[Federal Register Volume 78, Number 21 (Thursday, January 31, 2013)]
[Rules and Regulations]
[Pages 7215-7250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-01384]



[[Page 7215]]

Vol. 78

Thursday,

No. 21

January 31, 2013

Part VI





 Bureau of Consumer Financial Protection





-----------------------------------------------------------------------





12 CFR Part 1002





Disclosure and Delivery Requirements for Copies of Appraisals and Other 
Written Valuations Under the Equal Credit Opportunity Act (Regulation 
B); Final Rule

Federal Register / Vol. 78 , No. 21 / Thursday, January 31, 2013 / 
Rules and Regulations

[[Page 7216]]


-----------------------------------------------------------------------

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1002

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


Disclosure and Delivery Requirements for Copies of Appraisals and 
Other Written Valuations Under the Equal Credit Opportunity Act 
(Regulation B)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretations.

-----------------------------------------------------------------------

SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
amending Regulation B, which implements the Equal Credit Opportunity 
Act (ECOA), and the Bureau's official interpretations of the 
regulation, which interpret and clarify the requirements of Regulation 
B. The final rule revises Regulation B to implement an ECOA amendment 
concerning appraisals and other valuations that was enacted as part of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act). In general, the revisions to Regulation B require creditors 
to provide to applicants free copies of all appraisals and other 
written valuations developed in connection with an application for a 
loan to be secured by a first lien on a dwelling, and require creditors 
to notify applicants in writing that copies of appraisals will be 
provided to them promptly.

DATES: This final rule is effective January 18, 2014.

FOR FURTHER INFORMATION CONTACT: Owen Bonheimer, Counsel, or William W. 
Matchneer, Senior Counsel, Office of Regulations, at (202) 435-7000.

SUPPLEMENTARY INFORMATION: 

I. Summary of the Final Rule

    Congress amended ECOA section 701(e) to require creditors to 
provide applicants with a copy of appraisals and other written 
valuations developed in connection with certain mortgage transactions 
as a matter of course, rather than only providing copies of appraisals 
upon applicants' request as previously required. For the reasons 
discussed below, the Bureau is now adopting amendments to Regulation B 
in final form, generally as proposed. The final rule amends Sec.  
1002.14 of Regulation B to provide for the following in connection with 
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 appraisals developed.
     Require creditors to provide applicants a copy of each 
appraisal and other written valuation promptly upon its completion or 
three business days before consummation (for closed-end credit) or 
account opening (for open-end credit), whichever is earlier.
     Permit applicants to waive the timing requirement for 
providing these copies. However, applicants who waive the timing 
requirement must be given a copy of all appraisals and other written 
valuations at or prior to consummation or account opening, or, if the 
transaction is not consummated or the account is not opened, no later 
than 30 days after the creditor determines the transaction will not be 
consummated or the account will not be opened.
     Prohibit creditors from charging for the copy of 
appraisals and other written valuations, but permit creditors to charge 
applicants reasonable fees for the cost of the appraisals or other 
written valuations unless applicable law provides otherwise.
    As discussed further in part VI, this final rule becomes effective 
on January 18, 2014. Accordingly, the final rule applies to mortgage 
transactions to be secured by a first lien on a dwelling for which the 
creditor receives an application on or after January 18, 2014.

II. Background

A. ECOA and Regulation B

    ECOA \1\ 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, or age (provided the 
applicant has the capacity to contract), or 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 consumer credit as well as to 
business and commercial credit except as provided in Regulation B, 
Sec.  1002.3(a)-(d).
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 1691 et seq.
---------------------------------------------------------------------------

    Prior to its amendment by the Dodd-Frank Act, section 701(e) of 
ECOA required creditors to provide credit applicants, upon written 
request, with copies of appraisal reports used in connection with their 
applications for a loan secured by residential real property. This 
provision was added to ECOA in 1991 as part of the Federal Deposit 
Insurance Corporation Improvement Act (FDICIA).\2\ 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 loan was denied due 
to a discriminatory appraisal.\3\
---------------------------------------------------------------------------

    \2\ Public Law 102-242, 105 Stat. 2236 (1991).
    \3\ For additional legislative history on the appraisal 
provision as originally added by the FDICIA, see S. Rept.167, 102nd 
Cong. (1991); S. Rept. 461, 101st Cong. (1990); 137 Cong. Rec. S2519 
(daily ed. Feb. 28, 1991); 136 Cong. Rec. S14592, 14598-99 (daily 
ed. Oct. 5, 1990).
---------------------------------------------------------------------------

    Section 1474 of the Dodd-Frank Act replaces the existing section 
701(e) with a new provision that imposed several new requirements 
concerning appraisals as well as other valuations, as described below. 
The Act also transferred general rulemaking authority for ECOA from the 
Board of Governors of the Federal Reserve System (Board) to the Bureau 
on July 21, 2011.\4\ 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 interim final 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.
---------------------------------------------------------------------------

    \4\ Public Law 111-203, 124 Stat. 1376 (2010). The transfer of 
authority is further discussed in Part IV below.
---------------------------------------------------------------------------

B. Dodd-Frank Act Amendments Concerning Appraisals and Other Valuations

    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.\5\ The Dodd-Frank Act 
created the Bureau and consolidated various rulemaking and supervisory 
authorities in this new agency, including the authority to implement 
ECOA.\6\ At the same time, Congress imposed new statutory requirements 
governing mortgage practices with the intent to restrict the practices 
that

[[Page 7217]]

contributed to the crisis and to provide additional protections to 
consumers.
---------------------------------------------------------------------------

    \5\ For more discussion of the mortgage market, the financial 
crisis, and mortgage origination generally, see the Bureau's 2012 
TILA-RESPA Proposal, 77 FR 51116 (Aug. 23, 2012), available at 
http://www.consumerfinance.gov/regulations/.
    \6\ 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.
---------------------------------------------------------------------------

    Sections 1471 through 1474 of the Dodd-Frank Act established a 
number of new requirements for appraisal and other valuation 
activities, including requirements relating to appraisal independence, 
appraisals for higher-risk mortgages, regulation of appraisal 
management companies, automated valuation models (AVMs), and providing 
copies of appraisals and other written valuations.\7\ Many of the Dodd-
Frank Act appraisal provisions are required to be implemented through 
joint rulemakings involving the Bureau and other 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 disclosure and appraisal copy requirements of a Dodd-
Frank Act amendment to the Truth in Lending Act (TILA) applicable to 
higher-risk mortgages. That Dodd-Frank Act amendment to TILA, which 
adds TILA 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).
---------------------------------------------------------------------------

    \7\ See TILA sections 129E and 129H as established by Dodd-Frank 
Act sections 1471 and 1472, 15 U.S.C. 1639e and 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 section 701(e) of ECOA as amended by Dodd-Frank Act section 
1474, 15 U.S.C. 1691(e).
---------------------------------------------------------------------------

ECOA Requirements Relating to Appraisals and Other Valuations
    Section 1474 of the Dodd-Frank Act \8\ amended ECOA section 701(e) 
to require that creditors provide copies of all appraisals and other 
written valuations to loan applicants, in credit transactions to be 
secured by a first lien on a dwelling, at no additional cost and 
without requiring applicants to request such copies affirmatively. 
Amended ECOA section 701(e) generally provides that:
---------------------------------------------------------------------------

    \8\ Public Law 111-203, sec. 1474, 124 Stat. 1376 (2010).
---------------------------------------------------------------------------

     A creditor shall furnish to an applicant a copy of any and 
all appraisals and other written 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 copy must be provided promptly upon 
completion, 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 copies of such 
appraisals or other valuations be provided three days prior to closing, 
except where otherwise required by law.
     The creditor shall provide a copy of each appraisal or 
other written 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 appraisal 
and other written 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 August 15, 2012, the Bureau--along with the Board, the Federal 
Deposit Insurance Corporation (FDIC), the Federal Housing Finance 
Agency (FHFA), the National Credit Union Administration (NCUA), and the 
Office of the Comptroller of the Currency (OCC)--jointly issued for 
public comment a proposal to implement new section 129H of TILA 
relating to appraisals for higher-risk mortgages (2012 Interagency 
Appraisals Proposal). The proposal was published in the Federal 
Register on September 5, 2012. See 77 FR 54722 (Sept. 5, 2012). TILA 
section 129H includes certain requirements that are similar to ECOA 
section 701(e). Under Section 129H(d), creditors must provide 
applicants, 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 also must provide applicants, 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 for a comparable transaction by specified percentages. Id. 
1639h(f). To finalize the 2012 Interagency Appraisals Proposal 
described above, the inter-agency group is issuing a final rule under 
section 129H of TILA (2103 Interagency Appraisals Final Rule).

III. Summary of the Rulemaking Process

A. Pre-Proposal Testing and Outreach

    The Bureau has conducted consumer testing relating to 
implementation of ECOA section 701(e) requirements in conjunction with 
its 2012 TILA-RESPA Proposal.\9\ 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.\10\
---------------------------------------------------------------------------

    \9\ See 77 FR 51116 at 51313-14, 51427 (Aug. 23, 2012). On July 
9, 2012, the Bureau issued for public comment a proposed rule and 
forms combining the TILA mortgage loan disclosures with the Real 
Estate Settlement Procedures Act (RESPA) Good Faith Estimate (GFE) 
and settlement statement required 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 TILA-RESPA Proposal). 12 U.S.C. 2603(a); 15 U.S.C. 1604(b).
    \10\ Kleimann Comm. Gp., Inc., Know Before You Owe: Evolution of 
the Integrated TILA-RESPA Disclosures (July 9, 2012), available at 
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).\11\ The 
qualitative testing plan developed by the Bureau and Kleimann was 
unique with respect to qualitative testing performed by other

[[Page 7218]]

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 nondepository institutions, mortgage brokers, and 
closing agents.
---------------------------------------------------------------------------

    \11\ This discussion is limited to 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 required under 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/.
---------------------------------------------------------------------------

    In addition, the Bureau launched an initiative to obtain public 
feedback on each round of prototype disclosures at the same time as it 
conducted the qualitative testing of the prototypes, which it titled 
``Know Before You Owe.'' \12\ 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. 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.
---------------------------------------------------------------------------

    \12\ See http://www.consumerfinance.gov/knowbeforeyouowe.
---------------------------------------------------------------------------

    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).\13\ The 
Bureau believed that it was important to test the TILA and ECOA 
appraisal-related disclosures together, in an integrated manner, to 
determine how to provide these overlapping but separate disclosures in 
a manner that would minimize consumer confusion and improve consumer 
comprehension. Testing of the first version showed that consumers 
tended to find the TILA and ECOA disclosures confusing when they were 
given together using the specific language set forth in the respective 
statutes.\14\ Consumer comprehension improved when the Bureau developed 
a slightly longer plain language version that was designed to 
incorporate the elements of both statutes. Based on the results of that 
testing, the Bureau 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.'' The Bureau 
included this language in the prototype form used in the final rounds 
of the testing process.
---------------------------------------------------------------------------

    \13\ Kleimann Comm. Gp., Inc., Know Before You Owe: Evolution of 
the Integrated TILA-RESPA Disclosures 254-256 (July 9, 2012), 
available at http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf.
    \14\ Id.
---------------------------------------------------------------------------

    In addition, as part of the rulemaking process for this rule, as 
described in the proposal, 77 FR 53090, at 50400 n.39, 50402 n.48 (Aug. 
21, 2012), the Bureau considered information obtained during pre-
proposal outreach to industry regarding its practices in providing 
copies of written appraisals to applicants. This outreach was carried 
out in the context of the development of the 2012 Interagency 
Appraisals Proposal and involved a large bank, a trade group of smaller 
depository institutions, and an independent mortgage bank (IMB).

B. The Bureau's 2012 ECOA Proposal on Providing Copies of Appraisals 
and Other Written Valuations

    The Bureau issued for public comment its proposal to amend 
Regulation B to implement the Dodd-Frank Act amendment to ECOA section 
701(e) on August 15, 2012. The proposal was published in the Federal 
Register on August 21, 2012. 77 FR 50390 (Aug. 21, 2012). The Bureau 
proposed to amend Regulation B, Sec.  1002.14(a)(1), to set forth a 
general requirement that creditors provide applicants for credit to be 
secured by a first lien on a dwelling with copies of all appraisals and 
other written valuations developed in connection with their 
applications. The Bureau further proposed timing requirements for 
providing such copies and standards governing any waiver of the timing 
requirements. The Bureau proposed to amend Sec.  1002.14(a)(2) to 
require that a creditor provide a written disclosure of the applicant's 
right to receive a copy of such appraisals and other written 
valuations. As proposed, Sec.  1002.14(a)(3) would have prohibited 
creditors from charging the applicants for providing a copy of 
appraisals and other written valuations, but would have permitted 
creditors to require applicants to pay a reasonable fee to reimburse 
the creditor for the cost of appraisals and other written valuations. 
The Bureau proposed in Sec.  1002.14(a)(4) to clarify that the 
requirements of Sec.  1002.14(a)(1) would apply regardless of whether 
credit is extended or denied, or if the application is incomplete or 
withdrawn. The Bureau proposed in Sec.  1002.14(a)(5) to allow the 
copies of appraisals and other written valuations 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 have defined certain 
terms used in Sec.  1002.14(a).

C. Overview of Comments Received

    The Bureau received 68 comments on the 2012 ECOA Proposal, 
primarily from creditors and their representatives. Most of the 
industry commenters generally supported the core elements of the 
proposal, while providing suggestions for exemptions, clarifications, 
or changes to particular elements of the proposal. Comment letters also 
were submitted by a group advocating for the use of plain language, and 
on behalf of appraisers, government-sponsored enterprises (GSEs), and 
real estate agents, as well as an affordable housing advocacy group. 
The affordable housing advocacy group commenter generally supported the 
proposal and suggested changes to strengthen consumer protections. The 
plain language group commenter suggested changes to make the rule 
easier to understand. Most of the remaining commenters generally 
supported the rule but suggested clarifications and changes to 
particular elements of the proposal. The comments are discussed in more 
detail in the section-by-section analysis below.

D. Other Rulemakings

    In addition to this final rule and the 2013 Interagency Appraisals 
Final Rule described above, the Bureau currently is adopting several 
other final rules and issuing one proposal, all relating to mortgage 
credit to implement requirements of title XIV of the Dodd-Frank Act. 
Each of the final rules follows a proposal issued in 2011 by the Board 
or in 2012 by the Bureau. Collectively, these proposed and final rules 
are referred to as the Title XIV Rulemakings.
     Ability to Repay: The Bureau is finalizing a rule, 
following a May 2011 proposal issued by the Board (Board's 2011 ATR 
Proposal),\15\ to implement provisions of the Dodd-Frank Act (1) 
requiring creditors to determine that a consumer has a reasonable 
ability to repay covered mortgage loans and

[[Page 7219]]

establishing standards for compliance, such as by making a ``qualified 
mortgage,'' and (2) establishing certain limitations on prepayment 
penalties, pursuant to TILA section 129C as established by Dodd-Frank 
Act sections 1411, 1412, and 1414. 15 U.S.C. 1639c. The Bureau's final 
rule is referred to as the 2013 ATR Final Rule. Simultaneously with the 
2013 ATR Final Rule, the Bureau is issuing a proposal to amend the 
final rule implementing the ability-to-repay requirements, including by 
the addition of exemptions for certain nonprofit creditors and certain 
homeownership stabilization programs and a definition of a ``qualified 
mortgage'' for certain loans made and held in portfolio by small 
creditors (2013 ATR Concurrent Proposal). The Bureau expects to act on 
the 2013 ATR Concurrent Proposal on an expedited basis, so that any 
exceptions or adjustments to the 2013 ATR Final Rule can take effect 
simultaneously with that rule.
---------------------------------------------------------------------------

    \15\ 76 FR 27390 (May 11, 2011).
---------------------------------------------------------------------------

     Escrows: The Bureau is finalizing a rule, following a 
March 2011 proposal issued by the Board (Board's 2011 Escrows 
Proposal),\16\ to implement certain provisions of the Dodd-Frank Act 
expanding on existing rules that require escrow accounts to be 
established for higher-priced mortgage loans and creating an exemption 
for certain loans held by creditors operating predominantly in rural or 
underserved areas, pursuant to TILA section 129D as established by 
Dodd-Frank Act section 1461. 15 U.S.C. 1639d. The Bureau's final rule 
is referred to as the 2013 Escrows Final Rule.
---------------------------------------------------------------------------

    \16\ 76 FR 11598 (Mar. 2, 2011).
---------------------------------------------------------------------------

     HOEPA: Following its July 2012 proposal (2012 HOEPA 
Proposal),\17\ the Bureau is issuing a final rule to implement Dodd-
Frank Act requirements expanding protections for ``high-cost 
mortgages'' under the Homeownership and Equity Protection Act (HOEPA), 
pursuant to TILA sections 103(bb) and 129, as amended by Dodd-Frank Act 
sections 1431 through 1433. 15 U.S.C. 1602(bb) and 1639. The Bureau 
also is finalizing rules to implement certain title XIV requirements 
concerning homeownership counseling, including a requirement that 
lenders provide lists of homeownership counselors to applicants for 
federally-related mortgage loans, pursuant to RESPA section 5(c), as 
amended by Dodd-Frank Act section 1450. 12 U.S.C. 2604(c). The Bureau's 
final rule is referred to as the 2013 HOEPA Final Rule.
---------------------------------------------------------------------------

    \17\ 77 FR 49090 (Aug. 15,2012).
---------------------------------------------------------------------------

     Servicing: Following its August 2012 proposals (2012 RESPA 
Servicing Proposal and 2012 TILA Servicing Proposal),\18\ the Bureau is 
adopting final rules to implement Dodd-Frank Act requirements regarding 
force-placed insurance, error resolution, information requests, and 
payment crediting, as well as requirements for mortgage loan periodic 
statements and adjustable-rate mortgage reset disclosures, pursuant to 
section 6 of RESPA and sections 128, 128A, 129F, and 129G of TILA, as 
amended or established by Dodd-Frank Act sections 1418, 1420, 1463, and 
1464. 12 U.S.C. 2605; 15 U.S.C. 1638, 1638a, 1639f, and 1639g. The 
Bureau also is finalizing rules on early intervention for troubled and 
delinquent borrowers, and loss mitigation procedures, pursuant to the 
Bureau's authority under section 6 of RESPA, as amended by Dodd-Frank 
Act section 1463, to establish obligations for mortgage servicers that 
it finds to be appropriate to carry out the consumer protection 
purposes of RESPA, and its authority under section 19(a) of RESPA to 
prescribe rules necessary to achieve the purposes of RESPA. The 
Bureau's final rule under RESPA with respect to mortgage servicing also 
establishes requirements for general servicing standards policies and 
procedures and continuity of contact pursuant to its authority under 
section 19(a) of RESPA. The Bureau's final rules are referred to as the 
2013 RESPA Servicing Final Rule and the 2013 TILA Servicing Final Rule, 
respectively.
---------------------------------------------------------------------------

    \18\ 77 FR 57200 (Sept. 17, 2012) (RESPA); 77 FR 57318 (Sept. 
17, 2012) (TILA).
---------------------------------------------------------------------------

     Loan Originator Compensation: Following its August 2012 
proposal (2012 Loan Originator Proposal),\19\ the Bureau is issuing a 
final rule to implement provisions of the Dodd-Frank Act requiring 
certain creditors and loan originators to meet certain duties of care, 
including qualification requirements; requiring the establishment of 
certain compliance procedures by depository institutions; prohibiting 
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; and establishing restrictions on mandatory arbitration and 
financing of single-premium credit insurance, pursuant to TILA sections 
129B and 129C as established by Dodd-Frank Act sections 1402, 1403, and 
1414(a). 15 U.S.C. 1639b, 1639c. The Bureau's final rule is referred to 
as the 2013 Loan Originator Final Rule.
---------------------------------------------------------------------------

    \19\ 77 FR 55272 (Sept. 7, 2012).
---------------------------------------------------------------------------

    The Bureau is not at this time finalizing proposals concerning 
various disclosure requirements that were added by title XIV of the 
Dodd-Frank Act, integration of mortgage disclosures under TILA and 
RESPA, or a simpler, more inclusive definition of the finance charge 
for purposes of disclosures for closed-end mortgage transactions under 
Regulation Z. The Bureau expects to finalize these proposals and to 
consider whether to adjust regulatory thresholds under the Title XIV 
Rulemakings in connection with any change in the calculation of the 
finance charge later in 2013, after it has completed quantitative 
testing, and any additional qualitative testing deemed appropriate, of 
the forms that it proposed in July 2012 to combine TILA mortgage 
disclosures with the good faith estimate (RESPA GFE) and settlement 
statement (RESPA settlement statement) required under RESPA, pursuant 
to Dodd-Frank Act section 1032(f) and sections 4(a) of RESPA and 105(b) 
of TILA, as amended by Dodd-Frank Act sections 1098 and 1100A, 
respectively (2012 TILA-RESPA Proposal).\20\ Accordingly, the Bureau 
already has issued a final rule delaying implementation of various 
affected title XIV disclosure provisions.\21\ The Bureau's approach to 
coordinating the implementation of the Title XIV Rulemakings is 
discussed below.
---------------------------------------------------------------------------

    \20\ 77 FR 51116 (Aug. 23, 2012).
    \21\ 77 FR 70105 (Nov. 23, 2012).
---------------------------------------------------------------------------

Coordinated Implementation of Title XIV Rulemakings
    As noted in all of its foregoing proposals, the Bureau regards each 
of the Title XIV Rulemakings as affecting aspects of the mortgage 
industry and its regulations. Accordingly, as noted in its proposals, 
the Bureau is coordinating carefully the Title XIV Rulemakings, 
particularly with respect to their effective dates. The Dodd-Frank Act 
requirements to be implemented by the Title XIV Rulemakings 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. See Dodd-Frank Act section 1400(c), 15 U.S.C. 
1601 note. In addition, some of the Title XIV Rulemakings are to take 
effect no later than one year after they are issued. Id.
    The comments on the appropriate implementation date for this final 
rule are discussed in detail below in part VI of this notice. In 
general, however, consumer advocates requested that the Bureau put the 
protections in the Title

[[Page 7220]]

XIV Rulemakings into effect as soon as practicable. In contrast, the 
Bureau received some industry comments indicating that implementing so 
many new requirements at the same time would create a significant 
cumulative burden for creditors. In addition, many commenters also 
acknowledged the advantages of implementing multiple revisions to the 
regulations in a coordinated fashion.\22\ Thus, a tension exists 
between coordinating the adoption of the Title XIV Rulemakings and 
facilitating industry's implementation of such a large set of new 
requirements. Some have suggested that the Bureau resolve this tension 
by adopting a sequenced implementation, while others have requested 
that the Bureau simply provide a longer implementation period for all 
of the final rules.
---------------------------------------------------------------------------

    \22\ Of the several final rules being adopted under the Title 
XIV Rulemakings, six entail amendments to Regulation Z, with the 
only exceptions being the 2013 RESPA Servicing Final Rule 
(Regulation X) and the 2013 ECOA Appraisals Final Rule (Regulation 
B); the 2013 HOEPA Final Rule also amends Regulation X, in addition 
to Regulation Z. The six Regulation Z final rules involve numerous 
instances of intersecting provisions, either by cross-references to 
each other's provisions or by adopting parallel provisions. Thus, 
adopting some of those amendments without also adopting certain 
other, closely-related provisions would create significant technical 
issues, e.g., new provisions containing cross-references to other 
provisions that do not yet exist, which could undermine the ability 
of creditors and other parties subject to the rules to understand 
their obligations and implement appropriate systems changes in an 
integrated and efficient manner.
---------------------------------------------------------------------------

    The Bureau recognizes that many of the new provisions will require 
creditors to make changes to automated systems and, further, that most 
administrators of large systems are reluctant to make too many changes 
to their systems at once. At the same time, however, the Bureau notes 
that the Dodd-Frank Act established virtually all of these changes to 
institutions' compliance responsibilities, and contemplated that they 
be implemented in a relatively short period of time. And, as already 
noted, the extent of interaction among many of the Title XIV 
Rulemakings necessitates that many of their provisions take effect 
together. Finally, notwithstanding commenters' expressed concerns for 
cumulative burden, the Bureau expects that creditors actually may 
realize some efficiencies from adapting their systems for compliance 
with multiple new, closely-related requirements at once, especially if 
given sufficient overall time to do so.
    Accordingly, the Bureau is requiring that, as a general matter, 
creditors and other affected persons begin complying with the final 
rules on January 10, 2014. As noted above, section 1400(c) of the Dodd-
Frank Act requires that some provisions of the Title XIV Rulemakings 
take effect no later than one year after the Bureau issues them. 
Accordingly, the Bureau is establishing January 10, 2014, one year 
after issuance of the Bureau's 2013 ATR, Escrows, and HOEPA Final Rules 
(i.e., the earliest of the title XIV final rules), as the baseline 
effective date for most of the Title XIV Rulemakings. The Bureau 
believes that, on balance, this approach will facilitate the 
implementation of the rules' overlapping provisions, while also 
affording creditors sufficient time to implement the more complex or 
resource-intensive new requirements. As discussed in part VI below, 
however, the effective date of this final rule is January 18, 2014, to 
align with the effective date of the 2013 Interagency Appraisals Final 
Rule.
    The Bureau has identified certain rulemakings or selected aspects 
thereof, however, that do not present significant implementation 
burdens for industry. Accordingly, the Bureau is setting earlier 
effective dates for those final rules or certain aspects thereof, as 
applicable. Those effective dates are set forth and explained in the 
Federal Register notices for those final rules.

