals are sent via the 
United States Postal Service, and 0.25% of appraisals are sent via 
courier. Mailing an appraisal is assumed to cost $2.12 based on the 
cost of first class mail for a 3.7oz letter (20 pages of 20 lb paper 
weighs 3.2oz with a 0.5oz allowance for an envelope) and requires 5 
minutes of loan officer time; sending an appraisal via a courier is 
assumed to cost $17 ($15 for courier fees and $2 for replication 
costs) in material costs and 5 minutes of loan officer time; and, 
sending a copy via email is assumed to cost $0.05 of material cost 
and 1 minute of loan officer time.
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    To measure these paperwork costs, counts of originations and 
applications for reporting depository institutions and credit unions 
are obtained from the HMDA data; for non-HMDA reporters, counts are 
imputed using accepted statistical techniques that allow estimates 
based on the data available in Call reports.\40\ Different techniques 
are used to extrapolate from the applications and originations data 
available in HMDA for reporting IMBs to the broader set of all IMBs.
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    \40\ Specifically, Poisson regressions are run projecting loan 
volumes in these categories on the natural log of the following 
characteristics available in the Call reports: total 1-4 family 
residential loan volume outstanding, full-time equivalent employees, 
and assets. The regressions are run separately for each category of 
depository institution.
---------------------------------------------------------------------------

    Covered persons would also incur some costs in reviewing the 
proposed rule and in training the relevant employees.\41\ To estimate 
these costs, the number of loan officers who may require training is 
estimated based on the application or origination estimates.
---------------------------------------------------------------------------

    \41\ The cost of reviewing the regulation at each institution is 
assumed to be the time cost of reading and reviewing the regulation, 
which is assumed to be 3 minutes per page for 9 pages. It is assumed 
that the regulation is reviewed by one lawyer at each firm, and by 
one compliance officer at each non-depository institution, two 
compliance officers at each depository institution over $10 billion 
in assets, and one half a compliance officer at each smaller DI.
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    The total costs from the proposed rule are approximately $14 
million or just under $1.70 for each loan originated. The bulk of these 
costs arise from the paperwork requirements; roughly ten percent 
results from the one-time review and training costs.

Potential Reduction in Access by Consumers to Consumer Financial 
Products or Services

    Since the proposed rule, which largely codifies existing practice, 
is limited to relatively low cost clerical tasks and does not require 
the creditor to obtain any additional goods or services, the proposed 
rule is not likely to have an appreciable impact on the cost of credit 
for consumers or on loan volumes.

Impact of the Proposed Rule on Depository Institutions and Credit 
Unions With $10 Billion or Less in Total Assets, As Described in 
Section 1026 \42\ and the Impact of the Proposed Rule on Consumers in 
Rural Areas
---------------------------------------------------------------------------

    \42\ Approximately 50 banks with under $10 billion in assets are 
affiliates of large banks with over $10 billion in assets and 
subject to Bureau supervisory authority under Section 1025. However, 
these banks are included in this discussion for convenience.
---------------------------------------------------------------------------

    For smaller depository institutions, those with total assets of $10 
billion or less, the proposed rule is estimated to cost $4.6 million. 
Because of their smaller size, fixed training and reviewing costs are 
spread over fewer applications and originations and as a result, the 
average cost would increase slightly; for each loan these institutions 
originate, the cost is estimated to be roughly $1.80.
    The Bureau does not anticipate that the proposed rule would have a 
unique impact on consumers in rural areas.

Additional Analysis Being Considered and Request for Information

    In addition to the comment solicited elsewhere in this proposed 
rule, the Bureau requests commenters to submit data and to provide 
suggestions for additional data to assess the issues discussed above 
and other potential benefits, costs, and impacts of the proposed rule. 
The Bureau also requests comment on the use of the data described 
above. Further, the Bureau seeks information or data on the proposed 
rule's potential impact on consumers in rural areas as compared to 
consumers in urban areas. The Bureau also seeks information or data on 
the potential impact of the proposed rule on depository institutions 
and credit unions with total assets of $10 billion or less as described 
in Dodd-Frank Act section 1026 as compared to depository institutions 
and credit unions with assets that exceed this threshold and their 
affiliates.

