In connection with upcoming changes to Regulations B and Z concerning Appraisal Notices (see the section entitled “Appraisal Rules” in our article “The January 2014 CFPB Regulations,” located at http://www.docutechcorp.com/the-january-2014-cfpb-regulations for details), two new documents will replace our current Copy of Appraisal Report Notice (Cx6) for complying with the provisions of these two regulations.
New ECOA Appraisal Notice
The first document (Cx17903) will be used to comply with the provisions of Regulation B, which requires that a notice be provided to borrowers, in connection with loans secured by a first lien on a one-to-four unit dwelling (including condominiums, cooperatives, mobile, and other manufactured homes), which apprises them of the fact that they will be receiving a copy of any appraisal or evaluation report conducted on the property (see forthcoming 12 CFR § 1002.14 in 78 FR 7216  for details).
The document will match forthcoming Model Form C-9, located in 12 CFR Pt. 1002, App. C and will state the following:
“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.”
Notice of Right to Receive Copy of Appraisal Report, Cx17903, will print in all first lien Initial Disclosures when “Application Taken On or After 01/18/2014” is “Yes.”
New Higher-Risk Mortgage Notice
The second document (Cx17904) will be used to comply with the provisions of Regulation Z which requires a near-identical notice to be provided to the borrower in connection with what is referred to in the Dodd-Frank Act as a “higher-risk mortgage” (see 15 USCA § 1639h [West 2013]). We will be referring to these types of loans as “HRM-HPMLs.” This type of loan is basically a higher-priced mortgage loan (HPML) governed by 12 CFR § 1026.35, except that the following HPMLs are exempt from the appraisal notice requirements:
1. A qualified mortgage (QM), as defined in forthcoming 12 CFR § 1026.43(e) or Federal Agency rules (when such rules take effect), or a loan which meets the criteria of a QM under either Regulation Z or Federal Agency rules (when such rules take effect).
2. An HPML of $25,000 or less (adjusted for inflation).
3. An HPML secured by a manufactured home, a mobile home (i.e. a prefabricated home built before the HUD Title 6 Construction Standards were implemented on June 15, 1976), boat, or trailer.
4. An HPML used to finance the initial construction of a dwelling.
5. An HPML with a maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a borrower’s principal dwelling.
6. A reverse mortgage transaction (subject to 12 CFR § 1026.33[a]).
7. A refinance transaction which is a primary lien and:
a. Is either:
i. Extended by the same creditor who is the current holder of the transaction being refinanced; or
ii. The loan is insured or guaranteed by the same Federal government agency that insured or guaranteed by the transaction being refinanced.
(Basically, a streamline refinance)
b. Is not a negative amortization, interest only, or balloon payment loan, and
c. Is a no-cash out refinance.
(See 78 FR 10368 & 78520  for details)
Cx17904 will be provided for junior lien HRM-HPMLs, while Cx17903 will be provided for primary lien HRM-HPMLs. According to forthcoming 12 CFR § 1026.35[c][i], providing the notice required under Regulation B is considered compliant with Regulation Z’s appraisal notice requirements and all primary lien loans, including HRM-HPMLs, are subject to the notice requirements under Regulation B.
The text of Cx17904 will be verbatim to that of the model notice set forth in forthcoming Ibid., which will make it also near-verbatim to that of Cx17903, except that the word “promptly” will be excluded.
In order to configure Cx17904 to print for junior lien HRM-HPMLs, a new field “Higher-Risk HPML” (Field Index 67269) has been created to identify whether a loan is a HRM-HPML or not. If “HPML – Federal” is set to “Yes” or is not set, and none of the exclusions set forth above in items 1 through 8 are applicable, the loan will be considered an HRM-HPML for second liens, and Cx17904 will print. In essence, Cx17904 will print by default for second liens unless data is given that indicates it is not required. If “HPML – Federal” is set to “Yes”, and Qualified Mortgage Indicator is set to “No”, and none of the exclusions listed above apply, the loan will be considered an HRM-HPML for first liens.
Notice of Right to Receive Copy of Appraisal Report, Cx17904, will print in second lien Initial Disclosures when “Application Taken On or After 01/18/2014” is “Yes” and “Higher-Risk HPML” is “Yes.”
Update on California
In our article entitled “The January 2014 CFPB Regulations – Update” (available at http://www.docutechcorp.com/the-january-2014-cfpb-regulations-update), we mentioned the fact that two of California’s disclosures (including multi-state Cx6) may still need to be provided, even though the provisions of such disclosures will be obsolete once these new appraisal notice rules take effect.
We have not received any constructive feedback from regulatory agencies in California about whether the laws requiring these disclosures will be amended to accommodate changes to Federal regulations, or whether providing the new appraisal notice documents will satisfy such California laws.
Therefore, we are continuing to proceed with our plan of still providing these documents after January 18, 2014, but will include disclaimers to inform borrowers that they will automatically receive copies of their appraisal and/or automated valuation model report, under the appropriate conditions under Federal law. This means, for instance, that California borrowers may receive both Cx18023, which is a copy of current Cx6 for CA, and Cx17903 in the same loan package.
Availability for Testing
Test prints of these documents may be made through our Stage environment or Production environment for client review prior to the effective date of January 18, 2014. Clients printing test copies will need to make sure that the fields (particularly the application date field) are set properly in order for them to print. Please note Cx6 will now only print if “Application Taken On or After 01/18/2014” is “No.” If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
January 13, 2014
DR 140570 & 142321