IV. Legal Authority

    The final rule was issued on January 18, 2013, in accordance with 
12 CFR 1074.1. The Bureau issued this final 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.\23\ The term 
``consumer financial protection functions'' 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.'' \24\ ECOA is a Federal consumer financial law.\25\ 
Accordingly, the Bureau has authority to issue regulations pursuant to 
ECOA.
---------------------------------------------------------------------------

    \23\ Public Law 111-203, sec. 1061(b)(7), 124 Stat. 1376; 12 
U.S.C. 5581(b)(7).
    \24\ 12 U.S.C. 5581(a)(1).
    \25\ 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).
---------------------------------------------------------------------------

    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 contain--but are not limited to--such 
classifications, differentiation, or other provision, and may provide 
for such adjustments and exceptions for any class of transactions as, 
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).
    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). ECOA and title X of the Dodd-Frank Act are 
Federal consumer financial laws. Accordingly, the Bureau is exercising 
its authority under Dodd-Frank Act section 1022(b)(1) to prescribe 
rules that carry out the purposes and objectives of ECOA and title X 
and prevent evasion of those laws.
    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.

V. Section-by-Section Analysis

Section 1002.14 Rules on Providing Copies of Appraisals and Other 
Written Valuations

Overview
    Public comments generally. Many commenters offered general support 
for the proposed rule, with some

[[Page 7221]]

comments, for example by a large trade association for real estate 
brokers and agents, offering strong support for its potential to 
educate and inform consumers about appraisals and other valuations and 
their role in the real estate transaction. Most of the industry 
commenters generally supported the proposal and provided numerous 
suggestions for clarifications or changes to particular elements of the 
proposal, which are discussed in the corresponding sections below. Some 
industry commenters including community banks and other lending 
institutions, however, opposed the proposal. These comments stated, for 
example, that the mortgage credit industry cannot keep up with the all 
the regulations being issued under the Dodd-Frank Act and that rules 
requiring creditors to provide copies of appraisals are already in 
place.
    Discussion. As discussed above, the Dodd-Frank Act amendments to 
ECOA section 701(e) will take effect 18 months after the designated 
transfer date under the Dodd-Frank Act unless final rules implementing 
section 701(e) are issued on or before that date and provide for a 
different effective date. For that reason, the Bureau believes that, 
rather than adding burden to industry, this final regulation will 
relieve industry of uncertainty and potential liability risk that would 
likely result from ECOA section 701(e) taking effect without an 
implementing regulation. Furthermore, by issuing this final rule the 
Bureau is able to provide industry with additional time to develop new 
policies, train employees, and make system changes to implement the 
rule's requirements that would not be available if the statute takes 
effect in January 2013.
4(d) General Rules on Providing Disclosure in Electronic Form
    As discussed in the section-by-section analysis relating to Sec.  
1002.14(a)(5), the Bureau is updating the cross-reference in Sec.  
1002.4(d) to Sec.  1002.14, to reflect that the new disclosure 
requirement is cited as Sec.  1002.14(a)(2), rather than Sec.  
1002.14(a)(2)(i). This change will ensure that electronic disclosure 
standards in Regulation B apply to the new notice required by Sec.  
1002.14(a)(2) to the same extent as they have applied to the existing 
notice required by Sec.  1002.14(a)(2)(i) that the new notice will 
replace.
14(a) Providing Copies of Appraisals and Other Written Valuations
14(a)(1) In General
    ECOA section 701(e)(1) requires a creditor to provide an applicant 
a copy of all appraisals and other written valuations developed in 
connection with an application for credit that is to be secured by a 
first lien on a dwelling. This requirement replaced the previous 
requirement in section 701(e) to provide copies of appraisal reports 
upon request of the applicant for a loan secured by a lien on a 
dwelling. Accordingly, the Bureau proposed to revise Sec.  
1002.14(a)(1) in two important ways: to specify the types of materials 
that must be provided to consumers (i.e., copies of appraisals and 
other written valuations developed in connection with the application), 
and to specify the types of transactions for which these copies must be 
provided (i.e., applications for credit to be secured by a first lien 
on a dwelling).
    First, consistent with new ECOA section 701(e)(1), the Bureau 
proposed broadening the scope of the valuation materials for which 
copies must be provided to applicants under Sec.  1002.14(a)(1) to 
include copies of ``all written appraisals and valuations developed.'' 
The Bureau further proposed new comment 14(a)(1)-3 to clarify that for 
purposes of Sec.  1002.14, a ``written'' appraisal or other valuation 
would include, without limitation, an appraisal or valuation received 
or developed by the creditor in any of the following manners: in paper 
form (hard copy); electronically, such as by CD or email; or by any 
other similar media. In addition, the proposed comment would have 
clarified that creditors should look to Sec.  1002.14(a)(5) regarding 
the provision of copies of appraisals and other written valuations to 
applicants via electronic means.
    Second, the Dodd-Frank Act amendments to ECOA section 701(e) also 
narrowed the types of transactions that are covered to ``first lien'' 
transactions. Accordingly, the Bureau proposed revising Sec.  
1002.14(a)(1) to add the word ``first'' to narrow the scope of the 
final rule to cover only loans to be secured by a first lien on a 
dwelling.
    The Bureau also proposed changes to the Regulation B commentary 
further clarifying the types of transactions subject to the requirement 
to deliver copies of appraisals and other written valuations. Prior to 
this final rule, comments 14(a)-1 and 2 had clarified that Regulation B 
appraisal delivery requirements applied to credit for business purposes 
and to renewals of credit secured by a dwelling. The Bureau proposed 
generally retaining these comments (renumbered as comments 14(a)(1)-1 
and 2), with several conforming and technical changes. The Bureau 
proposed comment 14(a)(1)-1 to clarify that Sec.  1002.14(a)(1) covers 
applications for credit to be secured by a first lien on a dwelling, as 
the term ``dwelling'' 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)). The Bureau also proposed comment 14(a)(1)-2 to 
clarify 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 appraisal or other written valuation. Consequently, the Bureau 
proposed that this comment clarify that Sec.  1002.14(a) does not apply 
when a creditor uses the appraisals or other valuations that were 
previously developed in connection with the prior extension of credit 
in order to evaluate the renewal request.
    Public comment. Many commenters provided suggestions on which types 
of documents would qualify as appraisals or other written valuations 
copies of which must be provided to applicants.
    A significant number of industry commenters urged the Bureau to 
require creditors to provide only ``final'' versions of appraisals and 
other written valuations, to prevent uncertainty over whether creditors 
would be required to provide copies of drafts or preliminary versions 
of these documents. Commenters also suggested this clarification would 
help to reduce the volume of information that must be provided to and 
received by applicants, thereby reducing burden on creditors and 
preventing consumer confusion.
    Several industry commenters asked the Bureau to clarify that ECOA 
only requires providing copies of appraisals or other written 
valuations that are actually performed. In addition, a few industry 
commenters suggested that the Bureau require providing copies of only 
those appraisals and other written valuations that are used or relied 
upon by the creditor in making the credit decision. This narrower focus 
was viewed as more in line with the purpose of ECOA. One commenter 
requested that creditors should not be required to provide a copy of an 
appraisal or other written valuation that is ``materially deficient,'' 
as it could confuse the consumer.
    Some industry commenters expressed a general concern over liability 
risks raised by the proposed requirement to provide copies of 
appraisals and other written valuations. These commenters suggested 
that providing these copies to applicants could create liability risks 
for creditors and preparers. Some creditors and a creditor trade 
association expressed concern that applicants might view valuations 
that lenders conduct in-house, without commissioning an appraisal, as 
warranting the value of the

[[Page 7222]]

home. Two creditors and a creditor association in one state expressed 
concern over the potential for lender liability to carry over to 
investors under an assignee liability theory, which could reduce access 
to credit by reducing investor demand. Other industry commenters 
suggested that applicants might seek to hold an appraiser liable for 
the applicant's reliance upon the appraisal in entering into a 
transaction, particularly if the appraiser lists, or is required to 
list, the applicant as an ``intended user'' of the appraisal under the 
Uniform Standards of Professional Appraisal Practices (USPAP). Some of 
these commenters raised these concerns over potential liability as part 
of an overall concern with the potential burden of the regulation, and 
some urged the Bureau to include provisions in the final rule 
protecting creditors and preparers of appraisals and other valuations 
against liability.
    A number of commenters also urged the Bureau to exclude certain 
types of transactions from the scope of the final rule. Several 
industry group commenters requested that the Bureau exempt loan 
modifications, loss mitigation, short sales, and deed-in-lieu 
transactions from the rule's requirements altogether. These commenters 
suggested that these transactions did not involve an ``application'' by 
the consumer for an ``extension of credit'' within the meaning of ECOA. 
They also argued that applying the rule to loss mitigation and other 
foreclosure alternatives would increase the costs of these transactions 
and decrease their availability to consumers. One industry commenter 
also suggested that the Bureau clarify that a loan modification did not 
fit within the type of transaction the rule would cover, because a 
modification does not lead to ``consummation'' of the loan.
    In addition, an industry commenter requested clarification on 
whether the rule applies to an annual renewal clause under which a 
creditor makes a unilateral decision each year whether or not to renew 
a line of credit. Another industry trade association requested that the 
final rule exclude temporary loans, such as bridge or construction 
loans, which it argued are treated specially under other statutes such 
as RESPA and TILA. For construction loans, this commenter also asserted 
that applicants are more interested in receiving copies of valuations 
when the permanent financing begins, after the construction is complete 
and therefore factored into the valuation.
    One commenter suggested that the rule should cover second liens to 
protect consumers in these transactions. This commenter asserted second 
lien transactions generally carry higher risk than first lien 
transactions, and therefore are even more worthy of the protections in 
the rule.
    Discussion. The final rule adopts the language in Sec.  
1002.14(a)(1) discussed above as proposed, with a minor clarification. 
To clarify that an appraisal is intended to be classified as a type of 
``valuation'' under the final rule, and to clarify that the rule 
applies to written valuations, the final rule uniformly adopts the 
phrases ``appraisals and other written valuations'' and ``appraisals or 
other written valuations.'' This usage also aligns with the use of the 
term ``valuation'' to include appraisals in recent amendments to 
Regulation Z, Sec.  1026.42(b)(3), to implement section 129E of TILA. 
See 75 FR 66554, 66558 (Oct. 28, 2010) (adopting term ``valuation'').
    To provide guidance on Sec.  1002.14(a)(1), the final rule also 
adopts comments 14(a)(1)-1 through 3 as proposed, with an additional 
clarification in comment 14(a)(1)-1 relating to waiver (see discussion 
of waiver further below), and adopts an additional comment 14(a)(1)-
7.\26\
---------------------------------------------------------------------------

    \26\ Other comments on Sec.  1002.14(a)(1) relate to timing and 
waiver, and are discussed further below.
---------------------------------------------------------------------------

    The Bureau considered comments seeking clarification that the final 
rule does not require lenders to conduct appraisals or other written 
valuations. The Bureau does not believe, however, that this 
clarification is needed in the final rule or its commentary. On its 
face, section 701(e) of ECOA requires disclosure of copies of the 
appraisals and other written valuations that are developed in 
connection with an application. Neither ECOA section 701(e) nor the 
final rule requires that lenders must obtain appraisals or other 
written valuations.
    The final rule also retains the language from the proposed rule--
``developed in connection with an application for credit''--for 
determining which appraisals and other written valuations must be 
disclosed. Prior to the Dodd-Frank Act, ECOA section 701(e) referred to 
appraisals that were ``used'' in connection with the application. Had 
Congress intended to maintain that scope, it could have continued to 
use that term; instead, Congress referred to appraisals and other 
valuations that are ``developed'' in connection with the application, 
without necessarily requiring that they ultimately be ``used.'' The 
Bureau assumes this difference in terms reflects a deliberate wording 
choice by Congress, and the Bureau does not believe consumer protection 
will be enhanced by adjusting the statutory terminology. If an 
appraisal or other written valuation is ``developed in connection 
with'' an application, then the applicant may benefit from receiving a 
copy, even if the creditor does not to use the valuation. Some 
commenters expressed concern that applicants could mistakenly believe 
that such a valuation was ``used'' by the creditor. However, there is 
nothing in the final rule that prohibits creditors from providing 
information to applicants concerning whether a particular valuation was 
used.\27\
---------------------------------------------------------------------------

    \27\ Other industry commenters suggested that consumers would 
not benefit from receiving copies of valuations that were not used, 
and which may contain errors or even material deficiencies. The 
statute does not distinguish, however, between valuations that are 
used and those that are not used.
---------------------------------------------------------------------------

    As noted above, some commenters stated a concern that providing 
copies of appraisals and other written valuations to applicants could 
result in liability issues for creditors and preparers of appraisals or 
other written valuations. Industry commenters noted questions or 
concerns over whether creditors would be deemed to have warranted home 
values contained in their internal valuations provided to applicants, 
and on whether consumers would assert legal claims based upon their 
reliance on appraisals in deciding whether to enter into transactions. 
The commenters do not appear to be raising concerns over liability 
under ECOA section 701(e) itself. On its face, section 701(e) concerns 
providing copies of certain materials and providing a disclosure. It 
does not specify the content of valuations or otherwise supply 
standards regarding what they should contain.\28\ Moreover, ECOA has 
long required creditors to provide copies of appraisals upon request, 
and creditors routinely provide copies of appraisals for first lien 
loans including under GSE requirements. The commenters have not 
explained how requiring that copies of appraisals and other written 
valuations be provided as a matter of course increases creditors' 
exposure to liability under legal standards other than ECOA. In any 
event, as for legal standards other than those contained in ECOA, it is 
unclear what authority the Bureau would have to limit remedies arising 
from a creditor's providing copies of appraisals or other written 
valuations.\29\
---------------------------------------------------------------------------

    \28\ Congress has spelled out the conduct that gives rise to 
liability under ECOA. 15 U.S.C. 1691e. Creditors that ``fail[] to 
comply with any requirement imposed under [ECOA] shall be liable to 
the aggrieved applicant.'' 15 U.S.C. 1691e(a).
    \29\ As to whether USPAP will require that appraisals list 
applicants as intended users of written appraisal reports, the 
Bureau believes this is a question that arises under USPAP and not 
ECOA; thus it is a matter for appraisers to determine pursuant to 
USPAP, and for the Appraisal Standards Board, which is charged with 
developing, interpreting, and amending USPAP.

---------------------------------------------------------------------------

[[Page 7223]]

    With regard to the types of transactions that are covered by the 
final rule, the Bureau considered industry comments seeking 
clarification on whether loss mitigation activities, such as loan 
modifications, short sales, and deed-in-lieu transactions, are covered. 
These comments implicate provisions of ECOA and Regulation B that turn 
on whether there is an ``applicant'' or ``application'' for an 
``extension of credit.'' \30\ While some loan modifications can be 
subject to the provisions of Regulation B,\31\ including the existing 
Sec.  1002.14 disclosure-upon-request regime, there is variation 
between different types of loss mitigation programs; the particulars of 
the program at issue are important to understand in evaluating whether 
there is an application or applicant for an extension of credit within 
the meaning of Regulation B. Accordingly, the Bureau believes that 
questions on coverage of these types of transactions are best addressed 
with reference to the existing provisions of Regulation B.\32\ To the 
extent a loss mitigation transaction is covered by Regulation B, the 
transaction is covered by the final rule, including its requirement of 
providing copies of appraisals and other written valuations. Consumers 
generally will benefit from receiving information about the value of 
their dwelling, both in the context of making a decision about the loss 
mitigation transaction and also in detecting potential discrimination, 
consistent with the purposes of ECOA. The Bureau believes these 
benefits outweigh the cost to the creditor of providing copies of 
documentation that the creditor already has received. For the reasons 
discussed in the Bureau's analysis under section 1022(b) below, the 
Bureau believes the per-loan cost of providing copies of these 
materials is modest, and they will often be provided in electronic 
form. The Bureau is therefore not exercising its exception authority to 
exempt loss mitigation transactions from Sec.  1002.14 if those 
transactions would otherwise be covered by Regulation B.\33\
---------------------------------------------------------------------------

    \30\ See 12 CFR 1002.2(e)-(f), (j) and (q).
    \31\ In the context of interpreting the requirement of 
Regulation B that there be a notice of an adverse action on an 
application, for example, the Federal Reserve Board Consumer Affairs 
Letter CA 09-13 (Dec. 4, 2009), noted that loan modifications can 
involve an ``application'' for an ``extension of credit'' within the 
meaning of Regulation B. See Consumer Affairs Letter CA 09-13, 
Mortgage Loan Modification and Regulation B's Adverse Action 
Requirement (2009), available at http://www.federalreserve.gov/boarddocs/caletters/2009/0913/caltr0913.htm. The Board determined 
that certain transactions under the U.S. Department of Treasury's 
Making Home Affordable Modification Program (HAMP) then in place did 
involve applications for extension of credit within the meaning of 
Regulation B. Guidance issued by the Board prior to the transfer of 
ECOA rulemaking authority to the Bureau will be applied by the 
Bureau absent further action. 76 FR at 43570 (July 21, 2011).
    \32\ Similarly, questions about the rule's coverage of temporary 
loans, such as bridge or construction loans, and renewals of credit, 
relate to the overall scope of Regulation B. The final rule is not 
intended to address whether these loans are subject to ECOA in the 
first place. If a temporary loan or a renewal is subject to ECOA, 
and an appraisal or other written valuation is developed for that 
loan, then the applicant has a right to receive a copy under the 
final rule. This approach is consistent with existing comment 
14(a)(1)-2 concerning the application of Sec.  1002.14 to renewals, 
which is maintained in the final rule.
    \33\ With respect to the comment suggesting that 
``consummation'' is not necessarily occurring in the loan 
modification context, the Bureau is not persuaded that this is 
necessarily the case. The term ``consummation'' in Regulation Z is 
defined as the time the consumer becomes ``contractually obligated 
on the credit transaction.'' A loan modification can occur 
contractually, and take effect on a date certain.
---------------------------------------------------------------------------

    While the Bureau has considered the comment that the final rule 
should apply to second lien transactions because they are higher risk, 
it is not expanding the scope of the final rule to include second liens 
because such an expansion would be inconsistent with the plain meaning 
of section 701(e). The Bureau notes that the Dodd-Frank Act 
specifically limited the scope of ECOA section 701(e) to ``first 
liens,'' while applying the overlapping requirements under section 129H 
of TILA to certain subordinate lien loans that meet the definition of 
``higher risk mortgage.'' The commenters have not presented data or 
other specific information warranting a departure from the plain 
language of ECOA section 701(e).
    The final rule maintains comment 14(a)(1)-2, pertaining to credit 
renewals, with minor changes for consistency and clarity. Comment 
14(a)(1)-2 clarifies that creditors must provide copies of appraisals 
or other written valuations prepared in connection with credit renewals 
requested by the applicant. Whether an applicant has requested a credit 
renewal, and when such an application is received for purposes of the 
timing requirements under Sec.  1002.14(a)(2), depend on the facts and 
circumstances of an individual transaction. The remaining part of 
comment 14(a)(1)-2, clarifying that the rule does not apply to the use 
of an appraisal or other written valuation that was developed for a 
prior extension of credit, is adopted as proposed. Because the creditor 
in a prior transaction covered by the final rule would already have 
been required to provide a copy of an appraisal or other written 
valuation to the applicant, requiring the creditor in the subsequent 
transaction to provide another copy of that appraisal or other written 
valuation would be duplicative.\34\ The Bureau is therefore finalizing 
comment 14(a)(1)-2 largely as proposed.
---------------------------------------------------------------------------

    \34\ To the extent that an appraisal or other written valuation 
is developed in connection with an application received before 
January 18, 2014, it would not be subject to the final rule.
---------------------------------------------------------------------------

    In response to industry comments, the Bureau has added new comment 
14(a)(1)-7, which clarifies what copies must be provided in the event 
there are multiple versions of an appraisal or other written valuation. 
The comment clarifies that, if a creditor receives multiple versions of 
a particular appraisal or other written valuation, then the creditor is 
required to provide a copy of only the latest version received by the 
creditor. (See also the discussion of comment 14(a)(1)-4 below 
concerning application of the timing requirements in common situations 
where there are multiple versions of a particular appraisal or other 
written valuation.) The Bureau believes this comment is consistent with 
the language of ECOA section 701(e)(1) requiring copies of appraisals 
and other valuations to be provided promptly upon ``completion.'' The 
``latest version received'' rule thus clarifies that when creditors 
have multiple versions of a particular appraisal or valuation, they are 
only required to provide the latest version. The Bureau believes that 
this guidance will help avoid placing unwarranted burden on creditors 
and overloading consumers with multiple drafts of a particular 
appraisal or other written valuation.
    The Bureau notes, however, that the separate requirements of Sec.  
1002.14(a)(1) for the timing of providing copies to applicants will 
still apply. The application of the timing requirements to situations 
in which there are multiple versions of a particular valuation is 
further discussed below.
    Comment 14(a)(1)-7 also clarifies that if a creditor provides a 
version of an appraisal or other written valuation that is later 
superseded, then the creditor still must provide the latest version. 
While the Bureau recognizes that this guidance could result in 
instances in which consumers receive multiple versions of a particular 
appraisal or other written valuation, it does not believe that this 
result can be avoided given the statutory requirements.

[[Page 7224]]

    Comment 14(a)(1)-7 further clarifies that a copy of at least one 
version of each appraisal or other written valuation must be provided. 
The Bureau believes this comment is needed to ensure compliance with 
the statutory requirement that the applicant receive a copy of ``any 
and all'' appraisals or other written valuations ``developed'' in 
connection with an application. A rule requiring only ``final'' 
versions to be provided would not be consistent with the statutory 
requirement, because it would allow creditors to withhold a valuation 
that they determine is a draft or preliminary, even if they never 
receive a later version. The statute does not distinguish between 
valuations that are preliminary and those that are final or valuations 
that the creditor chooses to rely on and those it does not.
    Additionally, the Bureau does not believe that such a rule would be 
consistent with the purposes of ECOA's requirement regarding furnishing 
copies of appraisals and other written valuations. The chief purpose of 
this provision is to promote transparency regarding the loan process to 
assist applicants in determining whether they may be the victims of 
discrimination. This purpose would be frustrated if creditors could 
subjectively determine which valuations to provide. Accordingly, 
comment 14(a)(1)-7 clarifies that when there is only one version of a 
particular appraisal or other written valuation, a copy must be 
provided to the applicant regardless of whether the creditor relied on 
it or viewed it as being preliminary.
Timing and Waiver
    ECOA section 701(e)(1), requires that creditors provide copies of 
each appraisal or other written valuation promptly upon completion, but 
in no case later than three days prior to the closing of the loan. 
Accordingly, proposed Sec.  1002.14(a)(1) stated that a creditor must 
provide a copy of each appraisal or other written 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 
consummation of the transaction, whichever is first to occur.\35\ The 
reference to providing the copy generally within a 30-day time frame 
was proposed to maintain consistency with the existing requirements of 
Sec.  1002.14(a)(2)(ii).
---------------------------------------------------------------------------

    \35\ For clarity and to be consistent with other similar 
regulatory requirements under TILA and RESPA, the Bureau proposed to 
use the term ``consummation'' in place of the statutory term 
``closing'' and to clarify that the statutory term ``3 days'' means 
``three business days.''
---------------------------------------------------------------------------

    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 by law. Accordingly, proposed Sec.  1002.14(a)(1) 
would have provided that, notwithstanding the other requirements in 
Sec.  1002.14(a)(1), an applicant may waive the timing requirement in 
the proposal to receive a copy of an appraisal or other written 
valuation three business days prior to consummation and agree to 
receive the copy at or before consummation, except as otherwise 
prohibited by law. As discussed in the proposal, the Bureau did not 
propose that such waivers extend to the requirement that copies of 
appraisals and other written valuations be provided in the case of an 
application that is withdrawn, incomplete, or denied. The Bureau also 
proposed a new comment 14(a)(1)-4 that would clarify that waivers under 
Sec.  1002.14(a)(1) are permitted if the applicant makes an affirmative 
oral or written statement (which can be made by any one applicant in 
the case of a multiple-applicant transaction) and if the creditor 
provides the copies of all appraisals and other written valuations at 
or before consummation.
    Public comment. Some commenters addressed certain aspects of the 
timing requirement, including the waiver provision.\36\ A few 
commenters suggested shortening the proposed general 30-day time limit, 
to ensure that consumers receive copies of the appraisals and other 
written valuations at an earlier point in the transaction when they are 
most useful (and can, for example, inform price negotiations). An 
organization advocating for affordable housing suggested a deadline of 
three days after the creditor's approval, while a real estate agent 
trade association suggested 10 days after receipt, and an appraisal 
group suggested 20 days after receipt.
---------------------------------------------------------------------------

    \36\ One commenter also expressed concern that the term 
``consummation'' is not plain English, and that a deadline based 
upon this term could be difficult to understand. This comment is 
discussed further below in the analysis of Sec.  1002.14(b)(1).
---------------------------------------------------------------------------