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct an initial regulatory flexibility analysis (IRFA) and a 
final regulatory flexibility analysis (FRFA) of any rule subject to 
notice-and-comment rulemaking requirements, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities.\43\ The Bureau also is subject to 
certain additional procedures under the RFA involving the

[[Page 50401]]

convening of a panel to consult with small business representatives 
prior to proposing a rule for which an IRFA is required.\44\ An IRFA is 
not required for this proposal because the proposal, if adopted, would 
not have a significant economic impact on a substantial number of small 
entities.
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    \43\ For purposes of assessing the impacts of the proposed rule 
on small entities, ``small entities'' is defined in the RFA to 
include small businesses, small not-for-profit organizations, and 
small government jurisdictions. 5 U.S.C. 601(6). A ``small 
business'' is determined by application of Small Business 
Administration regulations and reference to the North American 
Industry Classification System (``NAICS'') classifications and size 
standards. 5 U.S.C. 601(3). A ``small organization'' is any ``not-
for-profit enterprise which is independently owned and operated and 
is not dominant in its field.'' 5 U.S.C. 601(4). A ``small 
governmental jurisdiction'' is the government of a city, county, 
town, township, village, school district, or special district with a 
population of less than 50,000. 5 U.S.C. 601(5).
    \44\ 5 U.S.C. 609.
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    The proposed rule would amend Regulation B, which implements the 
Equal Credit Opportunity Act, and the official interpretation to the 
regulation, which interprets the requirements of Regulation B. The 
proposed revisions to Regulation B would implement an Equal Credit 
Opportunity Act amendment concerning appraisals and other valuations 
that was enacted as part of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. In general, the proposed revisions to 
Regulation B would require creditors to provide free copies of all 
written appraisals and valuations developed in connection with an 
application for a loan to be secured by a first lien on a dwelling. The 
proposal also would require creditors to notify applicants in writing 
of the right to receive a copy of each written appraisal or valuation 
at no additional cost.
    The empirical approach to calculating the impact the proposed 
regulation has on small entities subject to its requirements utilizes 
the same data and methodology outlined in the previous section. The 
analysis that follows focuses on the economic impact of the proposed 
rule, relative to a pre-statute baseline, for small depository 
institutions, credit unions and non-depository independent mortgage 
banks (IMBs).
    The Small Business Administration classifies commercial banks, 
savings institutions, credit unions, and other depository institutions 
as small if they have assets less than $175 million, and classifies 
other real estate credit firms as small if they have less than $7 
million in annual revenues.\45\ All institutions that extend real 
estate credit secured by a first lien on a dwelling are affected by the 
proposed rule. As shown below, the vast majority of small banks, 
thrifts, credit unions, and independent mortgage banks originate such 
loans.
---------------------------------------------------------------------------

    \45\ 13 CFR Ch. 1.
---------------------------------------------------------------------------

    Of the roughly 17,747 depository institutions, credit unions, and 
IMBs, 13,106 are below the relevant small entity thresholds. Of these, 
9,807 are estimated to have originated mortgage loans in 2010. The 
Bureau has loan counts for credit unions and HMDA-reporting DIs and 
IMBs. For IMBs, the Bureau only has data on revenues for 560 of 2515 
institutions. In order to estimate the number of these institutions 
that have less than $7 million in revenues the Bureau uses an accepted 
statistical techniques (``nearest neighbor matching'') to impute 
revenues from the MCR.

