The Factsheets are a newer category of CFPB guidance called a ‘compliance aid,’ which are not meant to replace formal regulatory guidance, but to “accurately summarize and illustrate the underlying rules and statutes.”
The ECOA Valuations Rule dates from 2013 and generally requires creditors to provide applicants with copies of all property appraisals or other valuations generated and a notice, within three days of application, of the applicant’s right to receive those copies. These requirements are triggered by 1) an application for credit 2) secured by a first lien on a dwelling, and 3) an appraisal or other valuation generated in connection with the application.
The Factsheets confirm that these triggering requirements use defined terms from ECOA and Reg B, such as ‘application,’ ‘credit’ and ‘creditor.’ Of special note in today’s environment, the Factsheets also confirm that the definition of ‘credit’ under Reg B includes ‘the right granted by a creditor to defer payment of a debt, [or] incur debt and defer its payment.’ (Reg B, 12 CFR 1002.2(j)). Lenders with loss mitigation and modification programs should consider this in determining their need to comply with the ECOA Valuations Rule.
Denied or Withdrawn Applications
Among other issues that the Factsheets clarify, there are no exceptions to requirements of the ECOA Valuations Rule if the application for credit is denied or withdrawn. The required notice is due to the applicant within three business days of application, although the notice itself can be modified to make clear that the application has been denied.
Examples of ‘Dwelling’
Reg B defines ‘dwelling’ as a “residential structure that contains one to four units whether or not that structure is attached to real property.” (Reg B, 12 CFR 1002.14(b)(2)). The Factsheets offer examples of collateral that do not meet this definition, such as multiple structures, a single structure with more than four units, land without any structure, a motor vehicle and a commercial-use property.
Broad Definition of ‘Valuation Prepared in Connection with the Application’
Reg B defines ‘valuation’ broadly to include “any estimate of the value of a dwelling” developed in connection with an application for credit, including a document prepared by a lender’s staff, if it was prepared as part of the loan application process. The Factsheets give examples of narrow exceptions to this broad definition, including publicly available lists of property values (such as Zillow), unless they are incorporated into a separate analysis of value, and an appraisal used in a prior loan and reused without update for a new loan application.