    A large lending institution opposed a per se time limit, such as 30 
days, however. This commenter suggested that removing the reference to 
30 days would ensure lenders can provide an integrated package that 
includes all appraisal and other valuation documents. Otherwise, an 
appraisal received earlier in the application process potentially would 
need to be disclosed before a valuation received later. Other industry 
commenters embraced the requirement to provide copies of the appraisals 
and other written valuations three business days before consummation, 
without expressing support for the 30-day limit in the timing 
requirement. One industry commenter suggested, however, that the 30-day 
limit should apply in the case of an incomplete application. Another 
industry commenter suggested the time period for providing copies 
should not begin until the application is ``complete'' within the 
meaning of Regulation B, Sec.  1002.2(f).
    One large lending institution requested that the Bureau exercise 
its exception authority to allow creditors to provide copies of non-
substantive changes to appraisals and other written valuations, such as 
typographical errors, at consummation. This commenter believed that 
without this exception, the applicant could receive multiple versions 
of the same document, with only non-substantive differences. The 
commenter expressed concern that this result would distract consumers 
and interfere with their ability to analyze the information received.
    Finally, one commenter suggested counting the day of consummation 
for purposes of the three-business-day requirement, and the day of 
receipt for purposes of the proposed general 30-day limit.
    Commenters generally supported the proposed provision granting the 
borrower the right to waive the three-business-days-before closing 
requirement for providing copies of the appraisal or other written 
valuation so that the copies can be provided at or before closing; no 
comments opposed the proposal to allow for a waiver. Several commenters 
noted that a waiver right would be important to prevent delayed 
closings. A few comments requested that the final rule provide 
additional guidance on what constitutes a valid waiver. One creditor 
trade association suggested this guidance be provided in the form of a 
safe harbor, including explicit authorization for creditors to seek 
waivers. Two other creditor trade associations also sought confirmation 
that creditors could inform consumers of their ability to provide 
waivers. An appraisal industry commenter suggested, however, that 
before a creditor could seek a waiver, the creditor should provide a 
full explanation of the value of receiving the copies in a prompt 
manner, such as the value the copy may have in negotiations where the 
valuation estimate is below the originally agreed-upon price.\37\ A 
creditor also requested guidance on

[[Page 7225]]

whether the waiver can be provided within three days prior to 
consummation. This commenter cited instances where a delay in receipt 
of a final appraisal due to minor corrections resulted in a delayed 
closing because a waiver had not already been executed three or more 
days before closing.\38\ A credit union commenter went further, arguing 
that consumers should be allowed to waive the timing requirement, 
regardless of whether the corrections are minor.
---------------------------------------------------------------------------

    \37\ This commenter also questioned the logic of allowing one 
applicant in a multi-applicant transaction to waive the timing for 
all applicants.
    \38\ While the commenter did not identify which existing 
standards may have caused such closing delays, the Bureau notes that 
this type of problem may arise under GSE Appraisal Independence 
Requirements discussed below.
---------------------------------------------------------------------------

    Discussion. For the reasons explained below, proposed Sec.  
1002.14(a)(1) and its accompanying commentary are being revised to 
clarify the timing and waiver provisions of the rule. The timing 
requirement in Sec.  1002.14(a)(1) is revised to provide greater 
clarity. In addition, the final rule includes new comments 14(a)(1)-4 
and 5 to clarify the timing requirement. The final rule adopts proposed 
comment 14(a)(1)-4 regarding waiver with clarifications and renumbers 
it as comment 14(a)(1)-6.
    As proposed, Sec.  1002.14(a)(1) would have required providing 
copies ``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.'' Several commenters 
sought clarification and explanation of this proposed timing 
requirement, which had merged language from ECOA section 701(e) as 
amended and existing Sec.  1002.14. For the reasons discussed below, 
the Bureau is revising this language to provide a simpler rule: The 
copy must be provided promptly upon completion of the appraisal or 
other written valuation, or three business days before consummation 
(for closed-end credit) or account opening (for open-end credit), 
whichever is earlier. The Bureau is including the reference to 
``account opening'' to accommodate the application of Sec.  
1002.14(a)(1) to open-end credit transactions and for consistency with 
Regulation Z. Regulation Z does not use the term ``consummation'' for 
open-end credit secured by a dwelling. See, e.g., Sec.  1026.40 
(referring to ``opening'' of home equity plans).
    New comments 14(a)(1)-4 and 5 clarify that the ``promptly upon 
completion'' standard is applied based upon the facts and circumstances 
and provide illustrative examples of situations in which the timing 
requirement would or would not be met. Comment 14(a)(1)-4.v clarifies 
that in the absence of a waiver (see discussion below), the ``promptly 
upon completion'' requirement governs even if no consummation or 
account opening occurs.
    Based upon industry comments noting that appraisals and other 
valuations may undergo review and revision, the Bureau believes that 
basing the ``promptly'' standard upon the date of receipt could 
interfere with creditors' review processes or lead to copies being 
provided to consumers before the review processes are complete. In 
addition, using the date of receipt as a point of reference could 
create confusion and uncertainty, as the Dodd-Frank Act amendment of 
section 701(e) refers to ``promptly upon completion.'' Therefore the 
final rule does not mandate using the date of receipt as the reference 
point for the timing requirement.\39\
---------------------------------------------------------------------------

    \39\ Similarly, the Dodd-Frank Act amendment of section 
701(e)(1) also requires that the creditor provide applicants with 
copies of appraisals and other valuations promptly upon their 
completion, even if the application is incomplete, withdrawn, or 
denied. Therefore, the Bureau is not adopting the suggestion of one 
commenter to tie the timing of providing copies to the timing of the 
``completed'' application under Regulation B.
---------------------------------------------------------------------------

    The Bureau also is not finalizing the use of a fixed time period 
from the creditor's receipt of the appraisal as the general standard 
for determining whether copies are promptly provided to applicants. 
Upon further consideration, and in light of the public comments 
received, the Bureau believes that a time period of 30 days of receipt 
may not result in promptly providing copies to applicants in many 
instances. Congress' use of the term ``promptly upon completion'' 
evidences an intent that applicants should be provided with copies of 
valuations without delay. As some commenters noted, the earlier these 
copies are received in the loan process, the more helpful they are to 
consumers in analyzing the transaction. Applying a fixed 30-day timing 
requirement could result in applicants not receiving copies of 
valuations until late in the loan process, even when these valuations 
have been completed weeks earlier. Thus the final rule does not 
generally apply a fixed time of 30 days.\40\
---------------------------------------------------------------------------

    \40\ As noted above, a large creditor suggested if there are 
multiple valuations, some of which are prepared or finalized later 
in the origination process, a period longer than 30 days from 
receipt of the first valuation could be needed to provide an 
integrated package of valuation copies to consumers. While the 
Bureau appreciates that an integrated package that includes all of 
the appraisals or other written valuations developed in connection 
with the application may be helpful to applicants, the Bureau 
believes that this approach could result in some of the valuations 
in the integrated package not being provided promptly. Further, the 
Bureau does not believe that the benefit of this suggested approach 
would outweigh the value to the applicant of receiving the copies 
earlier in the transaction.
---------------------------------------------------------------------------

    However, as a large bank commenter noted, mandating a fixed time 
frame could reduce the chance that an integrated set of materials could 
be provided in a transaction involving several types of valuations. 
Similarly, mandating a fixed time frame of any kind could increase the 
chances that the creditor would need to make multiple deliveries of 
copies of appraisals or other valuations. For example, if a creditor 
receives a valuation from an AVM earlier in the application process, 
and the fixed time period were to elapse before the appraisal is 
complete, then the creditor would be required to send the copy of the 
AVM out before the copy of the appraisal.\41\ This would increase 
burden on creditors, due to an increase in the number of transactions 
in which creditors would need to make multiple deliveries of copies to 
applicants.
---------------------------------------------------------------------------

    \41\ The time period creditors will need to review appraisals 
also may change in the future, as rules may be adopted by Federal 
banking agencies under section 1473 of the Dodd-Frank Act, amending 
section 1110 of FIRREA to provide for review of appraisals for 
compliance with USPAP.
---------------------------------------------------------------------------

    In addition, the Bureau notes that a fixed time period is not 
specified in industry guidelines such as requirements used by the GSEs 
which purchase or guarantee a significant number of first lien mortgage 
transactions annually. The timing requirement for providing copies of 
appraisals in these recently-adopted GSE guidelines is based upon the 
Home Valuation Code of Conduct (HVCC). The HVCC--a standard that had 
been previously adopted by FHFA in 2008 shortly before Congress began 
to draft the Dodd-Frank Act--contained a timing standard that is 
similar to that ultimately included in ECOA section 701(e) as 
amended.\42\
---------------------------------------------------------------------------

    \42\ Fannie Mae Selling Guide, ``Appraiser Independence 
Requirements,'' (Oct. 15, 2010), available at https://www.fanniemae.com/content/fact_sheet/air.pdf (Part III requires 
that ``the Borrower is provided a copy of any appraisal report 
concerning the Borrower's subject property promptly upon completion 
at no additional cost to the Borrower, and in any event no less than 
three days prior to the closing of the Mortgage.''); Freddie Mac, 
Single Family Seller/Servicer Guide, Exhibit 35, Appraiser 
Independence Requirements (Oct. 15, 2010) (same). These requirements 
were incorporated directly from Part II of the Home Valuation Code 
of Conduct (Dec. 23, 2008), adopted by Federal Housing Finance 
Agency, available at http://www.fhfa.gov/webfiles/2302/HVCCFinalCODE122308.pdf.
---------------------------------------------------------------------------

    For the reasons stated above, the commentary to the final rule 
clarifies that the meaning of the term ``promptly upon completion'' 
depends upon the

[[Page 7226]]

facts and circumstances, including when the creditor receives the 
appraisal or other written valuation, and when any review or revisions 
occur. New comment 14(a)(1)-4 also clarifies when ``completion'' occurs 
for these purposes. Completion occurs when the lender has ``reviewed 
and accepted the appraisal or other written valuation to include any 
changes or corrections required,'' or when the creditor receives the 
last version, whichever is later.\43\
---------------------------------------------------------------------------

    \43\ See Fannie Mae, Appraiser Independence Requirements 
Frequently Asked Questions (Nov. 2010), available at https://www.fanniemae.com/content/faq/appraiser-independence-requirements-faqs.pdf (question 46 stating that ``[t]he word `completion' is 
meant to reflect when the lender has reviewed and accepted the 
appraisal to include any changes or corrections required.''); see 
also Freddie Mac, Appraiser Independence Requirements Frequently 
Asked Questions, available at http://www.freddiemac.com/singlefamily/appraiser_independence_faq.html#52 (question 52 
stating that ``[t]he terms `promptly upon completion' and `completed 
appraisal' refer to when the lender has reviewed and accepted the 
appraisal to include any changes or corrections required.'').
---------------------------------------------------------------------------

    This guidance is then illustrated by several examples in new 
comment 14(a)(1)-5 of situations in which the ``promptly upon 
completion'' standard would or would not be satisfied. While the 
``promptly upon completion'' standard does not provide the same degree 
of certainty as a fixed time period, the Bureau believes that the 
statute specifically contemplates a standard that is flexible.
    The Bureau's final rule implements the statutory requirement that 
copies of valuations be provided promptly upon completion, but not 
later than three days before consummation. As noted in the 2012 ECOA 
Appraisals Proposal, the Bureau is interpreting ``days'' as used in the 
statute to mean ``business days.'' The Bureau did not receive comments 
on this interpretation, and is adopting this standard as proposed.
    To ensure applicants actually receive the mandated copies at least 
three business days prior to consummation or account opening (absent 
waiver), the final rule includes additional guidance in comment 
14(a)(1)-4. Under this comment, ``provide''--which is a statutory term 
in ECOA section 701(e)(4) \44\ that is similar to the term ``furnish'' 
in ECOA section 701(e)(1)--is interpreted to mean delivery to the 
applicant. The comment clarifies that delivery occurs three business 
days after mailing or delivering the copy to the last-known address of 
the applicant, or when evidence indicates the applicant actually 
received the copies, whichever is earlier. The Bureau believes this 
clarification is consistent with the plain meaning of the applicable 
terms ``furnish'' and ``provide'' in Dodd-Frank Act section 1474. In 
addition, this approach is generally consistent with the proposed 
approach to the three-business-day timing requirement in the 2012 TILA-
RESPA Proposal.\45\ This clarification also should prevent situations 
in which the creditor mails copies of appraisals or other written 
valuations to the applicant three business days before consummation or 
account opening, and the applicant does not receive these materials 
until after the consummation or account opening. This clarification 
thus should ensure that applicants have at least the minimum amount of 
time contemplated by section 701(e) to review these copies before the 
transaction is consummated or the account is opened.
---------------------------------------------------------------------------

    \44\ ECOA section 701(e)(4) states, in pertinent part, ``[T]he 
creditor shall provide a copy of each written appraisal or valuation 
at no additional cost to the applicant.''
    \45\ See 77 FR 51116 at 51313-14, 51427 (Aug. 23, 2012) 
(proposed Sec.  1026.19(f)(1)(iii) and commentary).
---------------------------------------------------------------------------

    While one commenter requested including the day of consummation in 
the three-business-day time period that is part of Sec.  1002.14(a)(1), 
the final rule does not adopt this approach. Under this approach, if a 
closing were to occur at 9 a.m. on a Friday, copies of the appraisals 
and other written valuations could be disclosed at 11:59 p.m. on the 
preceding Wednesday via email. This would leave the consumer with 
effectively only one day to review the materials, which would be 
inconsistent with the three-day requirement in the statute.
    The waiver provision in Sec.  1002.14(a)(1) is revised to clarify 
that a waiver applies to both components of the general timing 
requirement, and not only to one aspect of it. As proposed, the waiver 
would have applied to only one component of the proposed timing 
requirement, the requirement that copies be provided three business 
days before closing. Read literally, the proposed waiver provision 
would not have applied to the other component of the timing 
requirement, the requirement that copies be provided ``promptly.'' As a 
result, as proposed, applicants would only have been permitted to 
partially waive the timing requirement.
    Upon further consideration, the Bureau interprets section 701(e)(2) 
to permit consumers to provide a waiver of both components of the 
timing requirements. Otherwise, the effect of a waiver would be 
unclear, providing a disincentive for applicants and creditors to avail 
themselves of this provision, even where a waiver would be in the 
applicant's interest. Additionally, to the extent that the Bureau's 
final rule departs from the language of the statute in this regard, the 
Bureau relies on its authority under section 703(a) to make provisions 
and adjustments to effectuate the purposes of and facilitate or 
substantiate compliance with ECOA. The Bureau finds that this 
adjustment is warranted to ensure creditors' ability to obtain and 
applicants' ability to provide a valid waiver of the timing 
requirements of Sec.  1002.14(a)(1).
    The Bureau is finalizing the provision in proposed Sec.  
1002.14(a)(1) that waiver is permitted ``except where otherwise 
prohibited by law.'' No commenters specifically addressed this 
provision in the proposed rule, which is based upon the statutory 
language in ECOA section 701(e)(2). The Bureau continues to believe 
this limitation is important to clarify that other provisions of law 
may not permit waiver. For example, the 2013 Interagency Appraisals 
Final Rule under TILA section 129H does not provide for a waiver of the 
timing requirement for providing copies of written appraisals no later 
than three business days before consummation.
    With respect to the form of the waiver, the Bureau is finalizing in 
renumbered comment 14(a)(1)-6 the provision in proposed comment 
14(a)(1)-4 allowing for an affirmative oral or written statement.\46\ A 
more prescriptive, rigid, or specific set of requirements as to the 
form of the waiver could unduly restrict the applicant's ability to 
exercise the waiver right. By allowing for an affirmative oral or 
written waiver, the final rule is designed to allow creditors to apply 
existing practices such as the standards for waiver of the appraisal 
copy requirement under the Appraisal Independence Requirements applied 
by certain GSEs.\47\ If the waiver resulted in

[[Page 7227]]

an applicant not receiving an appraisal or other written valuation at 
all or until after consummation or account opening, a more prescriptive 
approach might be warranted. Under the final rule, however, even if the 
waiver is obtained, creditors are still required to provide the 
required copies at or before consummation or account opening.
---------------------------------------------------------------------------

    \46\ Where there are multiple applicants, the final rule adopts 
the proposed approach of allowing one applicant to waive the timing 
requirement. This approach is consistent with the 2013 Interagency 
Appraisals Final Rule being adopted under section 129H of TILA. 
Comment 14(a)-1 is revised to clarify that the waiver must be 
provided by the primary applicant where one is readily apparent. 
This change is designed to ensure that in multiple applicant 
transactions, the individual providing the waiver generally is the 
same individual who would be receiving the documents.
    \47\ See Fannie Mae, Appraiser Independence Requirements 
Frequently Asked Questions (Nov. 2010) (question 45 stating that 
Fannie Mae ``does not specify what form the waiver must take or 
whether it be oral or written. In addition, [the Appraiser 
Independence Requirements standard] does not prohibit that a waiver, 
given in a timely manner, be recorded at some later point when the 
parties are available. [hellip] For example, a lender may obtain a 
waiver from a borrower through an email, phone call, or some other 
means, prior to the three-day period, and then have that waiver 
recorded in writing at the settlement table or at some other 
time.''); see also Freddie Mac, Appraiser Independence Requirements 
Frequently Asked Questions, Questions 45-46.
---------------------------------------------------------------------------

    With respect to when the waiver must be provided, Sec.  
1002.14(a)(1) is revised in the final rule. ECOA section 701(e) is 
silent on when the waiver must be provided. As noted above, several 
industry commenters asked the Bureau to provide more guidance on how 
waivers can occur. The Bureau believes that further clarity on when 
applicants can provide waivers is important. Under Sec.  1002.14(a)(1) 
in the final rule, as further clarified in comment 14(a)(1)-6, waivers 
can be provided in either of two situations: generally before three 
business days of consummation or account opening,\48\ or within three 
business days of consummation or account opening if certain conditions 
are met.
---------------------------------------------------------------------------

    \48\ See Freddie Mac, Appraiser Independence Requirements 
Frequently Asked Questions (question 43 stating that ``[i]f the 
borrower waives the requirement the waiver must be obtained three 
days prior to the closing of the mortgage.''); see also Fannie Mae, 
Appraiser Independence Requirements Frequently Asked Questions (Nov. 
2010) (question 45 stating that ``[s]ituations in which a borrower 
is unaware of his or her right to a copy of the appraisal prior to 
the three days and is then provided a waiver of that right at the 
closing table would not be compliant with the intent of [the 
Appraiser Independence Requirements]'').
---------------------------------------------------------------------------

    The Bureau believes that, in general, requests for waivers should 
not be presented to consumers less than three business days before 
consummation or account opening. Permitting such requests would, in the 
Bureau's view, present a risk that consumers would feel unduly 
pressured to provide waivers in order to avoid delays in closing and 
that creditors could use such waivers to cure previous violations of 
the rule's timing requirements. The Bureau is adopting in Sec.  
1002.14(a)(1) an exception to this general rule, however, governing 
treatment of waivers pertaining to copies of appraisals or other 
written valuations containing correction of clerical errors in 
previously-provided copies.
    Section 1002.14(a)(1) and the associated comment 14(a)(1)-6.ii 
therefore clarifies that an applicant can provide a waiver within three 
business days of consummation or account opening in the following 
circumstance: the creditor receives a revised version of an appraisal 
or other written valuation that the applicant already received three 
business days before consummation or account opening. The option to 
provide a waiver in this situation would only apply, though, if each of 
the following criteria are met: (1) The revisions are solely to correct 
clerical errors in that appraisal or other written valuation; (2) the 
revisions have no impact on the estimated value; (3) the revisions have 
no impact on the calculation or methodology used to derive the 
estimate; and (4) the applicant receives the copy of the revised 
appraisal or other written valuation at or prior to consummation or 
account opening. The Bureau believes this approach strikes an 
appropriate balance by allowing consumers to exercise their waiver 
right to avoid delays in closing due to last-minute, purely clerical 
corrections in appraisals and other written valuations.\49\
---------------------------------------------------------------------------

    \49\ This approach also is supported by other mortgage 
regulations that allow for technical revisions of materials 
otherwise due to the consumer prior to consummation. See, e.g., 
RESPA Regulation X, Sec.  1024.8(c), providing an exception for the 
timing of a disclosure of a HUD-1 settlement statement which makes a 
technical correction; see also the Bureau's 2012 TILA-RESPA 
Proposal, proposed Sec.  1026.19(f)(2)(iv), which would provide an 
exception for the timing of a disclosure due to clerical errors, and 
proposed comment 19(f)(2)(iv)-1 (clarifying that ``an error is 
clerical if it does not affect a numerical disclosure'').
---------------------------------------------------------------------------

    Finally, the Bureau is adding language to Sec.  1002.14(a)(1) to 
clarify the timing requirement in situations where the applicant has 
provided a waiver, but no consummation or account opening occurs. In 
that instance, the copy must be provided no later than 30 days after 
the creditor determines the transaction will not be consummated or the 
account will not be opened. In the absence of a statutory timeframe 
applicable to this situation, the Bureau is exercising its authority 
under ECOA section 703(a) to adopt a reasonable period for providing 
copies. The Bureau believes that providing a clear rule will reduce 
compliance burden and risks for creditors, while ensuring that 
consumers receive copies in a timely fashion. Additionally, the 
timeframe adopted uses familiar timeframes from longstanding timing 
requirements for providing copies of appraisals under existing Sec.  
1002.14(a)(2)(ii).\50\
---------------------------------------------------------------------------

    \50\ Tying this timing requirement to a different point in time, 
such as receipt of an appraisal or other written valuation, could 
result in creditors who have received waivers not being able to 
comply when more than 30 days elapse between receipt and a decision 
not to consummate the transaction or open the account.
---------------------------------------------------------------------------

Delivery of Copies of Appraisals and Other Written Valuations
    Section 1474 of the Dodd-Frank Act amended ECOA section 701(e) to 
mandate that creditors provide copies of appraisals and other written 
valuations regardless of whether the consumer affirmatively requests 
such copies. Accordingly, the Bureau proposed to remove current Sec.  
1002.14(a)(1) and (2), which permitted creditors to choose between the 
``routine delivery'' and ``delivery upon request'' methods of complying 
with the requirements of Sec.  1002.14. Further, proposed comment 
14(a)(1)-1 clarified that if there is more than one applicant, the 
disclosure about appraisals and the provision of copies of appraisals 
need only be given to one applicant, but they must be given to the 
primary applicant where one is readily apparent.
    Public comments. An appraisal group commenter suggested that the 
rule should require providing copies to all applicants in a multi-
applicant transaction, if consent has been given to provide the copies 
by electronic means. Another industry commenter requested clarification 
of whether delivery can be made to the same address for multiple 
applicants. Finally an industry commenter asked whether delivery can be 
made to the last-known address.
    Discussion. With respect to whether copies of appraisals and other 
written valuations can be sent to the last known address, new comment 
14(a)(1)-4 provides that copies of appraisals and other written 
valuations are deemed ``provided'' three days after they are mailed to 
the last known address of the applicant. See also comment 9-3 (adopting 
the ``last-known address'' standard for adverse action notices). The 
Bureau does not believe the other requested clarifications regarding 
this provision are necessary. The commentary makes clear that the 
creditor is required to deliver the materials only to one applicant in 
a multiple-applicant transaction.
    The final rule also does not adopt the suggestion by an appraisal 
industry group commenter of requiring copies of appraisals and other 
written valuations to be sent to all applicants in a multiple-applicant 
transaction, if the copies are being sent by electronic means. Having 
different rules for different means of communication of the copies 
would introduce additional complexity, especially if not all of the 
applicants have consented to electronic disclosures. This could have 
the unintended effect of discouraging creditors from adopting 
electronic delivery methods. Even if all applicants have consented to 
delivery by electronic means, the approach suggested by the commenter 
does not override the general principle that providing copies to one 
applicant (such as the primary

[[Page 7228]]

applicant) in a multiple-applicant transaction is sufficient. Indeed, 
the suggestion of this one industry commenter was not reflected by 
other commenters, whether in industry or on behalf of consumers. The 
Bureau therefore believes that a uniform requirement, allowing copies 
to be provided to one applicant regardless of how they are provided, 
will best facilitate compliance.
14(a)(2) Disclosure
    ECOA section 701(e)(5) requires that, at the time of application, 
the creditor ``notify an applicant in writing of the right to receive a 
copy of each written appraisal and valuation'' under section 701(e). 
Accordingly, the Bureau proposed in section 1002.14(a)(2) that, not 
later than the third business day after the creditor receives an 
application subject to Sec.  1002.14(a)(1), a creditor shall provide an 
applicant with a written disclosure of the applicant's right to receive 
a copy of all appraisals and other written 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 final rule, provides as follows: ``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, as added by the Dodd-Frank Act, provides as follows: 
``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 certain 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).
    Given that the ECOA and TILA disclosures were both created by the 
same legislation (the Dodd-Frank Act) to address overlapping subject 
matter (provision of copies of appraisals) in many of the same 
transactions (first liens secured by dwellings), the Bureau believes 
that Congress did not intend the disclosure requirements to be 
implemented in a disjointed manner that might cause consumer confusion 
and compliance burden for creditors. As explained in the proposal, the 
Bureau believes the combined disclosure will allow for additional text 
necessary to promote consumer comprehension, while also reducing 
compliance burden for industry by allowing for a single disclosure to 
satisfy both statutory requirements. Accordingly, the Bureau believes 
this approach serves the interests of consumers, the public, and 
creditors. On this basis, the Bureau proposed to exercise its authority 
under section 703(a) of ECOA and section 1405(b) of the Dodd-Frank Act 
to conform the two disclosure requirements. In connection with the 
proposed Sec.  1002.14(a)(2) requirement of notifying applicants of 
their ``right to receive a copy of all written appraisals and 
valuations developed in connection with [their] application,'' the 
Bureau proposed revising the sample disclosure form C-9 for appraisals 
in Regulation B to include language to satisfy the new appraisal-
related disclosure requirements of both ECOA and TILA.
    As part of its larger Know Before You Owe public outreach project, 
which is described in more detail in Part III above, the Bureau tested 
several versions of the new appraisal-related disclosures, all of which 
combined the disclosures required by both ECOA section 701(e) and TILA 
section 129H. This testing included consumers and industry 
participants.\51\ The Bureau believed that it was important to test 
both disclosures together in order to determine how best to provide 
disclosures required by ECOA section 701(e) and TILA section 129H in a 
manner that would minimize consumer confusion and improve consumer 
comprehension. Testing showed that consumers tended to find the 
combined TILA and ECOA disclosures confusing when they used specific 
language set forth in the statute. Consumer comprehension improved when 
the Bureau developed a slightly longer plain language disclosure that 
was designed to incorporate the elements of both statutes.\52\ Based 
upon the results of that testing, the Bureau developed and tested the 
following sample disclosure language it proposed to include in Form C-
9: ``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.''
---------------------------------------------------------------------------