                                                  Table 1--Counts and Originations of Creditors by Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Entities that  Small entities
                                                                Total                                           Small      originate any  that originate
                   Category                      NAICS Code    entities         Small entity threshold         entities   mortgage loans   any mortgage
                                                                                                                                \c\          loans \c\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial Banking \a\........................       522110         6596  $175 million in assets...........         3764            6362            3597
Savings Institutions \a\......................       522120         1145  $175 million in assets...........          491            1138             487
Credit Unions \b\.............................       522130         7491  $175 million in assets...........         6569            4359            3441
Independent Mortgage Banks \d,e\..............       522292         2515  $7 million in revenues...........         2282            2515            2282
                                               ---------------------------------------------------------------------------------------------------------
    Total.....................................  ...........       17,747  .................................        13106           14374            9807
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Asset size obtained from December 2010 Call Report Data downloaded from SNL. The institutions in the category savings institutions are all thrifts.
\b\ Asset size obtained from December 2010 NCUA Call Reports.
\c\ For HMDA reporters, loan counts from HMDA 2010. For institutions that do not report to HMDA, loan counts projected based on call report data fields
  and counts for HMDA reporters.
\d\ NMLS Mortgage Call Report (MCR) for Q1 and Q2 of 2011. All MCR reporters who originate at least one loan or have positive loan amounts are
  considered to be engaged in real estate credit (instead of purely mortgage brokers).
\e\ Revenues were not missing for 560 of the 2515 institutions. For institutions with missing revenue data, values were imputed using nearest neighbor
  matching of the count of originations and the count of brokered loans.

    Although most depository institutions, credit unions, and IMBs are 
affected by the proposed rule, the burden estimates below show that the 
proposed rule does not have a significant impact on a substantial 
number of small entities,. As discussed above, the economic impacts 
include preparing and sending copies of appraisals and other valuations 
and the costs of reviewing the rule and training employees.
    Consistent with the assumptions in the analysis of the previous 
section, the Bureau believes, based on its outreach, that currently it 
is routine business practice for appraisals to be sent to consumers for 
all first lien transactions that result in an origination and that 
copies of appraisals and valuations conducted for applications that do 
not result in a loan are not sent to consumers. The Bureau also 
believes that a second appraisal is typically conducted, and is sent, 
for any property with a loan size equal to or above $600,000. Further, 
appraisals are considered to be of inadequate quality 10% of the time, 
necessitating a second appraisal.\46\
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    \46\ All other assumptions regarding costs are the same as those 
used in the analysis under Section 1022(b)(2). These include the 
following assumptions regarding wages: Loan officer wages are 
assumed to $30.66 per hour, lawyer wages are $76.99 per hour, and 
compliance officer wages are $29.48 per hour. These rates are then 
increased to reflect that wages represent 67.5% of an employee's 
total compensation.
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    Under these assumptions, the total costs for small depository 
institutions and credit unions of providing copies of the appraisals or 
valuations and any one-time costs for reviewing the regulation and 
training employees are estimated to be roughly $2.70 per loan 
originated. For small IMBs, the costs are estimated to be just under 
$2.00 per loan originated. In both cases, the higher average costs 
reflect the greater importance of the fixed costs of training for 
smaller institutions as one-time costs are spread over fewer mortgage 
originations at these entities. Nevertheless, across all small 
entities, the costs of the rule amount to a small

[[Page 50402]]

faction of a percent of the revenue or profits from origination 
activity.\47\
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    \47\ Industry experts estimate that gross revenues per loan are 
approximately 3% of origination amount. The MBA's Mortgage Bankers 
Performance Report reports that in the 4th quarter of 2010 IMBs and 
subsidiaries reported that total production operating expenses were 
$4,930 per loan, average profits were $1,082 per loan, and average 
loan balance was $208,319.
---------------------------------------------------------------------------

Certification

    Accordingly, the undersigned certifies that this proposal, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. The Bureau requests comment on the analysis 
above and requests any relevant data.