    \51\ Kleimann Comm. Gp., Inc., Know Before You Owe: Evolution of 
the Integrated TILA-RESPA Disclosures 254-256 (July 9, 2012), 
available at http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf.
    \52\ Id. The discussion in the section-by-section analysis of 
this final rule 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 
required by 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://consumerfinance.gov/regulations/.
---------------------------------------------------------------------------

    Public comment. Industry commenters generally supported development 
of sample disclosure language that meets the disclosure requirements of 
both ECOA section 701(e) and TILA section 129H. Commenters said this 
approach would increase consumer understanding and reduce creditor 
burden and cost, eliminating the need for multiple, partially 
duplicative disclosures. Several commenters requested that the sample 
disclosure include additional clarifying language.
    First, some industry commenters suggested the sample disclosure 
include an explanation of creditor use of applicant-ordered appraisals. 
These comments suggested that applicants should either be told that 
creditors are prohibited from using such appraisals, or that borrowers 
should be notified that creditors are under no obligation to use the 
appraisals. One commenter also suggested that confusion on this issue 
could be avoided by simply removing language concerning the right of 
applicants to order their own appraisals. Comments by two national 
associations of creditors suggested the final rule provide guidance 
confirming that creditors could vary the text of the disclosure to 
exclude the sentence about applicant-ordered appraisals, as ECOA did 
not require this sentence.\53\
---------------------------------------------------------------------------

    \53\ An industry commenter also was concerned that applicants 
might think they could order their own appraisals directly from the 
creditor, because the creditor was providing the disclosure.
---------------------------------------------------------------------------

    Second, several industry commenters urged the Bureau to include the 
word ``valuation'' in the sample consumer disclosure describing the 
materials the consumer may receive. Commenters generally believed this 
additional language would help consumers to understand that some of the 
information they receive may not be appraisals, and

[[Page 7229]]

in some cases they might not receive an appraisal.
    Other industry commenters offered other suggestions. These ranged 
from informing consumers that the time frame for ``promptly'' providing 
the copies would begin from when the creditor receives the appraisal or 
other valuation, to advising consumers that the creditor could charge 
for additional copies of appraisals or other valuations beyond the 
first copy provided.
    Discussion. While the Bureau has considered the comments described 
above, the Bureau is adopting the sample disclosure language in form C-
9 as proposed. The 2013 Interagency Appraisals Final Rule under TILA 
section 129H allows for an appraisal notice that is the same as the 
language in form C-9, thus preserving the option of using a single 
disclosure to satisfy both rules.
    The Bureau is not modifying the sentence regarding applicant-
ordered appraisals. The language informing applicants they can order 
their own additional appraisals is included in the sample disclosure in 
form C-9 so that this disclosure can also be used to satisfy the 
requirements of the 2013 Interagency Appraisals Final Rule under TILA 
section 129H, as discussed above, and more broadly to educate consumers 
(whether or not they are applying for a higher risk mortgage subject to 
TILA section 129H) on their right to order an additional appraisal for 
their own use. If this information were not included in the sample 
disclosure, then it could not be used to satisfy the requirements under 
TILA section 129H and its implementing regulation, the 2013 Interagency 
Appraisals Final Rule. Therefore the final rule maintains this portion 
of the sample disclosure in form C-9. To address industry comments 
suggesting borrowers might try to compel lenders to use applicant-
ordered appraisals in an inappropriate manner, new comment 14(a)(2)-1 
is being included in the final rule. This comment clarifies that the 
rule does not affect restrictions on creditor use of applicant-ordered 
appraisals by creditors. The Bureau does not believe, however, that the 
concise, tested language in the sample disclosure should be expanded to 
discuss these standards, which are complex and subject to varying 
interpretations. For example, industry commenters differed in their 
views on whether or how creditors may use these appraisals. Elaborating 
on this language in the sample disclosure to inform consumers that 
creditors cannot use or are not obligated to use the appraisals 
applicants may order, without a more detailed explanation of the 
standards governing the creditor conduct in the appraisal process, 
could discourage consumers from ordering their own appraisal as a means 
of disputing the appraisal ordered by the creditor, if they were to 
choose to do so.\54\ Such information could detract from consumer 
comprehension of the disclosure, and in any event is not required by 
ECOA section 701(e).
---------------------------------------------------------------------------

    \54\ See 12 CFR 1026.42(c)(3) (describing permitted actions that 
do not conflict with appraisal independence standards in Sec.  
1026.42(a)-(b)). While one commenter suggested the sample disclosure 
could lead borrowers to believe, incorrectly, that they may order 
appraisals from the creditor, consumer testing did not suggest this 
confusion is likely. The Bureau therefore declines to alter the 
sample disclosure to instruct applicants on how they can order 
appraisals.
---------------------------------------------------------------------------

    On the issue of whether to include the word ``valuations'' in the 
text of the consumer disclosure, the Bureau is not persuaded that this 
additional language would improve consumer comprehension and 
understanding. Consumer testing of an earlier version of the sample 
disclosure language, conducted in connection with the Bureau's 2012 
TILA-RESPA Proposal, indicated that consumers preferred a disclosure 
that did not include the word ``valuation'', as simpler and easier to 
understand. While ECOA section 701(e) calls for a disclosure that 
includes this word, as noted above, the Bureau is exercising its 
exception authority so that the disclosure under section 701(e) can be 
harmonized with TILA section 129H, which, among other differences, does 
not refer to ``valuations.'' Based upon consumer testing indicating the 
proposed text was easier to understand without the word ``valuation,'' 
and because allowing a single disclosure option for creditors that 
satisfies both regulations under ECOA section 701(e) and TILA section 
129H reduces creditor burden and the volume of consumer disclosures, 
the Bureau believes this exception would facilitate compliance and 
consumer understanding. If the term ``valuations'' were included in the 
text of the consumer disclosure, the disclosure would not be the same 
as the disclosure for subordinate lien transactions (which are not 
subject to section 701(e)), detracting from the unified approach that 
industry commenters widely supported. Regardless, if a non-appraisal 
valuation is developed in connection with a creditor's credit decision, 
then a copy of that valuation must be provided under the final rule. 
The final rule does not regulate communications at the time the 
valuation copy is provided. Creditors may choose to include 
explanations of the non-appraisal valuation, if one is provided. The 
Bureau believes that allowing voluntary description by the creditor at 
the point of providing copies is preferable to mandating a more complex 
up-front disclosure that could generate consumer confusion. In summary, 
the Bureau believes that the unified disclosure benefits both consumers 
and creditors because it clearly communicates basic information 
required by both ECOA section 701(e) and TILA section 129H in one 
disclosure.
    The Bureau notes, however, that proposed Sec.  1002.14(a)(2) would 
have required notifying applicants of their right to receive not only 
an appraisal, but also a ``valuation.'' This may have led to some of 
the commenters' suggestions of including the term ``valuation'' in the 
sample disclosure. Accordingly, for the sake of clarity, and to confirm 
that sample disclosure C-9 (whose text does not refer to the word 
``valuation'') would satisfy the disclosure requirement in Sec.  
1002.14(a)(2), the final rule modifies the disclosure requirement to 
delete the word ``valuation.'' \55\ This change is made based upon the 
same exercise of the exception authority used to develop form C-9, 
discussed above. The Bureau believes this change will prevent confusion 
as to what language is required to be included in the disclosure.\56\
---------------------------------------------------------------------------

    \55\ The word ``valuation'' also is removed from the title of 
the sample disclosure, for consistency with the disclosure 
requirement and the disclosure text.
    \56\ In addition, because the sample disclosure is not a 
mandatory disclosure, creditors may voluntarily choose to refer to 
the term ``valuation'' in the disclosure unless prohibited by other 
regulations (for example, if the sample language is required to be 
included in the Loan Estimate under any final TILA-RESPA Integration 
rule, and that rule applies to the transaction).
---------------------------------------------------------------------------

    The final rule also does not adopt other changes industry 
commenters suggested for the sample consumer disclosure, as consumer 
testing did not suggest these changes are necessary. For example, the 
Bureau does not believe it is necessary to modify the sample disclosure 
to inform consumers that applicants can be charged for additional 
copies beyond the first copy. The sample disclosure already only refers 
to the right to receive ``a copy'' without charge. Consumer testing did 
not indicate that consumers were concerned about what could happen if 
they wanted additional copies. The Bureau also does not believe that 
the sample disclosure should be revised to state when the time period 
for ``promptly'' providing the copies begins. The sample disclosure 
already states the creditor will promptly provide a copy of an 
appraisal the

[[Page 7230]]

creditor may order in the future. This language already implies that 
the creditor will first need to receive and if necessary review the 
original before it makes copies. Consumer testing indicated a strong 
preference for succinct, focused language in the appraisals disclosure, 
and did not suggest consumers wanted additional clarification on the 
precise nature of the timing requirement.
    Finally, to clarify the extent to which the text in sample 
disclosure from C-9 can be modified by creditors, the Bureau is 
revising the commentary. If the 2012 TILA-RESPA Proposal is adopted as 
proposed, that rule would require including in the TILA-RESPA Loan 
Estimate the same language as this final rule adopts in the sample 
disclosure form C-9, without variation. On the other hand, the 2012 
TILA-RESPA Proposal and the mandatory forms proposed therein would not 
apply to open-end credit or reverse mortgage transactions. Therefore 
the potential to modify the language in the sample disclosure may 
depend on the applicability of laws and regulations other than ECOA and 
this final rule. Comment Appendix C-1-ii therefore is revised to 
clarify that creditors may modify the model form C-9 unless otherwise 
provided by law.\57\ This comment, as revised, addresses the commenter 
question of whether the sentence in form C-9 referring to applicant-
ordered appraisals can be modified (or deleted); as the comment 
suggests, the sentence could not be changed if the sentence is required 
by another applicable regulation, such as the consumer disclosure 
requirement in the 2013 Interagency Appraisals Final Rule under TILA 
section 129H applicable to higher-risk mortgages. This change to the 
commentary also clarifies that this or any other modification would not 
be permitted in a transaction that is subject to the TILA-RESPA rule 
that the Bureau finalizes in the future, to the extent that final rule 
maintains the mandatory forms from the 2012 TILA-RESPA Proposal.
---------------------------------------------------------------------------

    \57\ This comment also is revised to refer to the ``appraisal or 
other written valuations'', consistent with the scope of the final 
rule.
---------------------------------------------------------------------------

Timing of Disclosure
    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 appraisal and other written valuation. The Bureau interprets the 
phrase ``at the time of application'' to require creditors to provide 
the ECOA appraisal disclosure not later than three business days after 
receiving an application. The Bureau's proposed Sec.  1002.14(a)(2) 
would have required 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 appraisals and other 
written valuations developed in connection with such application.
    This approach to the timing of the notification is consistent with 
the disclosure requirements of TILA and RESPA. Currently, in 
transactions subject to TILA and RESPA, creditors are required to 
provide disclosures required under TILA and RESPA not later than the 
third business day after receiving a consumer's written 
application.\58\ In its 2012 TILA-RESPA Proposal to integrate the other 
TILA and RESPA requirements, the Bureau has proposed that the ECOA 
appraisal disclosure be provided as part of the Loan Estimate 
disclosure to be delivered not later than the third business day after 
application.\59\
---------------------------------------------------------------------------

    \58\ See, e.g., 12 CFR 1026.19(a)(1)(i) providing in relevant 
part:
    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 section 1026.18 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.
    \59\ 2012 TILA-RESPA Proposal, at proposed Sec. Sec.  
1026.19(e)(1)(iii) and 1026.37(m)(1), available at http://www.consumerfinance.gov/regulations/. Proposed Sec.  
1026.19(e)(1)(iii) provides as follows: ``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.''
---------------------------------------------------------------------------

    The Bureau stated in the preamble to its ECOA proposal that it 
believes this approach is warranted because providing the disclosure to 
applicants at the same time as other similar disclosures--and (once 
adopted) 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.
    Public comments. Many commenters expressed support for the three-
business-day time frame for the disclosure to be made, consistent with 
the current and proposed TILA-RESPA approach. Several commenters cited 
the ability to integrate the ECOA appraisal disclosure into the 
integrated TILA-RESPA Loan Estimate when adopted as a reason for 
supporting the timing requirement in the proposed rule. While one 
commenter suggested the disclosure could be better timed as part of the 
application process itself, other commenters said it would be 
burdensome for lenders to provide the disclosure at that time. One 
commenter also suggested the deadline for the disclosure be extended to 
10 business days.
    A large lending institution also requested clarification on when 
the disclosure must be given in business transactions in which the use 
of a dwelling as collateral is negotiated and added as a term of the 
credit agreement well after the initial application has been submitted. 
In this type of situation, the comment recommended that the final rule 
either clarify that the disclosure requirement applies only if the 
initial loan application contemplates the lender taking a first lien on 
a dwelling, or provide the creditor an opportunity to cure and provide 
the disclosure at some later point in the application process when it 
becomes apparent a dwelling will be used as collateral.
    Discussion. Consistent with most of comments received on the timing 
of the disclosure, the final rule maintains the three-business day 
timing requirement for the reasons stated in the proposal. This time 
period allows lenders to align ECOA appraisal disclosures with TILA-
RESPA early disclosures in transactions that are covered by TILA and 
RESPA. Earlier timing requirements would place additional burden on 
creditors, while later timing requirements could result in an 
unwarranted departure from the statutory time frame. To ensure 
consistency with the requirements of TILA and RESPA, including section 
129H of TILA, the final rule also includes new conforming language in 
Sec.  1002.14(a)(2) providing that the disclosure shall be mailed or 
delivered not later than the third business day after the creditor 
receives the consumer's application.\60\
---------------------------------------------------------------------------

    \60\ In addition, if TILA disclosures are provided earlier than 
three days after application, such as for open-end credit under 
Regulation Z Sec.  1026.40, the creditor also could provide the 
disclosure required under Sec.  1002.14(a)(2) at that time, though 
the creditor would not be required to do so.
---------------------------------------------------------------------------

    The final rule includes an exception to this requirement, however. 
In the case of an application for credit that is not to be secured by a 
first lien on a dwelling at the time of application, if the creditor 
later determines the credit will be secured by a first lien on a 
dwelling, the creditor shall mail or deliver the notice required under 
Sec.  1002.14(a)(2) in writing not later than the third business day 
after the creditor determines that the loan is to be secured

[[Page 7231]]

by a first lien on a dwelling. The Bureau believes this is a reasonable 
interpretation of the statute in the absence of a specific provision in 
ECOA section 701(e) on this point. ECOA section 701(e)(5) calls for a 
notice ``at the time of application,'' but does not address the timing 
of the notice when the creditor does not know at that time that the 
credit will be secured by a first lien on a dwelling. The Bureau is 
therefore exercising its authority under ECOA section 703(a) to provide 
a timeframe for notification in this situation to assist creditors in 
complying with rule and to ensure that applicants involved in these 
transactions receive the notice.
    The Bureau also notes that it did not receive comments on its 
proposal to set the start of the three-day time period as the time when 
the creditor receives the ``application.'' The Bureau is finalizing the 
use of this term as proposed. Because Regulation B already defines the 
term ``application'' in Sec.  1002.2(f) with reference to the 
creditor's ``procedures'' for receiving a request for credit, the 
Bureau believes this approach will permit creditors to setup their 
procedures to align the timing for the appraisal notice with other 
disclosure requirements.
14(a)(3) Reimbursement
    ECOA 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, however, that creditors shall provide a ``free'' 
copy of each appraisal or other written valuation at no additional cost 
to the applicant. Accordingly, the Bureau proposed Sec.  1002.14(a)(3) 
to implement section 701(e)(3) and (4), as added by the Dodd-Frank Act, 
and provide greater clarity. The Bureau stated in the preamble to its 
proposal that it interpreted these two provisions to permit creditors 
to charge applicants reasonable fees to reimburse the creditor for 
costs of the appraisal or other valuation itself, but not for 
photocopying, postage, or similar costs associated with providing one 
written copy to the applicant. Thus the Bureau proposed removing 
current comment 14(a)(2)(ii)-1, which permits creditors to charge 
photocopy and postage costs incurred in providing a copy to the 
applicant.
    The Bureau also proposed that Sec.  1002.14(a)(3) affirm that 
creditors may impose fees to reimburse the costs of appraisals or other 
valuations. ECOA section 701(e)(3) does not expressly refer to 
valuations, and thus does not expressly permit or prohibit creditors 
from charging reasonable fees to reimburse the cost of valuations. The 
Bureau stated that because ECOA section 701(e)(3) does expressly permit 
such fees for ``appraisals,'' legislative intent with respect to other 
types of ``valuations'' is unclear. The Bureau stated that it believed 
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 certain types of valuations, such as 
broker-price opinions or AVM reports, but not for others, such as 
appraisals. The Bureau stated that it did 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 appropriate in particular circumstances.\61\ Such a result would 
impose additional costs on loan applicants. Accordingly, the Bureau 
proposed 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 other valuation, except as otherwise 
provided by law. In proposing this interpretation, to the extent 
necessary, the Bureau proposed to rely on the authority provided in 
ECOA section 703(a) to provide adjustments and exceptions for any class 
of transactions.
---------------------------------------------------------------------------

    \61\ 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 
U.S. Gov't Accountability Office, GAO-11-653, Residential 
Appraisals: Opportunities to Enhance Oversight of an Evolving 
Industry, at 22 (2011). Other forms of valuation, however, tend to 
cost less than appraisals. Broker Price Opinions typically cost $65-
125; valuations derived from an AVM typically cost $5-25. See id., 
at 17-18; see also U.S. Gov't Accountability Office, GAO-12-147, 
Real Estate Appraisals: Appraisal Subcommittee Needs to Improve 
Monitoring Procedures, at 39 (2012).
---------------------------------------------------------------------------

    The Bureau proposed that comment 14(a)(3)-2 clarify that Sec.  
1002.14(a)(3) would not prohibit the creditor from charging a fee 
reasonably designed to reimburse costs incurred in connection with 
obtaining appraisal and other valuations services, but would not permit 
increasing the fee for the appraisal or other valuation to cover costs 
of providing documentation under Sec.  1002.14. As stated in the 
proposal, the Bureau believed that ECOA section 701(e)(3) and (4) did 
not call for more prescriptive rate regulation of valuation-related 
activities. By contrast, section 1472 of the Dodd-Frank Act created 
TILA section 129E, which specifically imposes a criterion for appraiser 
fees--that they be ``reasonable and customary'' in the market area 
where the property is located--and specified various sources for 
determining whether fees meet the standard. The Bureau therefore stated 
that it did not believe that Congress intended ECOA section 701, which 
focuses on the provision of copies of written valuation documents to 
loan applicants rather than the substantive performance of appraisal 
and other valuation services, to function in such a manner. 
Accordingly, the Bureau stated that it believed that section 701(e)(3) 
and (4) is simply designed to prevent direct or indirect ``upcharging'' 
related to the provision of documents that is the focus of this section 
of the statute.
    To clarify the statutory language stating that creditors cannot 
seek reimbursement for the cost of the appraisal ``where otherwise 
required in law,'' the Bureau also proposed that comment 14(a)(3)-2 
note that other laws 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 mortgages, 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 proposed comment 14(a)(3)-1 to 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 appraisals 
or other written valuations. In addition, comment 14(a)(3)-2 was 
proposed to 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 other valuation services, so long they are not increased 
to cover the costs of providing copies required under Sec.  
1002.14(a)(1).
    Public comment. Several commenters addressed proposed Sec.  
1002.14(a)(3). These comments generally addressed the following two 
aspects of Sec.  1002.14(a)(3): the proposed provision relating to 
reasonable fees charged to reimburse costs of appraisals and other 
valuations, and the provision prohibiting charges for the costs of 
providing copies of appraisals and other valuations to applicants.

[[Page 7232]]

    No commenters opposed the proposal to allow creditors to charge 
reasonable fees for appraisals and other valuations unless otherwise 
provided by law. One industry commenter requested that the rule 
explicitly allow the fee to cover costs charged by appraisal management 
companies (AMCs), which can be either a component of or supplemental to 
the cost of the appraisal. This commenter argued that Congress did not 
intend to prohibit AMC fees in the Dodd-Frank Act, as it specifically 
provided for their disclosure in the settlement statement pursuant to 
RESPA section 4(c). 12 U.S.C. 2603(c). Another industry commenter 
suggested that the final rule interpret ``reasonable fee'' to mean a 
fee that was disclosed and agreed to by the applicant. A different 
industry commenter requested additional clarification on what could not 
be charged under this provision.\62\
---------------------------------------------------------------------------

    \62\ An appraisal industry commenter objected to certain 
language in the Bureau's preamble, including the statement that 
appraisals could involve ``needless cost'' in certain transactions 
where other valuations could be used, and to the statement that 
broker price opinions and automated valuation models are ``equally 
appropriate'' for some transactions.
---------------------------------------------------------------------------

    In addition, several industry commenters requested that the rule 
allow creditors to withhold copies of the appraisals and other 
valuations if the borrower did not pay the permitted fees to reimburse 
the cost of appraisals and other valuations. Some commenters noted this 
type of exception would be particularly important in transactions where 
the application is withdrawn, incomplete, or denied. One commenter also 
requested that disclosure required under section 14(a)(2) inform the 
consumer of the ability of the creditor to withhold these copies.
    Industry commenters were generally supportive of the proposed 
prohibition on charges for providing copies of appraisals and other 
written valuations. While a large internet lender specifically agreed 
with the proposed prohibition, a few lending institutions objected to 
the proposed prohibition on the grounds that it would force them to 
absorb additional costs. Because proposed Sec.  1002.14(a)(3) and 
comment 14(a)(3)-1 referred to a prohibition on charges for providing 
``a copy,'' several industry commenters suggested this could be read as 
prohibiting charges for providing duplicate or additional copies. These 
commenters therefore requested that the final rule clarify that 
creditors could charge for subsequent copies of appraisals and other 
written valuations. A large industry trade association also noted a 
concern over whether the prohibition against charging for copies of 
appraisals and other written valuations would prohibit indirect 
recovery of these costs.
    Discussion. Section 1002.14(a)(3) in the final rule and associated 
commentary are generally adopted as proposed, with some minor 
clarifications as discussed below.
    As in the proposal, Sec.  1002.14(a)(3) in the final rule clarifies 
that charges for valuations are not prohibited by section 701(e)(3) of 
ECOA. No commenters addressed this provision in the proposal. As noted 
in the proposal, in adopting this provision in the final rule, the 
Bureau relies to the extent necessary on its authority to make 
adjustments under section 703(a) of ECOA. Such an adjustment would 
facilitate compliance with ECOA and prevent circumvention, and also 
would effectuate the purposes of ECOA. Otherwise, ECOA section 
701(e)(3) might be interpreted as distinguishing between one type of 
valuation (an ``appraisal'') whose cost may be reimbursed by 
applicants, and all other types of valuations whose cost may not be 
reimbursed by the applicant. Yet the definition of ``valuation'' in 
section 701(e)(6) of ECOA refers broadly to ``any estimate of the value 
of a dwelling,'' without distinguishing between these types of 
valuations. Under such an interpretation, the Bureau would need to 
provide guidance on how to distinguish between appraisal and non-
appraisal valuations; without such guidance, creditors could 
deliberately or inadvertently mischaracterize non-appraisal valuations 
as appraisals to recover their cost, or creditors may avoid valuations 
altogether to avoid incurring unrecoverable costs. Additionally, as 
noted in the proposal, a distinction between the ability to recover 
costs for appraisals versus other types of valuations could discourage 
creditors from using less costly forms of valuations, especially in 
smaller dollar-amount transactions. For example, Federal banking 
regulations 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.\63\ It 
is not the purpose of ECOA section 701(e) to encourage one type of 
valuation over another; its purpose is to inform the consumer of the 
basis for the credit decision. Thus the adjustment in Sec.  
1002.14(a)(3) will ensure the final rule adheres more closely to the 
purpose of ECOA as well.
---------------------------------------------------------------------------

    \63\ 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.
---------------------------------------------------------------------------

    At the same time, comment 14(a)(3)-2 in the final rule clarifies 
that in allowing reasonable fees to reimburse \64\ the cost of 
appraisals and other valuations, Sec.  1002.14(a)(3) is not intended to 
create a legal obligation of the applicant to pay these fees. As noted 
above, one commenter suggested a link between the concept of a 
``reasonable fee,'' and whether the fee was disclosed and agreed to by 
the consumer. While the Bureau does not believe that the term 
``reasonable fee'' could be equated in all cases with fees disclosed to 
and agreed by the applicant, the commenter highlights the relevance of 
the applicant's agreement to pay the fee. Whether the legal obligation 
to pay the fee exists is a matter arising under other laws, including 
without limitation contract law, however. Other laws also may limit the 
ability to recover these fees, as indicated by the phrase ``unless 
otherwise provided by law'' in Sec.  1002.14(a)(3).\65\
---------------------------------------------------------------------------

    \64\ With respect to proposed Sec.  1002.14(a)(3) more broadly, 
the comment suggesting the word ``reimbursement'' be used more 
consistently left unclear exactly how it would suggest the term be 
used.
    \65\ These other laws may include requirements applicable to 
estimates of loan fees provided at the time of application, 
limitations on changes to these fees in certain circumstances, 
prohibitions against charging for second appraisals in higher-risk-
mortgage transactions involving ``flipping,'' and prohibitions 
against unfair, deceptive, and abusive acts and practices under 
applicable law. While one commenter requested additional 
clarification of what charges are prohibited by Sec.  1002.14(a)(3), 
the Bureau believes that the phrase ``otherwise provided by law'' is 
intended to be open-ended, and calls for creditors to consider 
applicable laws when setting their fees. As noted in the proposal, 
the Bureau does not believe that ECOA section 701(e) calls for rate 
regulations.
---------------------------------------------------------------------------