VII. Paperwork Reduction Act

A. Overview

    The Bureau's information collection requirements contained in this 
proposed rule, and identified as such, have been submitted to the 
Office of Management and Budget (OMB) for review under section 3507(d) 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) 
(Paperwork Reduction Act or PRA). Under the PRA, the Bureau may not 
conduct or sponsor, and a person is not required to respond to, an 
information collection unless the information collection displays a 
valid OMB control number.
    The title of this information collection is ECOA Appraisal 
Proposal. The frequency of response is on-occasion. The proposed rule 
would amend 12 CFR Part 1002, Equal Credit Opportunity (Regulation B). 
Regulation B currently contains collections of information approved by 
OMB. The Bureau's OMB control number for Regulation B is 3170-0013 
(Equal Credit Opportunity Act (Regulation B) 12 CFR 1002). As described 
below, the proposed rule would amend the collections of information 
currently in Regulation B.
    The information collection in the proposed rule would be required 
to provide benefits for consumers and would be mandatory. Because the 
Bureau does not collect any information under the proposed rule, no 
issue of confidentiality arises. The likely respondents would be 
certain businesses, for-profit institutions, and nonprofit institutions 
that are creditors under Regulation B.
    Under the proposed rule, the Bureau generally would account for the 
paperwork burden for the following respondents pursuant to its 
enforcement/supervisory authority: insured depository institutions with 
more than $10 billion in total assets, their depository institution 
affiliates, and certain non-depository institutions. The Bureau and the 
FTC generally both have enforcement authority over non-depository 
institutions subject to Regulation B. Accordingly, the Bureau has 
allocated to itself half of its estimated burden to non-depository 
institutions. Other Federal agencies, including the FTC, are 
responsible for estimating and reporting to OMB the paperwork burden 
for the institutions for which they have enforcement/supervision 
authority. They may, but are not required to, use the Bureau's burden 
estimation methodology.
    Using the Bureau's burden estimation methodology, the total 
estimated burden for the roughly 14,000 creditors subject to the 
proposed rule, including Bureau respondents, would be approximately 
173,000 hours of ongoing burden annually and 20,000 hours in one-time 
burden. Since creditors already provide consumers copies of appraisals 
if a loan closes, the Bureau assumes that there are no required 
software or information technology upgrades associated with 
implementing the rule, because all of the actions required by the rule 
are already practiced by the affected institutions. The Bureau expects 
that the amount of time required to implement each of the proposed 
changes for a given institution may vary based on the size, complexity, 
and practices of the respondent.

B. Information Collection Requirements

    The information collection requirements in the proposed rule would 
be the provision of certain appraisals and other valuations to 
consumers. Under the proposed rule, copies of all appraisals and other 
valuations conducted in connection with an application for a loan to be 
secured by a first lien must be furnished to applicants free of charge 
within 3 days of application, and these copies may be delivered 
physically or electronically. Currently, ECOA requires that free copies 
be provided upon request. From outreach, the Bureau learned that it is 
customary to send consumers a copy of all valuations if the loan 
closes, but firms differed in their practices of sending out copies of 
valuations for loans that did not close.\48\ Therefore, the Bureau 
considers the incremental paperwork burden the cost of reviewing the 
rule, staff training, and the cost of sending out copies of appraisals 
and other valuations to consumers who apply for loans that do not 
close, but reach the stage where an appraisal or other valuation is 
conducted.
---------------------------------------------------------------------------

    \48\ Outreach conversations included a large bank, a trade group 
of smaller depository institutions, and an independent mortgage 
bank.
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C. Summary of Estimated Burden for CFPB Respondents

    The total annualized on-going burden for the depository 
institutions and credit unions with more than $10 billion in assets 
(including their depository affiliates) that originate mortgage loans 
is estimated to be roughly 74,500 hours and the annualized ongoing 
burden for all non-depository institutions that originate mortgage 
loans is estimated to be 47,800 hours. These respondents are estimated 
to incur an additional 5,800 hours and 4,600 hours in one-time burden, 
respectively. As discussed previously, for purposes of the PRA analysis 
under this proposed rule, the Bureau would assume roughly 23,900 on-
going burden hours and 2,300 one-time hours for the non-depository 
institutions.\49\
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    \49\ There may be a small additional burden for privately 
insured credit unions estimated to originate mortgages. The Bureau 
will assume half of the burden these institutions.
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D. Comments

    Comments are specifically requested concerning: (i) Whether the 
proposed collections of information are necessary for the proper 
performance of the functions of the Bureau, including whether the 
information will have practical utility; (ii) the accuracy of the 
estimated burden associated with the proposed collections of 
information; (iii) how to enhance the quality, utility, and clarity of 
the information to be collected; and (iv) how to minimize the burden of 
complying with the proposed collections of information, including the 
application of automated collection techniques or other forms of 
information technology. All comments will become a matter of public 
record. Comments on the collection of information requirements should 
be sent to the Office of Management and Budget (OMB), Attention: Desk 
Officer for the Consumer Financial Protection Bureau, Office of 
Information and Regulatory Affairs, Washington, DC 20503, or by the 
Internet to http://oira_submission@omb.eop.gov, with copies to the 
Bureau at the Consumer Financial Protection Bureau (Attention: PRA 
Office), 1700 G Street NW., Washington, DC 20552, or by the Internet to 
CFPB_Public_PRA@cfpb.gov.

VIII. Text of Proposed Revisions

    Certain conventions have been used to highlight the proposed 
changes to the text of the regulation and official interpretation. New 
language is shown inside [rtrif]bold-faced arrows[ltrif], while

[[Page 50403]]

language that would be deleted is set off with [lsqbb]bold-faced 
brackets[rsqbb].

List of Subjects in 12 CFR Part 1002

    Aged, Banks, Banking, Civil rights, Consumer protection, Credit, 
Credit unions, Discrimination, Fair lending, Marital status 
discrimination, National banks, National origin discrimination, 
Penalties, Race discrimination, Religious discrimination, Reporting and 
recordkeeping requirements, Savings associations, Sex discrimination.

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau of Consumer 
Financial Protection proposes to amend 12 CFR part 1002 and the 
Official Interpretations, as follows:

PART 1002--EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)

    1. The authority citation for part 1002 continues to read as 
follows:

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b.

    2. Revise Sec.  1002.14 to read as follows:

Sec.  1002.14  Rules on providing [lsqbb]appraisal 
reports[rsqbb][rtrif] appraisals and valuations[ltrif].