    In response to the comment seeking clarification that Sec.  
1002.14(a)(3) does not limit the recoverability of AMC charges, the 
Bureau recognizes that the Dodd-Frank Act did not intend to prohibit 
recovery of AMC fees. As the commenter noted, RESPA section 4(c) allows 
but does not require creditors to break out the AMC fees on the 
settlement statement from the fees paid directly to the appraiser. The 
commenter suggests that recoverability of AMC fees was left in doubt by 
the proposed comment 14(a)(3)-2, referring to fees ``reasonably 
designed'' to reimburse creditor costs incurred ``in connection with 
obtaining'' appraisal and other valuation services. To clarify, the 
Bureau is revising comment 14(a)(3)-2 so its language more closely 
tracks ECOA section 701(e) (which refers to ``reasonable fees'' to 
reimburse appraisal costs, rather than fees that are

[[Page 7233]]

``reasonably designed'' for this purpose) and to specifically indicate 
that section 14(a)(3) is not intended to prohibit recovery of AMC fees.
    The final rule also adopts the prohibition in proposed Sec.  
1002.14(a)(3) against charging for providing a copy of an appraisal or 
other written valuation ``as required under the final rule.'' While 
industry commenters raised a question of whether creditors could charge 
for providing additional copies of the same appraisal or other written 
valuation, such as when the applicant requests them, the Bureau does 
not believe that the regulation is unclear on this point. The final 
rule, in Sec.  1002.14(a)(1), requires only that the creditor provide 
``a copy'' of each appraisal or other written valuation. The 
prohibition against charging for copies only applies to copies that are 
``required under the final rule.'' Because the final rule does not 
require that creditors provide more than one copy, there is no 
suggestion in the final rule that creditors are prohibited from 
charging for duplicates or additional copies. If they do provide 
additional duplicate copies, it would not be pursuant to a requirement 
in the rule. The Bureau also does not believe the rule requires, as one 
commenter suggested, the tracking of mailing or copying costs and even 
their refund to the consumer to ensure they are not included in the 
interest rate previously set.\66\
---------------------------------------------------------------------------

    \66\ As noted in comment 14(a)(3)-2, the prohibition against 
charging for copies is designed to prevent an increase of charges 
within a specific transaction based upon the copies that must be 
provided. Thus a creditor would be prohibited from imposing a line-
item fee for providing copies, or from adjusting other line item 
fees based upon the copies that are provided (for example, 
increasing the points and fees in the closing statement above the 
amount specified in the loan estimate to account for costs of copies 
that are being provided).
---------------------------------------------------------------------------

    To fully implement the prohibition in Sec.  1002.14(a)(3) against 
charging for providing a copy of an appraisal or other written 
valuation, the Bureau also is amending the commentary to sample 
disclosure form C-9. Comment Appendix C-1-ii is revised to remove the 
suggestion that a creditor may add text to the disclosure notifying the 
applicant of the cost the applicant will be required to pay for a copy 
of the report.
    The Bureau declines to add an exception in the final rule to the 
requirement to provide copies of appraisals and other written 
valuations where the applicant has not paid the fee for the appraisal 
or other written valuation. Section 1002.14(a)(2)(ii) of Regulation B 
currently calls for providing the copy after receipt of the request, 
the report, or reimbursement for the report, ``whichever is last to 
occur.'' As proposed, Sec.  1002.14(a)(2) would no longer have based 
the timing of disclosure upon the receipt of payment. The Bureau 
believes this approach is consistent with the language of ECOA section 
701(e) as amended. The statutory timing requirement concerning 
providing copies contains no reference to receipt of reimbursement for 
the valuation from the applicant. Moreover, ECOA section 701(e)(4) 
specifically states that ``notwithstanding'' the creditor's ability to 
charge a reasonable fee to reimburse the creditor's appraisal costs, 
the creditor ``shall provide'' the copy at no additional cost. The 
Bureau does not believe that conditioning the creditor's obligation to 
provide copies at no additional cost on the applicant's reimbursement 
of the costs of the appraisal or other written valuation would be 
consistent with legislative intent as expressed in ECOA section 701.
    The Bureau understands the need for creditors to manage payment 
risks. The final rule does not affect the ability of creditors to 
request up-front payment from applicants before appraisals or other 
written valuations are ordered (which would protect creditors even if 
the application is withdrawn, incomplete, or denied), to collect 
payment at consummation or account opening, or to undertake other 
efforts to collect the fee if the transaction is not consummated or the 
account is not opened. The Bureau therefore declines to adopt this 
exception suggested by comments it received.
14(a)(4) Withdrawn, Denied, or Incomplete Applications
    ECOA section 701(e)(1) requires providing copies of the appraisals 
or other written valuations ``whether the creditor grants or denies the 
applicant's request for credit or the application is incomplete or 
withdrawn.'' The Bureau therefore proposed in Sec.  1002.14(a)(4) that 
the requirements of Sec.  1002.14(a)(1) also apply whether credit is 
extended or denied or if the application is incomplete or withdrawn. 
Specifically, creditors would be required to provide copies of 
appraisals and other written valuations even in situations where an 
applicant provides only an incomplete application.
    Public comments. Two national associations of creditors suggested 
that the Bureau use its adjustment authority under ECOA to eliminate 
the statutory requirement to provide copies of appraisals and other 
written valuations where an applicant withdraws from the application 
process before indicating an intent to proceed. These commenters argued 
that the valuation is not relevant to the withdrawing applicant, and 
providing a copy would impose an unnecessary cost.
    Discussion. Dodd-Frank Act section 1474 amended ECOA section 701(e) 
to require providing copies of appraisals and other written valuations 
even in cases where the application is withdrawn. The statute did not 
distinguish between withdrawals that occur before or after declaring an 
intent to proceed with the transaction. While the commenter suggested 
the Bureau should exercise its exception authority in cases in which 
the application is withdrawn before the applicant expresses an intent 
to proceed, the Bureau is not persuaded there is a basis for doing so 
here. The ``intent to proceed'' standard governs whether fees can be 
charged to applicants under Regulation X, which implements RESPA, and 
not when applicants have a protected interest against discrimination 
under ECOA. The Bureau does not believe that the purpose of ECOA in 
preventing, detecting, and remedying discrimination would be served by 
providing such an exception. Under Regulation X, Sec.  1024.7(a)(4), 
the intent to proceed comes after the applicant has received a good 
faith estimate (or a revised good faith estimate), which quotes loan 
terms to applicants and which could be based upon an appraisal or other 
written valuation. Indeed, in some cases the very reason that the 
consumer elects to withdraw the application may be the result of what 
the lender has said or done in response to the appraisal or other 
valuation, for example by changing the interest rate based on a lower-
than-expected loan to value ratio. Therefore the text of Sec.  
1002.14(a)(4) is adopted as proposed.
14(a)(5) Copies in Electronic Form
    The Bureau believes that it is appropriate to allow creditors to 
provide applicants with copies of appraisals and other written 
valuations in electronic form if the applicant consents to receiving 
the copies in such form. Accordingly, the Bureau proposed that Sec.  
1002.14(a)(5) permit copies of appraisals and other written valuations 
required by Sec.  1002.14(a)(1) to 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.).\67\
---------------------------------------------------------------------------

    \67\ As noted in the proposal, Sec.  1002.4(d)(2) of Regulation 
B currently provides that the disclosures required to be provided in 
writing by Regulation B 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. While Sec.  
1002.4(d)(2) refers to written ``disclosures'', the E-Sign Act also 
applies more broadly to ``information relating to a transaction'' 
that is required to be made available in writing. 15 U.S.C. 
7001(c)(1). Thus the proposal sought to clarify that the 
requirements of the E-Sign Act also would apply to providing copies 
of appraisals and other written valuations.

---------------------------------------------------------------------------

[[Page 7234]]

    Public comments. Several industry commenters supported the option 
of consent-based electronic delivery. Two lenders suggested the E-Sign 
Act consent process is burdensome, and should not be required; one 
industry commenter suggested that the E-Sign Act consent process is 
important, however.
    Discussion. The Bureau believes that application of the E-Sign Act 
to the electronic disclosure of copies of appraisals and other written 
valuations is appropriate, and the final rule maintains this condition. 
While one commenter noted that the appraisal is not a contract 
document, Section 101(a) of the E-Sign Act governing electronic 
signatures in contracts is not the provision at issue here. Rather, 
Section 101(c) of the E-Sign Act, 15 U.S.C. 7001(c), governs consent 
for provision of consumer disclosures by electronic means. The 
commenter therefore has not articulated a basis for treating copies of 
appraisals and other written valuations as falling outside the scope of 
Section 101(c). In any event, however, applying the E-Sign Act 
requirements to provision of copies of appraisals and other written 
valuations by electronic means would not force creditors to institute 
E-Sign Act compliance procedures. Creditors could simply choose not to 
provide the copies by electronic means.
    The Bureau also notes that because the disclosure required by Sec.  
1002.14(a)(2) is a written disclosure required by Regulation B, Sec.  
1002.4(d)(2) will permit that disclosure to be provided electronically 
based upon a consent given in compliance with the E-Sign Act. There is 
no need to restate this point in a separate provision within Sec.  
1002.14. As discussed at the beginning of the section-by-section 
analysis above, the Bureau is revising the electronic disclosure 
provision in Sec.  1002.4(d)(2), however, to ensure its exception can 
apply to the new notice required by Sec.  1002.14(a)(2) of the final 
rule, which replaces the consumer notice required by existing Sec.  
1002.14(a)(2)(i). While this change was not proposed in the proposal, 
this revision is necessary to maintain the consistency of cross-
references in Regulation B and its existing approach to electronic 
disclosure of the consumer notice required under Sec.  1002.14. In 
particular, existing Sec.  1002.4(d)(2) allows the creditor to provide 
written disclosures required by certain specified provisions of 
existing Regulation B, including existing Sec.  1002.14(a)(2)(i), 
electronically without regard to consumer consent or provisions of the 
E-Sign Act, if the disclosure ``accompan[ies] an application accessed 
by the applicant in electronic form.'' The Bureau believes this cross-
reference in Sec.  1002.4(d)(2) to the notice requirement in Sec.  
1002.14(a)(2) should be maintained, for the same reasons the Board did 
not apply the E-Sign Act requirements to disclosures provided with the 
application.\68\ In addition, creditors could choose to provide the 
notice as an accompanying disclosure with the application, which would, 
by definition, be provided within three business days of the 
application as required by this final rule.\69\ Therefore, the cross-
reference is being updated to reflect the citation to the disclosure 
provision in the final rule, Sec.  1002.14(a)(2).
---------------------------------------------------------------------------

    \68\ The Bureau notes that the Board adopted this exception to 
the requirements of the E-Sign Act for certain disclosures required 
in Regulation B in amendments to provide guidance on electronic 
delivery of disclosures. For the same reasons that the Board cited, 
the Bureau believes that permitting the disclosure required in Sec.  
1002.14(a)(2) to be provided without regard to the consumer consent 
or other provisions of the E-Sign Act when the disclosure 
accompanies an application the consumer accesses electronically 
eliminates a ``a potential significant burden on electronic commerce 
without increasing the risk of harm to consumers.'' 72 FR 63445, 
63448 (Nov. 9, 2007).
    \69\ This option would not necessarily be available for all 
transactions. For example, if the 2012 TILA-RESPA Proposal is 
finalized as proposed, the appraisal notice will be required to be 
included in the integrated TILA-RESPA Loan Estimate. The exception 
under Sec.  1002.4(d)(2) would not be triggered by a Loan Estimate 
disclosed after the application, rather than accompanying the 
application.
---------------------------------------------------------------------------

Removal of Exemption for Credit Unions
    The Board's 1993 Final Rule on Providing Appraisal Reports (1993 
Final Rule) provided in Sec.  1002.14(b) that credit unions were exempt 
from the requirements in Sec.  1002.14(a) to provide copies of 
appraisals upon request, if not provided routinely. See 58 FR 65657, 
65660 (Dec. 16, 1993). In the 1993 Final Rule, the Board pointed to 
pre-existing NCUA regulations, and how they already required credit 
unions to provide copies of appraisals upon request.\70\ The Board also 
cited the legislative history of the 1991 ECOA amendments, which 
indicated Congress was aware of these pre-existing regulations and thus 
did not intend to modify them.\71\ Accordingly, the Board found it 
unnecessary to require under Regulation B what the NCUA already 
required under its own regulations.
---------------------------------------------------------------------------

    \70\ See 12 CFR 701.31(c)(5), which currently provides:
    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.
    \71\ S. Rept. 167, 102nd Cong., at 90 (1991). The Senate Report 
stated as follows: ``Regulations by the National Credit Union 
Administration (NCUA) currently require credit unions to make 
appraisals available without regard to who has paid for the 
appraisal;[] test[sic] this legislation is not intended to modify 
those NCUA regulations. Neither is the legislation intended to 
affect the current custom of many lenders routinely to provide 
copies of appraisal reports.''
---------------------------------------------------------------------------

    Under today's version of the NCUA regulation, 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, as 
described above, the Dodd-Frank Act amendments to ECOA removed the 
prior provisions of section 701(e) and replaced them with requirements 
that were significantly broader in scope. Unlike the prior provisions 
of section 701(e), section 701(e) as amended requires creditors to 
provide copies of all valuations, and not only appraisals; section 
701(e) also requires that creditors provide these copies automatically, 
rather than allowing them to be provided upon request. Thus amended 
section 701(e) guarantees that applicants will receive copies of 
valuations that are performed, including non-appraisal valuations, and 
regardless of whether applicants specifically request the copies. In 
addition, neither section 1474 of the Dodd-Frank Act nor its 
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, the Bureau 
proposed deleting the exemption for credit unions provided in Sec.  
1002.14(b).
    Public comment. Most credit union commenters urged the Bureau to 
maintain the exemption for credit unions, suggesting, for example, that 
the existing rule (requiring disclosure on request) be maintained and 
that credit unions did not need to be covered by the new rule because 
they were not a cause of the financial crisis that the Dodd-Frank Act 
was intended to address. One of the commenters argued that the Bureau 
should maintain the

[[Page 7235]]

exemption in order to allow the NCUA to amend its regulations to 
conform to section 701(e) of ECOA. Some of these commenters suggested 
the proposed rule would be burdensome, particularly when viewed in 
combination with the other rules being implemented under the Dodd-Frank 
Act. One credit union stated, however, that it understood the Bureau's 
proposed rationale for removing the exemption in Regulation B. An 
appraisal industry commenter also stated that it supported removing the 
exemption.
    Discussion. As noted in the proposal, Congress did not exclude 
credit unions from the requirements of ECOA section 701(e), and the 
legislative history of the Dodd-Frank Act did not suggest Congress 
intended to exclude credit unions, unlike when Congress adopted the 
previous version of section 701(e) in 1991. Moreover, even assuming 
credit unions may have had a lesser role in precipitating the financial 
crisis to which the Dodd-Frank Act responded, the purposes of ECOA 
include preventing and remedying unlawful discrimination in credit 
transactions. By including the requirement to provide copies of 
appraisals and other written valuations in ECOA, Congress made the 
judgment that enhanced transparency of appraisals and other written 
valuations would further these purposes. In addition, applicants to 
credit unions have an equal interest in the protection and remedies 
afforded by ECOA as applicants to other creditors. Failure to apply the 
rule to credit unions would result in applicants to these creditors not 
having the same guarantees of receiving copies of appraisals and other 
written valuations promptly (regardless of whether they request them), 
or of receiving copies of non-appraisal valuations at all. In addition, 
the Bureau is not persuaded by the comments that the final rule 
implementing section 701(e) would impose a significant additional 
burden on creditors, as credit union commenters did not establish that 
credit unions do not follow the general industry practice of providing 
copies of appraisals to applicants in first lien transactions.\72\ The 
Bureau therefore is not persuaded that the standards for exercising its 
exception authority are met, whether under section 703(a) of ECOA to 
effectuate the purposes of, or foster compliance with, ECOA or under 
section 1405(b) of the Dodd-Frank Act to protect the interests of 
consumers and the public.\73\ Accordingly, the final rule does not 
include an exemption for credit unions.
---------------------------------------------------------------------------

    \72\ The Bureau also does not believe that the final rule 
implementing section 701(e) affects the ability of credit unions to 
comply with the existing NCUA regulations at 12 CFR 701.31(c)(5). 
Credit unions that comply with the final rule requiring disclosure 
of appraisals and other valuations to applicants also would be able 
to comply with existing NCUA regulations by maintaining appraisals 
on file for the specified time period for provision upon request.
    \73\ Despite commenter suggestions that the Bureau could wait to 
see if NCUA adopted its own rule, the Dodd-Frank Act does not 
suggest it is the responsibility of NCUA to issue such a rule under 
ECOA, backed by the remedies which ECOA provides. Section 1085 of 
the Dodd-Frank Act amended ECOA to transfer ECOA rulemaking 
authority (including authority under ECOA section 701(e)) to the 
Bureau. Section 1061 of the Dodd-Frank Act also transferred consumer 
financial protection functions of the NCUA to the Bureau. In any 
event, if the NCUA were to amend its rules in a manner consistent 
with section 701(e), the Bureau would review that regulation and 
consider any consequences that regulation could have on the 
application of this final rule to credit unions.
---------------------------------------------------------------------------

14(b) Definitions
    As discussed below, the Bureau proposed to define three terms in 
Sec.  1002.14(b). The Bureau also requested 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).
14(b)(1) Consummation
    As discussed above, for clarity and to be consistent with other 
similar regulatory requirements under TILA and RESPA, the Bureau 
proposed that Sec.  1002.14(a)(1) use the term ``consummation'' in 
place of the statutory term ``closing.'' The Bureau proposed to define 
the term ``consummation'' in Sec.  1002.14(b)(1) as the time that a 
consumer becomes contractually obligated on a credit transaction. This 
definition mirrors the definition of the term provided in Sec.  
1026.2(a)(13) of Regulation Z.
    The Bureau also proposed two comments to clarify the meaning of the 
term ``consummation.'' First, comment 14(b)(1)-1 was proposed to 
clarify that the question of when a contractual obligation on the 
consumer's part is created is a matter to be determined under 
applicable law; proposed 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. Second, comment 14(b)(1)-2 was proposed to 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.
    Public comments. The Bureau received very few comments on this 
definition. One industry commenter suggested the term would be 
confusing in the case of a rescindable transaction, and also queried 
whether consummation would occur when the lender issues a loan 
commitment. One commenter suggested the term is not plain English.
    Discussion. The lack of industry comments on use of the term 
``consummation'' suggests that industry is familiar with the meaning of 
the term. Consummation is a term that is defined elsewhere in 
regulations and used throughout mortgage regulations. The Bureau 
believes it is appropriate to use here for consistency and precision 
for closed-end transactions, and that given its common usage confusion 
is unlikely.\74\ In any event, for clarity, this final rule adopts the 
proposed comments 14(b)(1)-1 and 2 clarifying the meaning of 
``consummation;'' this guidance mirrors longstanding guidance in 
Regulation Z.\75\ Accordingly, the final rule thus maintains the 
definition of the term ``consummation'' as proposed.
---------------------------------------------------------------------------

    \74\ Section 3(2)(C) of the Plain Writing Act of 2010 excludes 
regulations from the scope of its requirements. In any event, the 
term ``consummation'' need not be included in the disclosure 
applicants will receive under Sec.  1002.14(a)(2) and is not 
included in the sample disclosure.
    \75\ The Bureau also does not agree with the comment suggesting 
that consummation could occur at the end of the rescission period. 
TILA specifically defines its rescission right as arising 
``following the consummation of the transaction,'' 15 U.S.C. 
1635(a), such that the existence of a rescission period after 
consummation under TILA would not affect the pre-consummation timing 
standards in this final rule.
---------------------------------------------------------------------------

14(b)(2) Dwelling
    The Bureau proposed that Sec.  1002.14(b)(2) retain the definition 
of the term ``dwelling'' in current Sec.  1002.14(c). Specifically, 
Sec.  1002.14(b)(2) proposed to define the term ``dwelling'' as a 
residential structure that contains one to four units whether or not 
that structure is attached to real property, and including but not 
limited to an individual condominium or cooperative unit, and a mobile 
or other manufactured home.
    Public comment. Industry commenters asked the Bureau to clarify 
several aspects of the definition of ``dwelling.'' For example, several 
commenters asked the Bureau to clarify in the final rule whether the 
definition of ``dwelling'' refers only to an owner-occupied dwelling, 
or to any residential

[[Page 7236]]

dwelling regardless of the applicant's residence in the building. 
Several commenters in the manufactured housing industry also requested 
that the definition of ``dwelling'' exclude residential structures that 
are not attached to the real property, such as recreational vehicles 
and house boats, as well as manufactured homes when titled as chattel. 
Further, some industry commenter asked for clarification on whether the 
rule applies to commercial transactions. Some of these comments 
requested that the final rule exclude commercial transactions even when 
they involve a first lien on a dwelling. One commenter argued, however, 
that covering commercial transactions would promote education, 
knowledge, and creditor safety and soundness by ensuring applicants are 
aware of the appraisals and other valuations on which the credit 
decisions are based. In addition, some industry commenters requested 
clarification on whether the final rule would cover certain multiple 
residence situations involving a single lot, such as three four-unit 
buildings situated on a single land parcel and operated as one small 
12-unit apartment complex. Finally, one commenter suggested the 
definition of ``dwelling'' be harmonized with the definition in 
Regulation C promulgated under the Home Mortgage Disclosure Act (HMDA), 
which is not limited to one-to-four-family structures, while another 
commenter suggested the definition be limited to single-family housing.
    Discussion. The final rule does not exclude business credit when it 
is secured by a first lien on a dwelling because business credit is 
covered by ECOA and Regulation B. ECOA section 701(e) applies to a 
``creditor'', a term that ECOA section 702(e) defines by reference to 
the term ``credit'' in section 702(d). Section 702(d) of ECOA does not 
limit the term ``credit'' to credit for personal, family, or household 
purposes, and Regulation B has long interpreted ``credit'' to include 
personal and ``business credit.'' See comment 1002.2(j)-1 (discussing 
definition of ``credit'' in Sec.  1002.2(j)); \76\ Sec.  1002.2(g) 
(definition of ``business credit'').\77\ Thus, the final rule covers 
applications for business credit to be secured by a first lien on a 
dwelling.
---------------------------------------------------------------------------

    \76\ The comment provides that ``[u]nder Regulation B, a 
transaction is credit if there is a right to defer payment of a 
debt--regardless of whether the credit is for personal or commercial 
purposes, the number of installments required for repayment, or 
whether the transaction is subject to a finance charge.''
    \77\ Regulation B generally uses the term ``business credit'' 
where unique or different requirements are applied to business or 
commercial transactions. The final rule does not adopt special or 
different requirements, and therefore uniformly uses the term 
``credit.''
---------------------------------------------------------------------------

    The final rule adopts the definition of ``dwelling'' as proposed. 
When describing the transactions subject to section 701(e) of ECOA, 
Dodd-Frank Act section 1474 used the term ``dwelling'', which has been 
defined in Sec.  1002.14(c) as follows: ``[T]he term dwelling 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 unit, and a mobile or other 
manufactured home.'' \78\ Given that this definition was in place when 
Congress amended ECOA section 701(e) and used the term ``dwelling'' in 
specifying the scope of the requirement, the Bureau believes that it is 
appropriate to continue to use the existing definition of ``dwelling.''
---------------------------------------------------------------------------

    \78\ This definition also is similar to the definition of 
dwelling in Regulation C, which covers ``a residential structure 
(whether or not attached to real property) located in a state of the 
United States of America, the District of Columbia, or the 
Commonwealth of Puerto Rico. The term includes an individual 
condominium unit, cooperative unit, or mobile or manufactured 
home.'' 12 CFR 1003.2. The Bureau does not believe the Regulation C 
definition should be adopted for this rule, however. The Regulation 
C definition could broaden the scope of the final rule beyond one-
to-four family dwellings, while it is unclear that ECOA section 
701(e) as amended contemplated this result.
---------------------------------------------------------------------------

    The definition of ``dwelling'' in Sec.  1002.14(c) requires that 
the unit be a ``residential structure'', but does not require that it 
be ``owner-occupied.'' As a result, the requirements of the final rule 
can apply to transactions involving one-to-four-unit residential 
structures that may be business or commercial in nature, including for 
investment purposes. Beyond this, whether a transaction meets the 
definition will depend on the facts and circumstances. Because 
transaction structures can vary widely, the Bureau does not believe it 
would be efficient or appropriate to try to address all such variations 
in the text of the rule or the commentary.\79\
---------------------------------------------------------------------------

    \79\ With respect to the example raised by a creditor and two 
national creditor associations--three four-unit buildings operated 
as a 12-unit apartment complex, the text of the rule makes clear 
that a four-unit residential building would be a dwelling, but a 12-
unit apartment complex is not. Thus a transaction secured by a four-
unit residential building would be covered by the rule, but a 
transaction secured by the entire 12-unit apartment complex would 
not be. Because this question can be analyzed in a straightforward 
manner by reference to the text of the rule, the Bureau does not 
believe that further commentary is needed for this to be apparent. 
Similarly, the definition of ``dwelling'' refers to the example of 
an ``individual condominium or cooperative unit,'' but not to a 
cooperative building as a whole, even though such a building may 
contain several individual units.
---------------------------------------------------------------------------