    (a) Providing appraisals[rtrif] and valuations[ltrif]. [rtrif](1) 
In general.[ltrif] A creditor shall provide [rtrif]an applicant 
[ltrif]a copy of [lsqbb]an appraisal report used[rsqbb][rtrif]all 
written appraisals and valuations developed [ltrif]in connection with 
an application for credit that is to be secured by a [rtrif]first 
[ltrif]lien on a dwelling. [lsqbb]A creditor shall comply with either 
paragraph (a)(1) or (a)(2) of this section.[rsqbb][rtrif]A creditor 
shall provide a copy of each such written appraisal or valuation 
promptly (generally within 30 days of receipt by the creditor), but not 
later than three business days prior to consummation of the 
transaction, whichever is first to occur. Notwithstanding the 
foregoing, an applicant may waive the right to receive a copy three 
business days prior to consummation and agree to receive the copy at or 
before consummation, except where otherwise prohibited by law.[ltrif]
    [lsqbb](1) Routine delivery. A creditor may routinely provide a 
copy of an appraisal report to an applicant (whether credit is granted 
or denied or the application is withdrawn).
    (2) Upon request. A creditor that does not routinely provide 
appraisal reports shall provide a copy upon an applicant's written 
request.
    (i) Notice. A creditor that provides appraisal reports only upon 
request shall notify an applicant in writing of the right to receive a 
copy of an appraisal report. The notice may be given at any time during 
the application process but no later than when the creditor provides 
notice of action taken under Sec.  1002.9 of this part. The notice 
shall specify that the applicant's request must be in writing, give the 
creditor's mailing address, and state the time for making the request 
as provided in paragraph (a)(2)(ii) of this section.
    (ii) Delivery. A creditor shall mail or deliver a copy of the 
appraisal report promptly (generally within 30 days of receipt by the 
creditor) after the creditor receives an applicant's request, receives 
the report, or receives reimbursement from the applicant for the 
report, whichever is last to occur. A creditor need not provide a copy 
when the applicant's request is received more than 90 days after the 
creditor has provided notice of action taken on the application under 
Sec.  1002.9 of this part or 90 days after the application is 
withdrawn.[rsqbb]
    [rtrif](2) Disclosure. For applications subject to paragraph (a)(1) 
of this section, a creditor shall provide an applicant with a written 
disclosure, not later than the third business day after the creditor 
receives an application, of the applicant's right to receive a copy of 
all written appraisals and valuations developed in connection with such 
application.
    (3) Reimbursement. A creditor shall not charge an applicant for 
providing a copy of written appraisals and valuations as required under 
this section, but may require applicants to pay a reasonable fee to 
reimburse the creditor for the cost of the appraisal or valuation 
unless otherwise provided by law.
    (4) Withdrawn, denied, or incomplete applications. The requirements 
set forth in paragraph (a)(1) of this section apply whether credit is 
extended or denied or if the application is incomplete or withdrawn.
    (5) Copies in electronic form. The copies required by Sec.  
1002.14(a)(1) may be provided to the applicant in electronic form, 
subject to compliance with the consumer consent and other applicable 
provisions of the Electronic Signatures in Global and National Commerce 
Act (E-Sign Act) (15 U.S.C. 7001 et seq.).[ltrif]
    [lsqbb](b) Credit unions. A creditor that is subject to the 
regulations of the National Credit Union Administration on making 
copies of appraisal reports available is not subject to this 
section.[rsqbb]
    [lsqbb](c)[rsqbb][rtrif](b)[ltrif] Definitions. For purposes of 
paragraph (a) of this section[lsqbb], the term dwelling[rsqbb][rtrif]:
    (1) Consummation. The term ``consummation'' means the time that a 
consumer becomes contractually obligated on a credit transaction.
    (2) Dwelling. The term ``dwelling''[ltrif] means a residential 
structure that contains one to four units whether or not that structure 
is attached to real property. The term includes, but is not limited to, 
an individual condominium or cooperative unit, and a mobile or other 
manufactured home. [lsqbb]The term appraisal report means the 
document(s) relied upon by a creditor in evaluating the value of the 
dwelling.[rsqbb]
    [rtrif](3) Valuation. The term ``valuation'' means any estimate of 
the value of a dwelling developed in connection with a creditor's 
decision to provide credit.[ltrif]
    3. Appendix C to part 1002 is amended by revising the sixth 
sentence in first paragraph, and sample Form C-9 is revised to read as 
follows:

Appendix C to Part 1002--Sample Notification Forms

    1. This Appendix contains ten sample notification forms. Forms 
C-1 through C-4 are intended for use in notifying an applicant that 
adverse action has been taken on an application or account under 
Sec. Sec.  1002.9(a)(1) and (2)(i) of this part. Form C-5 is a 
notice of disclosure of the right to request specific reasons for 
adverse action under Sec. Sec.  1002.9(a)(1) and (2)(ii). Form C-6 
is designed for use in notifying an applicant, under Sec.  
1002.9(c)(2), that an application is incomplete. Forms C-7 and C-8 
are intended for use in connection with applications for business 
credit under Sec.  1002.9(a)(3). Form C-9 is designed for use in 
notifying an applicant of the right to receive a copy of [lsqbb]an 
appraisal[rsqbb][rtrif]appraisals and valuations[ltrif] under Sec.  
1002.14. Form C-10 is designed for use in notifying an applicant for 
nonmortgage credit that the creditor is requesting applicant 
characteristic information.
* * * * *
    Form C-9--Sample Disclosure of Right to Receive a Copy of 
[lsqbb]an Appraisal[rsqbb][rtrif]Appraisals and Val uations[ltrif].
    [lsqbb]You have the right to a copy of the appraisal report used 
in connection with your application for credit. If you wish a copy, 
please write to us at the mailing address we have provided. We must 
hear from you no later than 90 days after we notify you about the 
action taken on your credit application or you withdraw your 
application.
    [lsqbb]In your letter, give us the following 
information:][rsqbb]
    [rtrif]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.[ltrif]
* * * * *

    4. Supplement I to part 1002 is amended by revising Section 1002.14 
to read as follows:

[[Page 50404]]

Supplement I to Part 1002--Official Interpretations

* * * * *
    [rtrif]Section 1002.14--Rules on Providing [lsqbb]Appraisal 
Reports[rsqbb][rtrif]Appraisals and Valuations[ltrif]
    14(a) Providing appraisals[rtrif] and valuations[ltrif].
    [rtrif]1. Multiple applicants. If there is more than one 
applicant the written disclosure about written appraisals and 
valuations, and the copies of written appraisals and valuations, 
need only be given to one applicant, but it must be given to the 
primary applicant where one is readily apparent.
    14(a)(1) In general.[ltrif]
    1. Coverage. This section covers applications for credit to be 
secured by a [rtrif]first [ltrif]lien on a dwelling, as that term is 
defined in [lsqbb]Sec.  1002.14(c)[rsqbb][rtrif]Sec.  
1002.14(b)(2)[ltrif], whether the credit is for a business purpose 
(for example, a loan to start a business) or a consumer purpose (for 
example, [lsqbb]a loan to finance a child's education[rsqbb][rtrif]a 
loan to purchase a home[ltrif]).
    2. Renewals. [lsqbb]This section[rsqbb][rtrif]Section 
1002.14(a)(1)[ltrif] applies when an applicant requests the renewal 
of an existing extension of credit and the creditor 
[lsqbb]obtains[rsqbb][rtrif]develops[ltrif] a new [lsqbb]appraisal 
report[rsqbb][rtrif]written appraisal or valuation[ltrif]. This 
section does not apply when a creditor uses the [lsqbb]appraisal 
report[rsqbb][rtrif]written appraisals and valuations[ltrif] that 
were previously [lsqbb]obtained[rsqbb][rtrif] developed in 
connection with the prior extension of credit in order[ltrif] to 
evaluate the renewal request.
    [rtrif]3. Written. For purposes of Sec.  1002.14, a ``written'' 
appraisal or valuation includes, without limitation, an appraisal or 
valuation received or developed by the creditor in paper form (hard 
copy); electronically, such as CD or email; or by any other similar 
media. But see Sec.  1002.14(a)(5) regarding the provision of copies 
of appraisals and valuations to applicants via electronic means.
    4. Waiver. Section 1002.14(a)(1) permits the applicant to waive 
the timing requirement that written appraisals and valuations be 
provided no later than three business days prior to consummation if 
the creditor provides the copy at or before consummation, except 
where otherwise prohibited by law. An applicant's waiver is 
effective under Sec.  1002.14(a) if the applicant provides the 
creditor an affirmative oral or written statement waiving the 3-day 
timing requirement. If there is more than one applicant for credit 
in the transaction, any applicant may provide the statement.[ltrif]
    [lsqbb]14(a)(2)(i) Notice.
    1. Multiple Applicants. When an applicant that is subject to 
this section involves more than one applicant, the notice about the 
appraisal report need only be given to one applicant, but it must be 
given to the primary applicant where one is readily apparent.[rsqbb]
    [lsqbb]14(a)(2)(ii) Delivery.[rsqbb][rtrif]14(a)(3) 
Reimbursement.[ltrif]
    [lsqbb]1. Reimbursement. Creditors may charge for photocopy and 
postage costs incurred in providing a copy of the appraisal report, 
unless prohibited by State or other law. If the consumer has already 
paid for the report--for example, as part of an application fee--the 
creditor may not require additional fees for the appraisal (other 
than photocopy and postage costs).[rsqbb]
    [rtrif]1. Photocopy, postage, or other costs. Creditors may not 
charge for photocopy, postage or other costs incurred in providing a 
copy of a written appraisal or valuation in accordance with this 
section.
    2. Reasonable fee for reimbursement. The regulation does not 
prohibit creditors from imposing fees that are reasonably designed 
to reimburse the creditor for costs incurred in connection with 
obtaining appraisal or valuation services, so long they are not 