    The definition of ``dwelling'' in Regulation B, Sec.  1002.14(c), 
currently includes a residential structure ``whether or not * * * 
attached to real property,'' and lists as an example a ``mobile or 
other manufactured home.'' Industry commenters reported that a 
significant number of consumers in the United States reside in 
manufactured homes. The Bureau does not believe the comments articulate 
a valid basis for a new exemption under Regulation B for manufactured 
homes that would otherwise meet the definition of ``dwelling.'' Whether 
an applicant has a right to receive a copy of an appraisal or other 
written valuation that has been performed should not turn on whether 
the residential structure is built on site or in a factory for later 
installation on site--particularly when such valuations can be done for 
these transactions.\80\ The definition of ``dwelling'' in Regulation B 
is appropriately broad enough to encompass manufactured homes. The 
Bureau recognizes, however, that transactions involving manufactured 
homes will not always result in appraisals or other written valuations. 
This issue is taken into account in Sec.  1002.14(b)(3) discussed 
below.
---------------------------------------------------------------------------

    \80\ HUD standards for its Title I insurance program for 
manufactured homes, for example, provide valuation standards. U.S. 
Dep't of Hous. & Urban Dev., TI-481, Changes to the Title I 
Manufactured Home Loan Program, at App. 2-1, D (Apr. 2009) 
(requiring valuations that meet HUD standards for transactions 
involving existing manufactured homes); id. at App. 8-9, C 
(describing valuation standards for certain manufactured home 
transactions); U.S. Dep't of Hous. & Urban Dev., TI-437, Appraisals 
of Manufactured Homes and Lots, at 1-2 (Jan. 1996) (describing 
valuation standards for manufactured homes classified as personal 
property and manufactured home transactions involving real 
property). GSEs also have standard forms available on their Web 
sites, such as Fannie Mae Form 1004C and Freddie Mac Form 70B, for 
conducting appraisals of manufactured home transactions eligible for 
purchase by them.
---------------------------------------------------------------------------

    The final rule also provides clarification in response to comments 
by several industry trade associations that Sec.  1002.14 should not 
apply to certain other structures, such as recreational vehicles or 
boats. Unlike manufactured homes, which are specifically enumerated 
examples of a ``dwelling'' in existing Sec.  1002.14(c) and proposed 
Sec.  1002.14(b)(2),\81\ other structures such as boats and 
recreational vehicles are not enumerated as examples. Though boats and 
recreational vehicles may have residential uses in some cases, the fact 
that they are not expressly enumerated here in existing Regulation B 
suggests that, unlike manufactured homes, they are not exclusively 
residential by nature and are not always covered by the existing 
appraisal copy requirements at Sec.  1002.14. Therefore,

[[Page 7237]]

while the Bureau does not see a basis for removing ``manufactured 
homes'' from the list of enumerated examples of a dwelling in Sec.  
1002.14 (see existing Sec. Sec.  1002.14(c) and 1002.13(a)(2)), there 
is a basis for analyzing boats and recreational vehicles differently.
---------------------------------------------------------------------------

    \81\ For a definition of ``manufactured home,'' see also 42 
U.S.C. 5402(6) and related HUD regulations at 24 CFR 3280.2.
---------------------------------------------------------------------------

    In addition, even though Regulation Z commentary has long stated 
that boats and trailers can be dwellings and has not ruled out that 
recreational vehicles and campers also could be dwellings,\82\ they are 
not covered by the 2013 Interagency Appraisals Final Rule under TILA 
section 129H. See Regulation Z, Sec.  1026.35(c)(2)(iii). As noted 
above, the rules implementing ECOA section 701(e) and TILA section 129H 
allow for identical consumer disclosure concerning appraisals and 
require creditors to provide copies of appraisals to applicants. To the 
extent regulations implementing ECOA section 701(e) and TILA section 
129H can be aligned, burden on creditors is reduced.
---------------------------------------------------------------------------

    \82\ See 12 CFR part 1026, Supp. I, comment 2(a)(19)-2. This 
comment states as follows: ``Use as a residence. Mobile homes, 
boats, and trailers are dwellings if they are in fact used as 
residences, just as are condominium and cooperative units. 
Recreational vehicles, campers, and the like not used as residences 
are not dwellings.''
---------------------------------------------------------------------------

    Accordingly, the Bureau is adopting comment 14(b)(2)-1 to confirm 
that the requirements of Sec.  1002.14 in particular do not apply to 
transactions secured solely by motor vehicles as defined by 12 U.S.C. 
5519(f)(1)--a term that includes boats, motor homes, recreational 
vehicles, and other vehicles, but not manufactured homes.\83\ It is not 
clear that in amending section 701(e) of ECOA in the Dodd-Frank Act, 
Congress intended to provide a basis for requiring creditors to provide 
copies of valuations when selling motor vehicles used as residences. 
The legislative history for section 701(e) specifically refers to 
providing protections for ``mortgage applicants,'' for example.\84\ 
ECOA section 701(e)(6) also lists examples of ``valuations'' that are 
used in the real estate context--broker price opinions, GSE values, and 
AVMs (a term which section 1473 of the Dodd-Frank Act defined within 
the context of Title XI of the Financial Institutions Reform, Recovery, 
and Enforcement Act (FIRREA), a statute focused on ``real estate 
related transactions'', 12 U.S.C. 3331). To the extent any motor 
vehicle transactions otherwise could be subject to Sec.  1002.14, the 
Bureau exercises its exception authority under ECOA section 703(a) to 
exclude them. As noted above, because the legislative history does not 
clearly suggest an intent to cover motor vehicle transactions, the 
exclusion will facilitate compliance by reducing regulatory 
uncertainty, and will be consistent with the purposes of section 701(e) 
of ECOA as reflected in the legislative history described above.
---------------------------------------------------------------------------

    \83\ Under 12 U.S.C. 5519(f)(1), the term ``motor vehicle'' 
means--(A) Any self-propelled vehicle designed for transporting 
persons or property on a street, highway, or other road; (B) 
recreational boats and marine equipment; (C) motorcycles; (D) motor 
homes, recreational vehicle trailers, and slide-in campers, as those 
terms are defined in sections 571.3 and 575.103(d) of title 49, Code 
of Federal Regulations, or any successor thereto; and (E) other 
vehicles that are titled and sold through dealers.''
    \84\ H. Conf. Rept. 517, 111th Cong., at 877 (2010) (joint 
explanatory statement on Dodd-Frank Act); see also H. Rept. 94, 
111th Cong., at 99 (2009) (discussing proposed revision to ECOA in 
H.R. 1728 that was later introduced in the Dodd-Frank Act, H.R. 
4173).
---------------------------------------------------------------------------

    The Bureau did not, however, seek comment in the proposal on 
whether structures that are ``motor vehicles'' can be covered by or 
should be excluded from the scope of ECOA and Regulation B more 
broadly, including the information collection requirements of Sec.  
1002.13. This clarification in comment 14(b)(2)-1 is therefore limited 
to Sec.  1002.14 and is not a pronouncement on whether boats, trailers, 
recreational vehicles, campers, or motor vehicles would otherwise fall 
within the definition of ``dwelling'' in other provisions of Regulation 
B.
14(b)(3) Valuation
    ECOA section 701(e) refers to ``valuations,'' which it defines as 
``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.'' Accordingly, proposed Sec.  1002.14(b)(3) 
would have defined the statutory term ``valuation'' as ``any estimate 
of the value of a dwelling developed in connection with a creditor's 
decision to provide credit.'' Comment 14(b)(3)-1 was proposed, based on 
current comment 14(c)-1, to provide the following list of examples of 
valuations, which included the three examples listed in the existing 
comment (which were examples of an ``appraisal report''), and added the 
three additional specific examples of ``valuations'' provided in ECOA 
section 701(e)(6):
     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 appraiser'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).
     A value 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.
     A value 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 proposal noted that 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 
an appraisal or other written valuation. The Bureau explained it does 
not believe that consumers would benefit from receiving duplicative 
pieces of information concerning appraisals and other written 
valuations. Additionally, the proposal noted that it is important that 
the rule make it simple for creditors to distinguish between documents 
that must be provided to applicants and those that are not required to 
be provided. Accordingly, the Bureau proposed comment 14(b)(3)-2, based 
on current comment 14(c)-2, to clarify that not all documents that 
discuss or restate a valuation of an applicant's property constitute 
``appraisals or other written valuations'' for purposes Sec.  
1002.14(a)(1). For further clarification, the Bureau proposed that the 
comment provide the following list of examples of documents that 
discuss the valuation of the applicant's property but nonetheless are 
not appraisals or other written valuations for purposes of the 
requirement to provide a copy to applicants:
     Internal documents, that merely restate the estimated 
value of the dwelling contained in an appraisal or other written 
valuation being provided to the applicant.
     Governmental agency statements of appraised value that are 
publically available.

[[Page 7238]]

     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.
    Public Comments. As noted above, a few industry commenters argued 
that the definition of valuation generally should be limited to 
estimates that were relied upon or used by the creditor in making its 
credit decision.
    An appraisal industry group suggested that the first proposed 
example of a valuation in proposed comment 14(b)(3)-1--a report 
prepared by an appraiser (whether or not licensed or certified)--should 
be modified to avoid suggesting that an unlicensed and uncertified 
appraiser is qualified.\85\
---------------------------------------------------------------------------

    \85\ An appraisal industry group also noted that the sixth 
proposed valuation example--broker price opinion--should clarify 
that they would not necessarily be permitted to be used in the 
credit transaction.
---------------------------------------------------------------------------

    GSEs and other industry commenters commented on the fourth proposed 
valuation example, values developed pursuant to a GSE-required method 
or mechanism.\86\ The GSE commenters noted that they allow but do not 
require that lenders use the GSE AVMs. A GSE commenter also noted that 
its AVM report could be provided to the borrower to satisfy the 
proposed rule. While some commenters expressed concern that GSE 
valuations were proprietary and creditors were forbidden from 
disclosing them, a large lending institution noted that the GSEs have 
reviewed and approved standard letters for the disclosure of GSE-
developed valuations to consumers.
---------------------------------------------------------------------------

    \86\ In addition, a GSE commenter indicated that one of its 
tools does not communicate a ``value'' to the creditor.
---------------------------------------------------------------------------

    Several lending and appraisal industry groups commented on the 
fifth proposed valuation example--valuations developed by AVMs. 
Commenters noted that AVM reports can be highly technical, including 
special coding and information that would be confusing to consumers. 
Some of these commenters suggested that AVMs therefore be excluded from 
the definition of ``valuation.'' Other commenters requested additional 
clarification of how the term AVM is defined, such as whether it would 
include property inspection waivers (PIW), property inspection 
alternatives (PIA), Desktop Underwriter (DU)[supreg], and Loan 
Prospector (LP)[supreg] reports. A few commenters suggested that the 
property inspection reports (PIPs) that may accompany some AVMs should 
be excluded from the definition of ``valuation.'' On the other hand, an 
appraisal industry commenter suggested including PIPs accompanying 
AVMs.
    More broadly, a significant number of industry commenters strongly 
objected to the inclusion, in the first, fourth, fifth, and sixth 
proposed valuation examples, of ``written comments and other documents 
submitted to the creditor in support of'' the estimate. These 
commenters generally believed this language exceeded the statutory 
definition of the term ``valuation'' in section 701(e)(6) of ECOA, and 
argued that the language was vague and would expose them to substantial 
uncertainty as to what they would need to provide to applicants in a 
given transaction. Some commenters believed this wording could trigger 
time consuming and costly internal discovery by creditors and valuation 
preparers to search within and outside the credit institution for all 
written correspondence and other documents pertaining to the valuation, 
including reviews by AMCs, internal reviews, and evaluations of 
appraisal reports, some of which may be privileged or proprietary, and 
other materials. Some commenters also noted this language could result 
in burdensome disclosures to consumers who would be confused by 
voluminous information including background materials.
    Industry commenters requested clarifications of and additions to 
the list of examples of documents that are not valuations. Manufactured 
housing industry commenters strongly supported the third proposed 
example excluding manufacturers' invoices for mobile homes, but 
suggested that the term ``mobile home'' is outdated and the term 
``manufactured home'' should be used instead, consistent with industry 
usage and regulations of the Department of Housing and Urban 
Development (HUD). These comments also requested that the documents 
reflecting the ``maximum loan amount'' for manufactured homes be 
excluded, because they may reveal manufacturer pricing information.
    Other commenters suggested that the list of examples of documents 
that are not valuations include the following: quality checks, fraud 
checks, internal reviews of valuations such as appraisal reviews, 
technical background data used by AVMs, and other ancillary documents 
developed for use by the appraiser or underwriter. Some commenters were 
concerned that some documents meeting the definition of valuation would 
be proprietary or reflect proprietary information. One industry 
commenter also was unsure whether a document integrating multiple 
publicly-available valuations would itself be a valuation. Finally, as 
discussed above, several industry commenters requested clarification 
that preliminary, draft, or other non-final documents be excluded.
    Discussion. The Bureau is finalizing the definition of valuation in 
Sec.  1002.14(b)(3) as proposed, with one technical change. In the 
proposal, the phrases ``developed in connection with an application for 
credit'' in the description of the requirement in Sec.  1002.14(a)(1) 
regarding the materials that must be provided, and the phrase 
``developed in connection with a creditor's decision to provide 
credit'' in the definition of valuation in Sec.  1002.14(b)(3), were 
taken directly from the text of ECOA sections 701(e)(1) and (6) 
respectively. The Bureau does not believe that Congress intended these 
phrases to have different meanings. As a practical matter, many 
appraisals or other written valuations developed in connection with an 
application for credit will be a valuation developed in connection with 
a creditor's decision to provide credit and vice versa. However, using 
different terms in the rule could suggest there may be circumstances in 
which a valuation falls into one category, but not another. To 
facilitate compliance by eliminating uncertainty and to ensure the 
final rule gives full effect to section 701(e)(1), which is controlling 
as to the materials that must be provided to applicants, the Bureau 
interprets section 701(e)(6) consistently with 701(e)(1), and to the 
extent necessary is exercising its authority under ECOA section 703(a), 
to use the phrase ``developed in connection with an application for 
credit'' in the definition of ``valuation'' in Sec.  1002.14(b)(3).
    The final rule also makes a number of clarifying revisions to the 
commentary. As noted earlier, comment 14(a)(1)-7 is being added to the 
final rule to clarify that drafts or other non-final materials need not 
be provided if they have been superseded by later versions. In 
addition, as discussed below, the final rule incorporates several 
revisions to proposed comment 14(b)(3)-1 and proposed comment 14(b)(3)-
2 (which is renumbered as comment 14(b)(3)-3), and adds a new comment 
14(b)(3)-2. These revisions address certain additional concerns of 
commenters regarding the materials that must be provided to 
applicants.\87\
---------------------------------------------------------------------------

    \87\ Comments 14(b)(3)-1 and 2 in the final rule provide a list 
of examples of documents that are valuations subject to the copy 
requirement, and comment 14(b)(3)-3 provides a list of documents 
that are not valuations subject to the copy requirement. As these 
comments note, these lists are not exclusive. The Bureau may issue 
guidance from time to time to identify other examples for either 
list.

---------------------------------------------------------------------------

[[Page 7239]]

    The list of examples of valuations in comment 14(b)(3)-1 has been 
revised to eliminate the phrase ``written comments and other documents 
submitted to the creditor in support of'' the estimate. The Bureau 
believes that the list of materials that must be provided will be 
easier for creditors to understand if it refers simply to the reports 
themselves. The Bureau notes that this phrase (``written comments and 
other documents'') is not explicitly provided for in the definition of 
``valuation'' in ECOA section 701(e)(6), and a number of commenters 
suggested that the phrase may be susceptible to uncertainty that could 
lead to overburdening creditors and consumers with the disclosure of 
information that is background in nature. The Bureau further notes 
that, in the absence of a definition of ``appraisal'' within ECOA, a 
1993 amendment to the definition of an appraisal report in the 
commentary to Regulation B (58 FR 65658, 65659) had included this 
phrase ``written comments and other documents.'' In light of the 
inclusion in section 701(e) of ECOA of a definition of ``valuation'' 
that is broad enough to include appraisal reports, and the comments 
received, the Bureau does not believe a general reference to ancillary 
and supplementary information is useful to include in the list. 
Instead, the Bureau has added comment 14(b)(3)-2 in the final rule to 
clarify that the term ``valuation'' includes any attachments or 
exhibits that are part of an integrated valuation report. The Bureau 
believes that this comment is clearer, more specific, and addresses the 
commenters' concerns over uncertainty in the meaning of the phrase 
``written comments and other documents.'' Under this comment in the 
final rule, for example, if a creditor receives an AVM report that has 
a list of comparable properties included as an exhibit or an 
attachment, then a copy of this exhibit or attachment would need to be 
provided. This comment therefore should ensure that consumers receive a 
copy of the complete, integrated report, without being distracted or 
burdened by additional ancillary information that falls outside the 
four corners of the report. Comment 14(b)(3)-1 also clarifies, however, 
that the list of examples is not exhaustive. Ultimately, the definition 
of ``valuation'' in Sec.  1002.14(b)(3) governs.
    For clarity and consistency across the examples in the final rule, 
the Bureau has revised the second proposed example to make clear that 
an internal creditor valuation must be disclosed, regardless of whether 
a third-party appraisal report is prepared. As a result of this change, 
the third proposed example--internal review documents reflecting the 
creditor valuation--was removed as largely duplicative. This deletion 
also addresses industry commenters' concerns that internal review 
documents, such as quality checks, fraud checks, automated underwriting 
determinations that do not estimate the value of the dwelling (such as 
certain GSE tools that simply suggest another valuation is excessive), 
or expressions of criticism of a valuation, should not be treated as 
themselves being valuations.
    In response to GSE comments that they do not ``require'' use of 
their valuation methods, the Bureau has revised the example relating to 
GSE valuations to delete the word ``required'', which also is not used 
in the statute. The statute simply refers to values developed 
``pursuant to a policy of a government sponsored enterprise.'' To 
provide additional guidance, this example in the comment now refers to 
GSE-approved forms for disclosing to consumers values developed 
pursuant to proprietary GSE mechanisms and methodologies.\88\ This 
revision also should help to clarify the type of GSE automated tools 
whose output would be considered valuations.
---------------------------------------------------------------------------

    \88\ This revision also is intended to focus this example on GSE 
valuation methods, and to distinguish this example from appraisals 
and other written valuations prepared by other third parties.
---------------------------------------------------------------------------

    The Bureau is finalizing inclusion of valuations developed by AVMs 
in the list of examples because they are included in the statutory list 
of valuation types in section 701(e)(6). The Bureau does not believe 
that the potential for AVM valuations to be coded or difficult for some 
consumers to understand is a basis for excluding them from the 
disclosure requirement. Consistent with the purpose of ECOA section 
701(e) and ECOA more broadly, if an AVM develops a valuation in 
connection with the application that is provided to the creditor, then 
the creditor has a duty under the final rule to disclose a copy to the 
applicant. While some AVMs may use proprietary methods, the final rule 
does not require the disclosure of these methods per se; rather, the 
final rule requires disclosure of the written valuations developed by 
the AVMs which are provided to the creditors.\89\ That is, the revised 
list of examples focuses on the report generated by the AVM to estimate 
the property's value, as opposed to the AVM methodology itself. Because 
AVM providers have control over such output, it should be within their 
control to ensure such output does not reveal proprietary information. 
Similarly, to the extent AVM reports are complex and coded, and 
creditors wish to voluntarily educate consumers, the creditors may 
provide additional explanatory information to the applicant at the time 
the AVM report is provided or request that the AVM generate such 
information. The rule does not require that creditors do so, however.
---------------------------------------------------------------------------

    \89\ Similarly, one commenter expressed concern that the 
proposed rule could require disclosure of documents in the 
possession of third parties other than the creditor. Yet the final 
rule does not apply to persons who are not creditors within the 
meaning of Regulation B, Sec.  1002.2(l), and thus does not impose 
any obligation on a creditor to compel a third party to provide a 
copy of such documentation to the applicant.
---------------------------------------------------------------------------

    The Bureau also does not believe it would be appropriate to define 
the term ``automated valuation model'' in comment 14(b)(3)-1. When in 
receipt of a particular computer-generated report that may provide an 
estimate of the value of the dwelling, the creditor ultimately must 
make its own judgment of whether that report meets the definition of 
valuation in Sec.  1002.14(b)(3). The final rule cannot foresee all the 
types of computer-generated reports that might include valuations. 
Moreover, comment 14(b)(3)-1 is merely intended as a list of examples 
of valuations. In addition, section 1473 of the Dodd-Frank Act amends a 
different statute--FIRREA--to define the term ``automated valuation 
model'' for purposes of that statute as ``any computerized model'' used 
to determine the value of a dwelling that secures a mortgage. That 
definition would be implemented by a separate inter-agency rulemaking.
    Further, the Bureau does not believe that changes to the text of 
the regulation or commentary are needed to address the appraisal 
industry comments on the references to appraisers ``whether or not 
licensed or certified'' and to broker price opinions in the list of 
examples of valuations. The final rule does not regulate, or purport to 
regulate, the use of valuations such as broker price opinions by 
creditors. By referring to an example of a valuation, the final rule 
also does not suggest such a valuation would be permitted in any 
specific transaction, or that the person preparing such a valuation 
would be qualified.
    The list of examples that do not qualify as valuations, finalized 
in comment 14(b)(3)-3, is revised to refer to a manufacturer's invoice 
for a ``manufactured home'' instead of a ``mobile home,'' consistent 
with the comment indicating that the term

[[Page 7240]]

``manufactured home'' is current industry usage.\90\ Removing the 
reference to ``mobile home'' in this example also aligns with the 
exclusion of motor vehicles from the scope of the final rule.
---------------------------------------------------------------------------

    \90\ The phrase ``mobile or other manufactured home'' is 
retained in the definition of ``dwelling'' in Sec.  1002.14(b)(2), 
however, to ensure internal consistency with the other definition of 
``dwelling'' in Regulation B at Sec.  1002.13(a)(2).
---------------------------------------------------------------------------

    The Bureau has considered the observations from manufactured 
housing industry commenters that data from the manufacturers' invoice 
for manufactured homes is sometimes included as a factor in the 
lender's calculation of the loan amount or maximum loan amount. For 
example, two industry commenters pointed to HUD Title I insurance 
underwriting criteria, under which the maximum Title I insurable loan 
amount for manufactured housing loans for new homes is based, in part, 
upon the manufacturer invoice amount. See HUD, TI-481, App. 2 at 3-4 
(Apr. 2009). The comments did not provide information that would 
clearly establish a basis for categorically determining that loan 
amounts, maximum loan amounts, or loan-to-value calculations are not 
valuations under the final rule, however. These creditor calculations, 
if they would otherwise be valuations, would not lose such status 
merely by taking into account manufacturer invoice information. Indeed, 
the comments did not provide a rationale for why an applicant should be 
barred from viewing a valuation that contains manufacturer invoice 
data, if the creditor has received information from that invoice and 
used it in a valuation.
    The list of examples that would not be covered by the rule also is 
revised to clarify that property inspection reports are not valuations, 
if they do not provide an estimate or opinion of the property's value 
and are not used in the development of such an estimate or opinion. 
This example is added to address several comments seeking clarification 
about a variety of property reports that may be provided in the 
underwriting process.
    Finally, the comment clarifies that the list is not exhaustive. 
Again, the definition of ``valuation'' in Sec.  1002.14(b)(3) governs. 
This serves to emphasize that the commentary cannot exhaustively 
catalog all of the types of documents that might or might not fit the 
definition of ``valuation.'' The final rule seeks to address those 
comments the Bureau believes point to the most common types of 
documents that may raise the most significant questions under the final 
rule.

VI. Effective Date

    This final rule is effective on January 18, 2014. The Bureau 
requested comment on the effective date of the final rule, particularly 
given the likelihood that the TILA-RESPA Loan Estimate containing the 
ECOA appraisal disclosure would not be finalized on the same timeline 
as this final rule. These comments and the Bureau's consideration of 
them are described below. As discussed above in part III, the Bureau 
believes that this effective date is consistent with the timeframes 
established in section 1400(c) of the Dodd-Frank Act and, on balance, 
will facilitate the implementation of the rules' overlapping 
provisions, while also affording creditors sufficient time to implement 
the more complex or resource-intensive new requirements.