increased to cover the costs of providing documentation under Sec.  
1002.14. However, creditors may not impose fees for reimbursement of 
the costs of an appraisal where otherwise provided by law. For 
instance, TILA prohibits a creditor from charging a consumer a fee 
for the performance of a second appraisal if the second appraisal is 
required under TILA section 129H(b)(2) (15 U.S.C. 
1639h(b)(2)).[ltrif]
    [lsqbb]14(c)[rsqbb]14(b)[ltrif] Definitions.
    [rtrif]14(b)(1) Consummation.
    1. State law governs. When a contractual obligation on the 
consumer's part is created is a matter to be determined under 
applicable law; Sec.  1002.14 does not make this determination. A 
contractual commitment agreement, for example, that under applicable 
law binds the consumer to the credit terms would be consummation. 
Consummation, however, does not occur merely because the consumer 
has made some financial investment in the transaction (for example, 
by paying a nonrefundable fee) unless, of course, applicable law 
holds otherwise.
    2. Credit v. sale. Consummation does not occur when the consumer 
becomes contractually committed to a sale transaction, unless the 
consumer also becomes legally obligated to accept a particular 
credit arrangement.
    14(b)(3) Valuation.[ltrif]
    1. [lsqbb]Appraisal reports. Examples of appraisal reports 
are:[rsqbb][rtrif] Examples of valuations. Examples of valuations 
include:[ltrif]
    i. A report prepared by an appraiser (whether or not licensed or 
certified), including written comments and other documents submitted 
to the creditor in support of the appraiser's estimate or opinion of 
the property's value.
    ii. A document prepared by the creditor's staff that assigns 
value to the property, if a third-party appraisal report has not 
been used.
    iii. An internal review document reflecting that the creditor's 
valuation is different from a valuation in a third party's appraisal 
report (or different from valuations that are publicly available or 
valuations such as manufacturers' invoices for mobile homes).
    [rtrif]iv. Values developed pursuant to a methodology or 
mechanism required by a government sponsored enterprise, including 
written comments and other documents submitted to the creditor in 
support of the estimate of the property's value.
    v. Values developed by an automated valuation model, including 
written comments and other documents submitted to the creditor in 
support of the estimate of the property's value.
    vi. A broker price opinion prepared by a real estate broker, 
agent, or sales person, including written comments and other 
documents submitted to the creditor in support of the estimate of 
the property's value.[ltrif]
    2. Other [lsqbb]reports[rsqbb][rtrif]documentation[ltrif]. 
[lsqbb]The term ``appraisal report'' does not cover all documents 
relating to the value of the applicant's property.[rsqbb][rtrif]Not 
all documents that discuss or restate a valuation of an applicant's 
property constitute ``written appraisals and valuations'' for 
purposes of Sec.  1002.14(a).[ltrif] Examples of [lsqbb]reports not 
covered are:[rsqbb][rtrif]documents that discuss the valuation of 
the applicant's property but nonetheless are not ``written 
appraisals and valuations'' include:[ltrif]
    i. Internal documents, [lsqbb]if a third-party appraisal report 
was used to establish the value of the property[rsqbb][rtrif]that 
merely restate the estimated value of the dwelling contained in a 
written appraisal or valuation being provided to the 
applicant[ltrif].
    ii. Governmental agency statements of appraised value 
[rtrif]that are publically available[ltrif].
    iii. Valuations lists that are publicly available (such as 
published sales prices or mortgage amounts, tax assessments, and 
retail price ranges) and valuations such as manufacturers' invoices 
for mobile homes.

    Dated: August 14, 2012.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2012-20422 Filed 8-17-12; 4:15 pm]
BILLING CODE 4810-AM-P
```