A. Public Comments

    Many industry commenters suggested that the effective date of the 
rule, or at least the disclosure requirement, should be delayed at 
least until the integrated TILA-RESPA Loan Estimate is finalized by the 
Bureau and the associated TILA-RESPA rule takes effect. One large 
lending institution suggested that the final ECOA rule take effect 12 
months after the effective date for other rules under the Dodd-Frank 
Act that had mandatory statutory deadlines. Two industry group 
commenters suggested that the Bureau seek ways to avoid staggered 
effective dates of these rules, which in their view would be wasteful 
because it would require that lenders update their systems twice--once 
for the ECOA rule, and then again when the TILA-RESPA Loan Estimate 
takes effect.
    Other commenters supported the use of a specific time period to set 
the rule's effective date, whether late 2013, 12 months, 18-24 months, 
or two years. A GSE also suggested that the rule take effect after 
2013, to avoid interfering with home modification and refinance 
programs scheduled to end by late 2013 so that resources currently used 
to support the GSE-administered refinance and modification programs do 
not have to be diverted to systems and process changes that would in 
any event be short-lived.\91\
---------------------------------------------------------------------------

    \91\ The GSE also requested further delayed implementation, in 
case these programs are extended very close to or after their 
expiration date at the end of 2013.
---------------------------------------------------------------------------

B. Discussion

    The final rule will be effective on January 18, 2014. Thus, the 
final rule applies to loans to be secured by first liens on dwellings 
for which an application is received by the creditor on or after 
January 18, 2014.
    The Bureau believes this transition period will provide sufficient 
time for creditors to make changes to their appraisal disclosures and 
their practices for providing copies of appraisals and other written 
valuations. The Bureau does not believe a later effective date, such as 
18 or 24 months after issuance of this final rule, is necessary. 
Appraisal disclosures are already required by Regulation B and provided 
by creditors, the final rule allows for creditors to continue to make 
these disclosures electronically (even without compliance with the E-
Sign Act if they are provided as an accompaniment to application 
documents), and creditors should not need to undertake complex dynamic 
systems programming to update this disclosure. In addition, copies of 
appraisals already are provided to applicants as a routine practice in 
most transactions covered by the final rule. While providing copies of 
valuations other than appraisals may be new in some transactions, the 
Bureau believes 12 months is sufficient time for creditors to prepare 
to include these with other materials (such as copies of appraisals) 
that already are provided to applicants as a routine practice in first 
lien transactions.\92\ In addition, as noted in the proposal, the 
Bureau believes it is important that consumers begin to receive 
disclosures with information on their new rights under ECOA with 
respect to appraisals.
---------------------------------------------------------------------------

    \92\ Even if GSE refinance or modification programs are extended 
very shortly at or after the end of 2013, and the GSEs elected not 
to prepare to implement this final rule until that time, this 
effective date would still leave a few weeks to prepare to provide a 
short appraisals disclosure to consumers who file new applications 
and to provide copies of appraisals and other valuations to 
consumers.
---------------------------------------------------------------------------

    Further, if the effective date of the ECOA rule were delayed more 
than 12 months, then it would take effect after the 2013 Interagency 
Appraisals Final Rule under TILA section 129H, which must take effect 
within 12 months after its issuance pursuant to section 1400(c)(1)(B) 
of the Dodd-Frank Act. Because these rules under ECOA section 701(e) 
and TILA section 129H cover a similar subject matter (appraisals), with 
harmonized disclosure requirements, relating to an overlapping set of 
transactions (loans secured by first liens on dwellings), the Bureau 
believes it is important for these rules to take effect at the same 
time. The Bureau believes that staggered effective dates for the ECOA 
and TILA rules could increase complexity and burden rather than ease 
compliance.

[[Page 7241]]

    As noted above, commenters raised concerns over the potential cost 
or burden of phased compliance, first with an ECOA disclosure 
requirement, and second with a rule on integrated TILA-RESPA 
disclosures. The Bureau does not believe, however, that it is 
appropriate to delay the consumer protections mandated by section 1474 
of the Dodd-Frank Act for the 2012 TILA-RESPA Proposal, which would not 
even apply to some transactions covered by the ECOA Appraisals Rule. 
See 77 FR 51116 (Aug. 23, 2012). The disclosure required by the final 
rule will provide consumers with important information about their 
rights under ECOA. In addition, for transactions covered by the ECOA 
Appraisals Rule that also would be covered by the Bureau's 2012 TILA-
RESPA Proposal, the Bureau does not believe it would significantly 
increase burden to set an earlier effective date for the ECOA 
Appraisals Rule. Under the 2012 TILA-RESPA Proposal, creditors in these 
transactions could simply adopt a TILA-RESPA Loan Estimate that 
includes the appraisals disclosure and therefore satisfies the ECOA 
Appraisals Rule.

VII. Dodd-Frank Act Section 1022(b)(2) Analysis

    In developing the final rule, the Bureau has considered potential 
benefits, costs, and impacts.\93\ The proposal set forth a preliminary 
analysis of these effects, and the Bureau requested comments and 
received some comments on this topic. In addition, the Bureau has 
consulted, or offered to consult with, the prudential regulators, FHFA, 
HUD, and the Federal Trade Commission (FTC), including regarding 
consistency with any prudential, market, or systemic objectives 
administered by such agencies.
---------------------------------------------------------------------------

    \93\ 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.
---------------------------------------------------------------------------

    The final rule amends Regulation B, which implements ECOA, and the 
official interpretations to the regulation, which interpret and clarify 
the requirements of Regulation B. The revisions to Regulation B 
implement an ECOA amendment concerning appraisals and other valuations 
that was enacted as part of the Dodd-Frank Act. In general, the 
revisions to Regulation B require creditors to provide a free copy of 
each appraisal and other written valuation developed in connection with 
an application for a loan to be secured by a first lien on a dwelling. 
The final rule also requires creditors to notify applicants in writing 
of the right to receive a copy of each written appraisal at no 
additional cost.
    The amendment to ECOA section 701(e) is self-effectuating, and the 
Dodd-Frank Act does not require the Bureau to adopt a regulation to 
implement these amendments. Thus, many costs and benefits of the final 
rule considered below would arise largely or entirely from the statute, 
not from the final rule. The final rule would provide substantial 
benefits compared to allowing the amendment to ECOA section 701(e) to 
take effect alone. These benefits arise because the final rule 
clarifies parts of the statute that call for interpretation, such as 
the definition of ``valuation'' in section 701(e)(6), the provision 
governing reimbursement of the creditor for certain costs in section 
701(e)(3), and the timing requirement for providing copies of 
appraisals and other written valuations in section 701(e)(1). Greater 
clarity on these issues should reduce the compliance burdens on covered 
persons by reducing costs for attorneys and compliance officers as well 
as potential costs of over-compliance and unnecessary litigation. In 
this light, the costs that the regulation would impose beyond those 
imposed by the statute itself are likely to be at most minimal.
    Section 1022 permits the Bureau to consider the benefits, costs, 
and impacts of the final regulation 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 final 
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).\94\
---------------------------------------------------------------------------

    \94\ 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 inform the rulemaking more fully.
---------------------------------------------------------------------------

    Section 1022 of the Dodd-Frank Act requires that the Bureau, in 
adopting the rule, consider potential benefits and costs to consumers 
and covered persons resulting from the rule, including the potential 
reduction of access by consumers to consumer financial products or 
services resulting from the rule, as noted above; it also requires the 
Bureau to consider the impact of its rules on covered persons described 
in section 1026 and the impact on consumers in rural areas. These 
potential benefits and costs, and these impacts, however, are not 
generally susceptible to particularized or definitive calculation in 
connection with this rule. The incidence and scope of such potential 
benefits and costs, and such impacts, will be influenced very 
substantially by economic cycles, market developments, and business and 
consumer choices that are substantially independent from adoption of 
the rule. No commenter has advanced data or methodology that it claims 
would enable precise calculation of these benefits, costs, or impacts.
    In considering the relevant potential benefits, costs, and impacts, 
the Bureau has utilized the available data discussed in this preamble, 
where the Bureau has found it informative, and applied its knowledge 
and expertise concerning consumer financial markets, potential business 
and consumer choices, and economic analyses that it regards as most 
reliable and helpful, to consider the relevant potential benefits and 
costs, and relevant impacts. The data relied upon by the Bureau also 
includes the public comment record established by the proposed rule. 
The Bureau notes, however, that for some aspects of this analysis, in 
particular with respect to the benefits of the rule, there are limited 
data available with which to quantify the potential impacts of the 
final rule. In light of these data limitations, the analysis below 
generally provides a qualitative discussion of the benefits of the 
final rule. General economic principles, together with the limited data 
that are available, provide insight into these benefits. Where 
possible, the Bureau has made quantitative estimates based on these 
principles and the data that are available; these estimates are 
primarily with regard to the costs of the rule. For the reasons stated 
in this preamble, the Bureau considers that the rule as adopted 
faithfully implements the purposes and objectives of Congress in the 
statute. Based on each and all of these considerations, the Bureau has 
concluded that the rule is appropriate as an implementation of the 
Dodd-Frank Act.
    The primary source of data used in this analysis is data collected 
under the Home Mortgage Disclosure Act (HMDA).\95\ Because the latest 
complete

[[Page 7242]]

data set available is for loans made in calendar year 2011, the 
empirical analysis generally uses the 2011 market as the baseline. Data 
from fourth quarter 2011 Reports of Condition and Income filed by 
federally-regulated banks and thrifts (Call Reports),\96\ fourth 
quarter 2011 credit union call reports from the NCUA, and de-identified 
data from the Nationwide Mortgage Licensing System (NMLS) Mortgage Call 
Reports (MCR) \97\ for the fourth 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.
---------------------------------------------------------------------------

    \95\ 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, in both cases including 
first liens on manufactured homes (transactions which also are 
subject to the final rule). U.S. Dep't of Hous. & Urban Dev., Office 
of Policy Development and Research, ``A Look at the FHA's Evolving 
Market Shares by Race and Ethnicity,'' U.S. Housing Market 
Conditions (May 2011), at 6-12. Depository institutions (including 
credit unions) with assets less than $40 million (in 2011), for 
example, and those with branches exclusively in non-metropolitan 
areas and those that make no home purchase loan or loan refinancing 
a home purchase loan secured by a first lien on a dwelling are not 
required to report under HMDA. Reporting requirements for non-
depository institutions depend on several factors, including whether 
the company made fewer than 100 home purchase loans or refinancings 
of home purchase 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 et al., The Mortgage Market in 
2011: Highlights from the Data Reported under the Home Mortgage 
Disclosure Act, 98 Fed. Res. Bull. (Fed. Res. Sys.), Dec. 2012, n.6.
    \96\ 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/.
    \97\ The NMLS 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.
---------------------------------------------------------------------------

    In addition, the Bureau notes that Regulation B generally applies 
to open-end credit and business or commercial credit; accordingly, the 
final rule also applies to these types of credit to the extent they are 
secured by a first lien on a dwelling. Calculations from the Experian 
Oliver-Wyman analysis of credit bureau data in the Q3 2012 Market 
Intelligence Reports \98\ were used to estimate the number of home 
equity lines of credit (HELOCs) originated in 2011, and the Survey of 
Consumer Finances (SCF) was used to calculate the proportion of HELOCs 
that are first liens.\99\ Reverse mortgages are believed to be 
predominantly first liens; counts of reverse mortgages are calculated 
from home equity conversion mortgages (HECM) in the HUD HECM 
Endorsement Summary Report.\100\
---------------------------------------------------------------------------

    \98\ Q3 2012 Experian-Oliver Wyman Market Intelligence Report. 
More information about the Experian-Oliver Wyman quarterly Market 
Intelligence Report is available at http://www.marketintelligencereports.com.
    \99\ The Bureau calculates that 26 percent of HELOCs are first 
liens from the 2010 SCF.
    \100\ Monthly HUD HECM Endorsement Summary reports are available 
at http://www.hud.gov/pub/chums/f17fvc/hecm.cfm. The non-HECM market 
for reverse mortgages has all but disappeared in recent years, so 
the Bureau believes the HECM count provides a reasonable estimate of 
reverse mortgage volume.
---------------------------------------------------------------------------

    Several comments from large and small lending institutions 
indicated it is standard practice for lenders in first lien residential 
real estate transactions to provide consumers with copies of appraisals 
performed. One lending institution stated its belief this is not a 
widespread industry practice, however. The comments did not provide 
data on the extent to which other valuations are conducted in first 
lien transactions, and also did not provide data on the extent to which 
creditors provide applicants with copies of valuations other than 
appraisal reports under current lending practices.\101\ As discussed 
below, one commenter criticized the proposal's estimate of $1.80 as the 
average increase in per-loan cost due to the rule.
---------------------------------------------------------------------------

    \101\ One commenter stated that GSEs charge $50 to generate a 
report from their proprietary valuation tools. It was not clear from 
this comment that GSEs would impose additional charges for creditors 
to disclose the valuation results to consumers. GSEs did not mention 
any such charges in their comments.
---------------------------------------------------------------------------

    A large lending institution reported that in one month in 2012, 
more than 2,000 appraisals it ordered were revised to correct 
misspellings or clerical errors. This information was provided to 
illustrate challenges creditors could face if prohibited from making 
minor, non-substantive corrections to valuations and appraisals within 
three days of closing, after the time frame in which copies should have 
been provided to the applicant absent a waiver.
    As discussed and addressed throughout this preamble, other 
commenters expressed general concerns about the burden of various 
aspects of the proposed rule. The Bureau has taken these comments into 
account in developing its final rule and in its analysis below.

A. Potential Benefits and Costs to Covered Persons and Consumers

    Consumers. Because the final regulation requires creditors to 
deliver copies of written 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 rule. As noted above and discussed further below, outreach 
indicated and GSE standards corroborated that it is standard practice 
for industry to provide copies of appraisals to applicants in first 
lien transactions that are consummated. Consumers therefore currently 
benefit from this industry practice already. The final rule provides a 
marginal increase in the number of transactions in which consumers will 
receive appraisals, and also ensures they will receive copies of other 
types of valuations (including in transactions where no appraisals are 
performed).
    Providing a free copy of any valuation consumers do not already 
receive provides consumers with details about the valuation and, in 
some cases, additional information on the condition of the property. 
Although consumers may receive some of this information from a home 
inspection or from an appraisal they would otherwise receive already 
under standard industry practice, each valuation provides the consumer 
with another independent evaluation. To the extent it would not already 
be provided to them, this detailed information may be particularly 
valuable to the consumer in a purchase transaction when the estimated 
value is less than their offer.\102\ In addition, consumers in 
transactions where appraisals are not conducted may not currently 
receive any information about the valuations developed in connection 
with their application. The final rule would therefore provide them 
with new information that may help them make decisions about their 
mortgage borrowing.
---------------------------------------------------------------------------

    \102\ The value of the information may vary depending on when in 
the home purchase and loan origination process the consumer receives 
the information.
---------------------------------------------------------------------------

    The final rule changes the consumer's right under Regulation B to 
obtain a copy from one where the consumer must request the copy to one 
where the copy is given as the default. Nonetheless, as noted above, it 
is standard industry practice to provide copies of appraisals in first 
lien transactions that are consummated. Thus the rule may result in 
more consumers obtaining copies of written appraisals in transactions 
that are not consummated because, despite low

[[Page 7243]]

transaction costs, there is evidence that default rules can have 
significant effects on outcomes in various settings.\103\ Consumers who 
previously may have requested copies of appraisals in the absence of 
the amendment save the time and effort required to make requests.
---------------------------------------------------------------------------

    \103\ See, e.g., John Beshears et al., The Importance of Default 
Options for Retirement Savings Outcomes: Evidence from the United 
States, Social Security Policy in a Changing Environment 169 
(Jeffrey Brown et al. eds., Univ. of Chi. Press); Eric Johnson & 
Daniel Goldstein. Do Defaults Save Lives?, 302 Science 1338 (2003).
---------------------------------------------------------------------------

    For those applicants who would not already receive a copy of an 
appraisal or other written valuation under existing practice, having a 
copy of any professional appraisal or other written valuation that is 
conducted as a point of reference may help them to gain a better 
understanding of the home's value and improve overall market 
efficiency, relative to the case where the applicant has less 
information about the value of the property.\104\ Individual consumers 
engage in real estate transactions infrequently, and because the 
expertise to value real estate is costly consumers often rely on 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 similar homes, which suggests 
that other sellers may not accurately price the homes that they are 
selling.\105\ Other research, conducted in a laboratory setting, 
provides evidence that individuals are sensitive to anchor values when 
estimating home prices.\106\ In such cases, an independent signal of 
the value of the home should benefit the consumer.
---------------------------------------------------------------------------

    \104\ 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 & John 
Quigley, Price Formation and the Appraisal Function in Real Estate 
Markets, 4 J. Real Est. Fin. and Econ. (1991).
    \105\ Steven Levitt & Chad Syverson, Market Distortions When 
Agents are Better Informed: The Value of Information In Real Estate 
Transactions, 90 Rev. Econ. & Stat. 599 (2008).
    \106\ Peter Scott & Colin Lizieri, Consumer House Price 
Judgments: New Evidence of Anchoring and Arbitrary Coherence, 29 J. 
Prop. Rsch. 49 (2012).
---------------------------------------------------------------------------

    Although the Bureau has not received comments from consumers on the 
proposed rule indicating any concerns, the Bureau believes that some 
consumers may not be interested in receiving copies of appraisals or 
other written valuations. While copies of appraisals are routinely 
provided in first lien transactions that are consummated, it is unclear 
that copies of other types of valuations are provided. For these 
consumers, the additional information received in copies of valuations 
may be unwelcome, or potentially distract their attention from other 
disclosures that are received shortly before consummation or account 
opening. The final rule seeks to reduce the volume of unnecessary 
information, by clarifying the list of examples of ``valuations'' and 
that multiple versions of the same valuation need not be provided so 
long as the timing requirements of the regulation are satisfied.
    In addition, the costs of the final rule may be indirectly passed 
on to consumers through very small increases in the cost of credit, 
largely associated with the costs of mailing copies to consumers who 
have not consented to receive them electronically under the E-Sign Act. 
Creditors also could charge for valuations--though this is not a 
consequence of the rule because creditors could charge for valuations 
now. These costs are discussed further below.
    Covered Persons. In the context of the final rule, ``covered 
persons'' includes depository institutions such as banks, credit 
unions, and thrifts, as well as non-depository creditors such as IMBs. 
The Bureau estimates that, of the roughly 14,700 depository 
institutions, about 11,400 originate mortgage loans. Another 2,800 non-
depository institutions engage in real estate credit, based on data 
from the NMLS MCR. The final 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 to creditors prior 
to the proposal, all respondents reported providing copies of written 
appraisals to borrowers as a matter of course if a first lien loan is 
originated.\107\ This practice also aligns with pre-existing 
requirements of certain GSEs to provide copies of appraisals promptly 
and no later than three business days before closing, as discussed in 
the section-by-section analysis above. These GSEs participate in a 
substantial portion of first lien transactions each year. In addition, 
the final rule requires that copies of other written valuations be 
provided to the applicant, and that copies of written appraisals be 
sent in the event that an application is received but does not result 
in a loan being originated. The final rule prohibits creditors from 
charging consumers for these copies. The final rule does, however, 
eliminate the cost of responding to individual requests for copies of 
an appraisal on an ad hoc basis, which is currently required under 
Regulation B, Sec.  1002.14. That is, the final rule eliminates any 
need to respond to ad hoc requests by querying a loan file, retrieving 
the appraisal, and then going through the process of sending copies of 
the appraisal to the applicant.
---------------------------------------------------------------------------

    \107\ Respondents include a large bank, a trade group of smaller 
depository institutions, and an IMB.
---------------------------------------------------------------------------

    Under the final 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 other written valuations.\108\ A recent government study found that 
appraisals are performed in about 90 percent of first lien 
transactions, and that non-appraisal valuations are obtained in first 
lien transactions in which an appraisal is not performed.\109\ 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 percent of the 
time, necessitating a second appraisal. Based on outreach to industry 
prior to the proposal, the Bureau assumes that creditors currently send 
to consumers copies of 100 percent of those written appraisals that are 
performed for an application for a transaction secured by

[[Page 7244]]

a first-lien on a dwelling that results in an origination. Because 
available data and outreach did not indicate otherwise, the Bureau 
conservatively assumes that copies of appraisals and other written 
valuations developed for applications that do not result in a 
transaction currently are not sent to consumers. Similarly, the Bureau 
conservatively assumes that copies of non-appraisal valuations 
currently are not sent to consumers. The burden calculations that 
follow assume that a non-appraisal written valuation is conducted for 
every application, which likely overstates the costs associated with 
the rule.
---------------------------------------------------------------------------

    \108\ Based on its pre-proposal 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. In the 
proposal, the Bureau assumed that 84 percent of appraisals are sent 
via email and that these are already being sent in a manner that 
complies with the E-Sign Act, 15.75 percent of appraisals are sent 
via the United States Postal Service, and 0.25 percent of appraisals 
are sent via courier. The final rule adopts this assumption, 
recognizing that some creditors, as reflected in comments received 
on the proposal, may elect not to provide copies electronically in 
compliance with the E-Sign Act (and therefore these copies would be 
provided as part of the 16 percent of copies that are sent via the 
postal service or courier). Because the Bureau does not have data, 
for purposes of this analysis, the Bureau conservatively assumes 
that the average non-appraisal valuation is as long as an appraisal 
(20 pages), that printing costs for valuations other than appraisals 
are the same as for appraisals, that currently, no written 
valuations other than appraisals are sent to applicants, and that 
the cost of sending copies of these valuations would be the same as 
an appraisal. 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 (a conservative assumption, 
because it is based on loan officer time rather than the time of a 
loan processor); 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.
    \109\ U.S. Gov't Accountability Office, GAO-12-840T, Residential 
Appraisals, at 6-7 (June 28, 2012).
---------------------------------------------------------------------------

    As a result, the new paperwork costs under the final rule arise 
from providing copies of any written appraisals for the proportion of 
applications that do not result in originations (a proportion the 
Bureau estimates from HMDA data on applications and originations), and 
from providing copies of any non-appraisal valuations developed in 
connection with an application whether or not originated.
    The additional cost of providing a copy of any non-appraisal 
valuation in most cases will be limited to the cost of generating a 
copy of the non-appraisal valuation to send to the applicant. When the 
copy is generated in paper form, the Bureau estimates the cost of 
generating the copy based upon an assumption that the non-appraisal 
valuation is at most as long as the written appraisal. With respect to 
transmission costs, in the 90 percent of first lien transactions where 
an appraisal is conducted and a copy already provided, the copy of the 
non-appraisal valuation often can be included with the appraisal 
already being sent, which would only increase transmission costs in the 
small minority of cases where the copy is not sent electronically 
(because of the postal delivery or courier having a marginally greater 
weight). If the copy of the non-appraisal valuation needs to be 
provided at a different time than the copy of a written appraisal, 
however, the creditor would need to make a second transmission to the 
applicant, which for a majority of transactions using electronic 
communications, would involve the cost of an additional electronic 
transmission. To be conservative, for first-lien, closed-end, forward 
mortgage loans the Bureau calculates the cost of sending the non-
appraisal valuation assuming that it is sent separately from the 
appraisal. Finally, in the 10 percent of first lien closed-end, forward 
mortgage transactions where only a non-appraisal valuation is prepared, 
the cost of generating the copy and transmission will be new. For the 
HECMs (reverse mortgages) and first lien HELOCs the Bureau estimates 
will be covered by the rule,\110\ the Bureau assumes that one appraisal 
or other written valuation beyond what is current standard practice 
will be provided.\111\
---------------------------------------------------------------------------

    \110\ For reverse mortgage loan counts, since the HUD HECM 
Monthly Endorsement summary does not provide summary statistics of 
loans made by depository institutions of different asset sizes or 
non-depository institutions, when calculations are performed for 
separate classes of institutions, all HECMs are attributed to that 
class of institutions to create an upper bound of the cost of the 
regulation for that class. Similarly, for HELOC first lien loan 
counts, the Experian-Oliver Wyman data cannot be split by size of 
depository institution, so a parallel convention of attributing all 
depository institution costs to each class of depository 
institutions is followed. The number of first lien HELOCs is 
calculated by multiplying the number of HELOCs for depository 
institutions (242,710) and non-depository institutions (76,790) by 
the proportion of HELOCs that are first liens in the 2010 SCF 
(0.26).
    \111\ This is a conservative estimate, particularly in the case 
of reverse mortgages, as the Bureau understands that creditors in 
HECM transactions already provide borrowers with copies of 
appraisals, or a completed HUD-92800.5B (Conditional Commitment 
Direct Endorsement Statement of Appraised Value). See U.S. Dep't. of 
Hous. & Urban Dev., Asst. Sec'y for Hous., Mortgagee Letter 2005-ML-
48 (Dec. 19, 2005).
---------------------------------------------------------------------------

    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.\112\ 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.
---------------------------------------------------------------------------

    \112\ 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 one-to-four 
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 final 
rule and in training the relevant employees.\113\ To estimate these 
costs, the number of loan officers who may require training is 
estimated based on the application or origination estimates.
---------------------------------------------------------------------------

    \113\ 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 and by 
one compliance officer at each institution, on average. Smaller 
institutions may not have a compliance officer, in which case 
additional implementation time would be assumed by the lawyer or 
other employee. Finally, the Bureau also believes that as part of 
routine software updates, creditors may make adjustments to software 
systems to ensure compliance with this rule (including updating the 
standard notice and incorporating additional valuation types into 
their copy distribution system); the Bureau does not believe these 
adjustments would impose significant additional costs beyond the 
existing routine upgrade processes.
---------------------------------------------------------------------------

    Finally, covered persons would incur some costs in updating 
Regulation B disclosures provided to applicants concerning appraisals. 
The cost of sending these disclosures would not change, however. In 
addition, some commenters suggested that non-appraisal valuations would 
be difficult for consumers to understand. While some creditors or 
valuation providers could choose to modify their reports to be more 
easily understood by the consumer audience, the rule does not require 
such modifications.
    Based upon the foregoing assumptions and estimates, costs from the 
final rule--including one-time costs and one year of annualized costs--
are estimated to be approximately $39 million, or approximately $5.05 
for each loan originated.\114\ This estimated cost is higher than the 
estimate in the proposal principally because, in the absence of 
information provided otherwise by commenters on the proposal, the 
Bureau is including the estimated cost of providing copies of written 
valuations other than appraisals, and is not assuming that creditors 
already are providing copies of most of these other written valuations 
to applicants.\115\ The bulk of these costs arise from the paperwork 
requirements; roughly 1.8 percent results from the one-time review and 
training costs. This estimate is conservative because it does not take 
into account cost savings that will be achieved as a result of the 
final rule removing subordinate lien transactions from the scope of 
Sec.  1002.14. These transactions currently are subject

[[Page 7245]]

to the appraisal copy-on-request regime of Sec.  1002.14. Under the 
final rule, these transactions would not be subject to Sec.  1002.14 
and creditors in these transactions would not otherwise be required to 
provide copies of appraisals if the transaction is not a higher-priced-
mortgage that is a closed-end transaction subject to the requirements 
of TILA section 129H and its implementing regulations in the 2013 
Interagency Appraisals Final Rule.
---------------------------------------------------------------------------

    \114\ A few industry commenters argued that the analysis did not 
adequately consider the proposal's costs and benefits in the context 
of related rulemakings, including the aggregate effects of the new 
regulations on the U.S. economy. The Bureau, however, interprets the 
consideration required by section 1022(b)(2)(A) to be focused on the 
potential benefits, costs, and impacts of the particular rule at 
issue, and to not include those of other pending or potential 
rulemakings. Moreover, the commenters do not suggest a reliable 
method for assessing cumulative impacts of multiple rulemakings. The 
Bureau believes that there are multiple reasonable approaches for 
conducting the consideration called for by section 1022(b)(2)(A) and 
that the approach it has taken in this analysis is reasonable and 
that, particularly in light of the difficulties of reliably 
estimating certain benefits and costs, it has discretion to decline 
to undertake additional or different forms of analysis. The Bureau 
notes that it has coordinated the development of the final rule with 
its other rulemakings and has, as appropriate, discussed some of the 
significant interactions of the rulemakings.
    \115\ In addition, a significant part of the annualized costs is 
attributable to the minority of institutions that are assumed not to 
provide copies electronically. Over time, an increasing number of 
institutions may provide copies electronically. Therefore, this 
assumption is a conservative one.
---------------------------------------------------------------------------

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

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

C. Impact of the Final Rule on Depository Institutions and Credit 
Unions With $10 Billion or Less in Total Assets, as Described in 
Section 1026 of the Dodd-Frank Act, and the Impact of the Final Rule on 
Consumers in Rural Areas

    For depository institutions with total assets of $10 billion or 
less, the Bureau estimates that the cost of compliance with the final 
rule would be $9.3 million. Because of their smaller size, fixed 
training and reviewing costs are spread over fewer applications and 
originations, and as a result the proportion of costs due to one-time 
burdens increases slightly to 3.0 percent of total cost. For each loan 
these institutions originate, the cost is estimated to be roughly 
$4.08.\116\
---------------------------------------------------------------------------

    \16\ Note that costs per-loan differ by institution class 
because the number of loans nd loan officers per-institution differ 
across institution classes.
---------------------------------------------------------------------------

    At least one commenter specifically questioned the estimated cost 
of $1.80 per loan originated in the proposed rule. Specifically, the 
commenter argued that the language in proposed comment 14(b)(3)-1, 
``including written comments and other documents submitted to the 
creditor in support of the estimate of the property value,'' would 
require creditors to provide additional documentation that would exceed 
the estimate of $1.80 per loan originated. As previously discussed, the 
Bureau has made changes to the list of examples of valuations in the 
commentary to make clear that the rule does not require a creditor to 
provide written comments and other documents unless they are 
attachments or exhibits to an integrated valuation report. Accordingly, 
the Bureau has addressed the basis for the commenter's concern over a 
potential for a higher cost. Furthermore, the Bureau has provided 
updated estimates of the per-loan cost which, as discussed above, 
include an estimate of the cost of providing copies of non-appraisal 
valuations.
    The Bureau does not expect that the final rule will have a unique 
impact on consumers in rural areas.

VIII. 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.\117\ The Bureau also is subject 
to certain additional procedures under the RFA involving the convening 
of a panel to consult with small business representatives prior to 
proposing a rule for which an IRFA is required.\118\ A FRFA is not 
required for this final regulation because the rule will not have a 
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \117\ 5 U.S.C. 605(b). For purposes of assessing the impacts of 
the final 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).
    \118\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    The final rule amends Regulation B, which implements ECOA, and the 
official interpretations to the regulation, which interpret and clarify 
the requirements of Regulation B. The revisions to Regulation B 
implement an ECOA amendment concerning appraisals and other valuations 
that was enacted as part of the Dodd-Frank Act. In general, the 
revisions to Regulation B require creditors to provide free copies of 
all appraisals and written valuations developed in connection with an 
application for a loan to be secured by a first lien on a dwelling. The 
final rule also requires creditors to notify applicants in writing of 
the right to receive a copy of each written appraisal at no additional 
cost.
    The empirical approach to calculating the impact of the final 
regulation on small entities subject to its requirements utilizes the 
same data and methodology outlined in Part VII above. The analysis that 
follows focuses on the economic impact of the final rule, relative to a 
pre-statute baseline, for small depository institutions, credit unions 
and non-depository 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.\119\ All creditors that extend real estate 
credit secured by a first lien on a dwelling are affected by the final 
rule. As shown below, the vast majority of small banks, thrifts, credit 
unions, and IMBs originate such loans.
---------------------------------------------------------------------------

    \119\ 13 CFR Ch. 1.
---------------------------------------------------------------------------

    The estimates provided here are based upon data and statistical 
analyses performed by the Bureau. To estimate counts and properties of 
mortgages for entities that do not report under HMDA, the Bureau has 
matched HMDA data to Call Report data and NMLS and has statistically 
projected estimated loan counts for those depository institutions that 
do not report these data either under HMDA or on the NCUA call report. 
These projections use Poisson regressions that estimate loan volumes as 
a function of an institution's total assets, employment, mortgage 
holdings and geographic presence.
    Of the roughly 17,462 depository institutions, credit unions, and 
IMBs, 12,568 are below the relevant small entity thresholds. Of these, 
9,373 are estimated to have originated mortgage loans in 2011. The 
Bureau has loan counts for credit unions and HMDA-reporting DIs and 
IMBs.

[[Page 7246]]

[GRAPHIC] [TIFF OMITTED] TR31JA13.030

    Although most depository institutions, credit unions, and IMBs are 
affected by the final rule, the burden estimates below show that the 
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 written valuations 
and the costs of reviewing the rule, training employees, and updating 
consumer disclosures concerning appraisals.
    Consistent with the assumptions in the analysis of the previous 
section, the Bureau believes, based on its outreach prior to the 
proposal, 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 other 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 percent of the time, necessitating a second 
appraisal.\120\
---------------------------------------------------------------------------

    \120\ 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 based on the Bureau of 
Labor Statistics Occupation Employment Survey 2011: at depository 
institutions, loan officer wages are assumed to $31.69 per hour, 
lawyer wages are $77.31 per hour, and compliance officer wages are 
$30.41 per hour. At non-depository institutions, loan officer wages 
are assumed to be $32.16 per hour, lawyer wages are assumed to be 
$75.83 per hour, and compliance officer wages are $34.66 per hour. 
These rates are then increased to reflect that wages represent 66.6 
percent of an employee's total compensation.
---------------------------------------------------------------------------

    Under these assumptions, the total costs for small depository 
institutions, credit unions, and small IMBs of providing copies of the 
appraisals and other written valuations and any one-time costs for 
reviewing the regulation and training employees are estimated to be 
roughly $4.64 per-loan originated.\121\ Across all small entities, the 
costs of the rule amount to a fraction of a percent of the revenue or 
profits from origination activity.\122\
---------------------------------------------------------------------------

    \121\ As noted above, costs per-loan differ by institution class 
because the number of loans and loan officers per-institution differ 
across institution classes.
    \122\ Industry experts estimate that gross revenues per loan are 
approximately 3 percent 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 final regulation 
will not have a significant economic impact on a substantial number of 
small entities.

IX. Paperwork Reduction Act

A. Overview

    The Bureau's information collection requirements contained in this 
final 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). Further, the PRA (44 U.S.C. 3507(a), (a)(2) and 
(a)(3)) requires that a Federal agency may not conduct or sponsor a 
collection of information unless OMB approved the collection under the 
PRA and the OMB control number obtained is displayed. Finally, 
notwithstanding any other provision of law, no person is required to 
comply with, or is subject to any penalty for failure to comply with, a 
collection of information does not display a currently valid OMB 
control number (44 U.S.C. 3512).
    This final rule contains revised information collection 
requirements that have not been approved by the OMB and, therefore, are 
not effective until OMB approval is obtained. The unapproved 
information collection requirements contained in this rule are 
described below. The Bureau will publish a separate notice in the 
Federal Register announcing the submission of these information 
collection requirements to OMB as well as OMB's

[[Page 7247]]

action on these submissions; including, the OMB control number and 
expiration date.
    The title of this information collection is ECOA Appraisal Final 
Rule. The frequency of response is on-occasion. The final rule amends 
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 part 1002). As described below, 
the final rule would amend the collections of information currently in 
Regulation B.
    The information collection in the final rule is required to provide 
benefits for consumers and is mandatory. Because the Bureau does not 
collect any information under the final 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 final rule, the Bureau generally accounts 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 the final rule's 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 use the Bureau's burden estimation methodology, but 
need not do so.
    Using the Bureau's burden estimation methodology, the total 
estimated burden for the roughly 14,200 creditors originate mortgages 
and therefore are subject to the final rule, including Bureau 
respondents, would be approximately 519,000 hours of ongoing burden 
annually and 14,500 hours in one-time burden. Because creditors 
generally already provide consumers copies of appraisals if a first 
lien transaction closes, the Bureau assumes that there are no required 
software or information technology upgrades associated with 
implementing the rule for providing copies of appraisals in 
transactions that are consummated or where the account is opened. The 
Bureau assumes that creditors would make a one-time technology upgrade 
to incorporate additional documents into this disclosure practice that 
may not be currently provided to applicants. This estimate also 
accounts for time to review the rule and for staff training. Under the 
final rule, creditors will be required to provide applicants with 
copies of these documents, such as appraisals developed in transactions 
that are not consummated or where the account is not opened, and non-
appraisal valuations developed for first lien transactions (including 
both the estimated 10 percent of first lien transactions that involve a 
valuation other than an appraisal, as well as a portion of the other 90 
percent of first lien transactions where a valuation is obtained in 
addition to an appraisal). The Bureau expects that the amount of time 
required to implement each of the required 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 final rule consist 
of the provision of copies of appraisals and other written valuations 
to applicants. Under the final rule, copies of all appraisals and other 
written valuations developed in connection with a creditor's decision 
on an applicant for a loan to be secured by a first lien on a dwelling 
must be provided to the applicant free of charge promptly upon 
completion, or three business days before consummation or account 
opening, whichever is earlier, and these copies may be delivered 
physically or electronically. Currently, Regulation B requires that 
free copies of appraisals be provided upon request. From its outreach 
prior to the proposal, the Bureau learned that it is customary and in 
many cases already required by GSEs for creditors to send applicants a 
copy of all appraisals if the first lien loan closes, but firms 
differed in their practices of sending out copies of appraisals for 
such loans that did not close.\123\ The outreach prior to the proposal 
stage also did not establish that creditors have a consistent practice 
of providing copies of valuations other than appraisals in first lien 
transactions. Therefore, the Bureau considers the incremental paperwork 
burden associated with the final rule's information collection 
requirements to be the cost of reviewing the rule, staff training, the 
one-time technology upgrade described above, sending out copies of non-
appraisal valuations to applicants for first lien transactions, and 
sending out copies of appraisals and other written valuations to 
consumers who apply for loans that do not close but that reach the 
stage where an appraisal or other valuation is conducted. In some 
transactions in which more than one appraisal or other written 
valuation is conducted--a scenario that commenters did not state was 
frequent, but which nonetheless is assumed to be possible--separate 
transmissions to the applicant would be necessary, but only if they 
cannot both be provided promptly upon their respective completion in 
the same package.
---------------------------------------------------------------------------

    \123\ Outreach conversations prior to the proposal included a 
large bank, a trade group of smaller depository institutions, and an 
IMB.
---------------------------------------------------------------------------

    While the final rule requires the creditor to provide a short 
written disclosure concerning the appraisal process within three 
business days of application, this disclosure may be classified as a 
warning label supplied by the Federal government. Accordingly, this 
requirement is not ``collection of information'' for purposes of the 
PRA. 5 CFR 1320.3(c)(2).

C. Summary of Estimated Burden for Bureau Respondents

    The total annualized ongoing 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 225,400 hours and the annualized ongoing burden for all non-
depository institutions that originate mortgage loans is estimated to 
be approximately 171,300 hours. These respondents are estimated to 
incur an additional 5,200 hours and 4,000 hours in one-time burden, 
respectively. For purposes of the PRA analysis under this final rule, 
the Bureau would assume roughly 85,700 ongoing burden hours and 2,000 
one-time hours for the non-depository institutions.\124\
---------------------------------------------------------------------------

    \124\ There may be a small additional burden for privately 
insured credit unions estimated to originate mortgages. The Bureau 
will assume half of the burden on these institutions.
---------------------------------------------------------------------------

    The Bureau has a continuing interest in the public's opinions of 
our collections of information. At any time, comments regarding the 
burden estimate, or any other aspect of this collection of information, 
including suggestions for reducing the burden, may be sent to: The 
Consumer Financial Protection Bureau (Attention: PRA Office), 1700 G 
Street NW., Washington, DC, 20552, or by the internet to [email protected].

[[Page 7248]]

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 amends 
Regulation B, 12 CFR part 1002, as set forth below:

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

0
1. The authority citation for Part 1002 continues to read as follows:

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

0
2. Section 1002.4 is amended by revising paragraph (d)(2) to read as 
follows:


Sec.  1002.4  General rules.

* * * * *
    (d) * * *
    (2) Disclosures in electronic form. The disclosures required by 
this part that are required to be given in writing 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.). Where the disclosures under Sec. Sec.  1002.5(b)(1), 
1002.5(b)(2), 1002.5(d)(1), 1002.5(d)(2), 1002.13, and 1002.14(a)(2) 
accompany an application accessed by the applicant in electronic form, 
these disclosures may be provided to the applicant in electronic form 
on or with the application form, without regard to the consumer consent 
or other provisions of the E-Sign Act.

0
3. Section 1002.14 is revised to read as follows:


Sec.  1002.14  Rules on providing appraisals and other valuations.

    (a) Providing appraisals and other valuations. (1) In general. A 
creditor shall provide an applicant a copy of all appraisals and other 
written valuations developed in connection with an application for 
credit that is to be secured by a first lien on a dwelling. A creditor 
shall provide a copy of each such appraisal or other written valuation 
promptly upon completion, or three business days prior to consummation 
of the transaction (for closed-end credit) or account opening (for 
open-end credit), whichever is earlier. An applicant may waive the 
timing requirement in this paragraph (a)(1) and agree to receive any 
copy at or before consummation or account opening, except where 
otherwise prohibited by law. Any such waiver must be obtained at least 
three business days prior to consummation or account opening, unless 
the waiver pertains solely to the applicant's receipt of a copy of an 
appraisal or other written valuation that contains only clerical 
changes from a previous version of the appraisal or other written 
valuation provided to the applicant three or more business days prior 
to consummation or account opening. If the applicant provides a waiver 
and the transaction is not consummated or the account is not opened, 
the creditor must provide these copies no later than 30 days after the 
creditor determines consummation will not occur or the account will not 
be opened.
    (2) Disclosure. For applications subject to paragraph (a)(1) of 
this section, a creditor shall mail or deliver to an applicant, not 
later than the third business day after the creditor receives an 
application for credit that is to be secured by a first lien on a 
dwelling, a notice in writing of the applicant's right to receive a 
copy of all written appraisals developed in connection with the 
application. In the case of an application for credit that is not to be 
secured by a first lien on a dwelling at the time of application, if 
the creditor later determines the credit will be secured by a first 
lien on a dwelling, the creditor shall mail or deliver the same notice 
in writing not later than the third business day after the creditor 
determines that the loan is to be secured by a first lien on a 
dwelling.
    (3) Reimbursement. A creditor shall not charge an applicant for 
providing a copy of appraisals and other written 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 other 
written 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.).
    (b) Definitions. For purposes of paragraph (a) of this section:
    (1) Consummation. The term ``consummation'' means the time that a 
consumer becomes contractually obligated on a closed-end credit 
transaction.
    (2) Dwelling. The term ``dwelling'' 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.
    (3) Valuation. The term ``valuation'' means any estimate of the 
value of a dwelling developed in connection with an application for 
credit.

0
4. In Appendix C to Part 1002:
0
A. Paragraph 1 is revised.
0
B. Sample Form C-9 is revised.
    The revisions 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 appraisals 
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 
Appraisals

    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.
* * * * *

0
5. In Supplement I to Part 1002--Official Interpretations:
0
A. Under Section 1002.14, the heading is revised.
0
B. Newly designated Section 1002.14 is revised.
0
C. Under Appendix C--Sample Notification Forms, paragraph 1 is revised.
    The revisions read as follows:

[[Page 7249]]

Supplement I To Part 1002--Official Interpretations

* * * * *

Section 1002.14--Rules on Providing Appraisals and Valuations

    14(a) Providing appraisals and other valuations.
    1. Multiple applicants. If there is more than one applicant, the 
written disclosure about written appraisals, and the copies of 
appraisals and other written valuations, need only be given to one 
applicant. However, these materials must be given to the primary 
applicant where one is readily apparent. Similarly, if there is more 
than one applicant for credit in the transaction, one applicant may 
provide a waiver under Sec.  1002.14(a)(1), but it must be the 
primary applicant where one is readily apparent.
    14(a)(1) In general.
    1. Coverage. Section 1002.14 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 for a business purpose 
(for example, a loan to start a business) or a consumer purpose (for 
example, a loan to purchase a home).
    2. Renewals. Section 1002.14(a)(1) applies when an applicant 
requests the renewal of an existing extension of credit and the 
creditor develops a new appraisal or other written valuation. 
Section 1002.14(a)(1) does not apply to the extent a creditor uses 
the appraisals and other written valuations that were previously 
developed in connection with the prior extension of credit to 
evaluate the renewal request.
    3. Written. For purposes of Sec.  1002.14, an ``appraisal or 
other written valuation'' includes, without limitation, an appraisal 
or other valuation received or developed by the creditor in paper 
form (hard copy); electronically, such as CD or email; or by any 
other similar media. See Sec.  1002.14(a)(5) regarding the provision 
of copies of appraisals and other written valuations to applicants 
via electronic means.
    4. Timing. Section 1002.14(a)(1) requires that the creditor 
``provide'' copies of appraisals and other written valuations to the 
applicant ``promptly upon completion,'' or no later than three 
business days before consummation (for closed-end credit) or account 
opening (for open-end credit), whichever is earlier.
    i. For purposes of this timing requirement, ``provide'' means 
``deliver.'' Delivery occurs three business days after mailing or 
delivering the copies to the last-known address of the applicant, or 
when evidence indicates actual receipt by the applicant, whichever 
is earlier. Delivery to or actual receipt by the applicant by 
electronic means must comply with the E-Sign Act, as provided for in 
Sec.  1002.14(a)(5).
    ii. The application and meaning of the ``promptly upon 
completion'' standard depends upon the facts and circumstances, 
including but not limited to when the creditor receives the 
appraisal or other written valuation, and the extent of any review 
or revision after the creditor receives it.
    iii. ``Completion'' occurs when the last version is received by 
the creditor, or when the creditor has reviewed and accepted the 
appraisal or other written valuation to include any changes or 
corrections required, whichever is later. See also comment 14(a)(1)-
7.
    iv. In a transaction that is being consummated (for closed-end 
credit) or in which the account is being opened (for open-end 
credit), if an appraisal or other written valuation has been 
developed but is not yet complete, the deadline for providing a copy 
of three business days before consummation or account opening still 
applies, unless the applicant waived that deadline as provided under 
Sec.  1002.14(a)(1), in which case the copy must be provided at or 
before consummation or account opening.
    v. Even if the transaction will not be consummated (for closed-
end credit) or the account will not be opened (for open-end credit), 
the copy must be provided ``promptly upon completion'' as provided 
for in Sec.  1002.14(a)(1), unless the applicant has waived that 
deadline as provided under Sec.  1002.14(a)(1), in which case as 
provided for in Sec.  1002.14(a)(1) the copy must be provided to the 
applicant no later than 30 days after the creditor determines the 
transaction will not be consummated or the account will not be 
opened.
    5. Promptly upon completion-examples. Examples in which the 
``promptly upon completion'' standard would be satisfied include, 
but are not limited to, those in subparagraphs i, ii, and iii below. 
Examples in which the ``promptly upon completion'' standard would 
not be satisfied include, but are not limited to, those in 
subparagraphs iv and v below.
    i. Sending a copy of an appraisal within a week of completion 
with sufficient time before consummation (or account opening for 
open-end credit). On day 15 after receipt of the application, the 
creditor's underwriting department reviews an appraisal and 
determines it is acceptable. One week later, the creditor sends a 
copy of the appraisal to the applicant. The applicant actually 
receives the copy more than three business days before the date of 
consummation (or account opening). The creditor has provided the 
copy of the appraisal promptly upon completion.
    ii. Sending a copy of a revised appraisal within a week after 
completion and with sufficient time before consummation (or account 
opening for open-end credit). An appraisal is being revised, and the 
creditor does not receive the revised appraisal until day 45 after 
the application, when the creditor immediately determines the 
revised appraisal is acceptable. A week later, the creditor sends a 
copy of the revised appraisal to the applicant, and does not send a 
copy of the initial appraisal to the applicant. The applicant 
actually receives the copy of the revised appraisal three business 
days before the date of consummation (or account opening). The 
creditor has provided the appraisal copy promptly upon completion.
    iii. Sending a copy of an AVM report within a week after its 
receipt and with sufficient time before consummation (or account 
opening for open-end credit). The creditor receives an automated 
valuation model (AVM) report on day 5 after receipt of the 
application and treats the AVM report as complete when it is 
received. On day 12 after receipt of the application, the creditor 
sends the applicant a copy of the valuation. The applicant actually 
receives the valuation more than three business days before the date 
of consummation (or account opening). The creditor has provided the 
copy of the AVM report promptly upon completion.
    iv. Delay in sending an appraisal. On day 12 after receipt of 
the application, the creditor's underwriting department reviews an 
appraisal and determines it is acceptable. Although the creditor has 
determined the appraisal is complete, the creditor waits to provide 
a copy to the applicant until day 42, when the creditor schedules 
the consummation (or account opening) to occur on day 50. The 
creditor has not provided the copy of the appraisal promptly upon 
completion.
    v. Delay in sending an AVM report while waiting for completion 
of a second valuation. The creditor receives an AVM report on day 5 
after application and completes its review of the AVM report the day 
it is received. The creditor also has ordered an appraisal, but the 
initial version of the appraisal received by the creditor is found 
to be deficient and is sent for review. The creditor waits 30 days 
to provide a copy of the completed AVM report, until the appraisal 
is completed on day 35. The creditor then provides the applicant 
with copies of the AVM report and the revised appraisal. While the 
appraisal report was provided promptly upon completion, the AVM 
report was not.
    6. Waiver. Section 1002.14(a)(1) permits the applicant to waive 
the timing requirement if the creditor provides the copies at or 
before consummation or account opening, except where otherwise 
prohibited by law. Except where otherwise prohibited by law, an 
applicant's waiver is effective under Sec.  1002.14(a)(1) in either 
of the following two situations:
    i. If, no later than three business days prior to consummation 
or account opening, the applicant provides the creditor an 
affirmative oral or written statement waiving the timing requirement 
under this rule; or
    ii. If, within three business days of consummation or account 
opening, the applicant provides the creditor an affirmative oral or 
written statement waiving the timing requirement under this rule and 
the waiver pertains solely to the applicant's receipt of a copy of 
an appraisal or other written valuation that contains only clerical 
changes from a previous version of the appraisal or other written 
valuation provided to the applicant three or more business days 
prior to consummation or account opening. For purpose of this second 
type of waiver, revisions will only be considered to be clerical in 
nature if they have no impact on the estimated value, and have no 
impact on the calculation or methodology used to derive the 
estimate. In addition, under Sec.  1002.14(a)(1) the applicant still 
must receive the copy of the revision at or prior to consummation or 
account opening.
    7. Multiple versions of appraisals or valuations. For purposes 
of Sec.  1002.14(a)(1), the reference to ``all'' appraisals and 
other written valuations does not refer to all versions of the same 
appraisal or other

[[Page 7250]]

valuation. If a creditor has received multiple versions of an 
appraisal or other written valuation, the creditor is required to 
provide only a copy of the latest version received. If, however, a 
creditor already has provided a copy of one version of an appraisal 
or other written valuation to an applicant, and the creditor later 
receives a revision of that appraisal or other written valuation, 
then the creditor also must provide the applicant with a copy of the 
revision to comply with Sec.  1002.14(a)(1). If a creditor receives 
only one version of an appraisal or other valuation that is 
developed in connection with the applicant's application, then that 
version must be provided to the applicant to comply with Sec.  
1002.14(a)(1). See also comment 14(a)(1)-4 above.
    14(a)(2) Disclosure.
    1. Appraisal independence requirements not affected. Nothing in 
the text of the disclosure required by Sec.  1002.14(a)(2) should be 
construed to affect, modify, limit, or supersede the operation of 
any legal, regulatory, or other requirements or standards relating 
to independence in the conduct of appraisers or the use of 
applicant-ordered appraisals by creditors.
    14(a)(3) Reimbursement.
    1. Photocopy, postage, or other costs. Creditors may not charge 
for photocopy, postage, or other costs incurred in providing a copy 
of an appraisal or other written valuation in accordance with 
section 14(a)(1).
    2. Reasonable fee for reimbursement. Section 1002.14(a)(3) does 
not prohibit a creditor from imposing a reasonable fee to reimburse 
the creditor's costs of the appraisal or other written valuation, so 
long as the fee is not increased to cover the costs of providing 
copies of such appraisals or other written valuations under Sec.  
1002.14(a)(1). A creditor's cost may include an administration fee 
charged to the creditor by an appraisal management company as 
defined in 12 U.S.C. 3350(11). Section 1002.14(a)(3) does not, 
however, legally obligate the applicant to pay such fees. Further, 
creditors may not impose fees for reimbursement of the costs of an 
appraisal or other valuation where otherwise prohibited by law. For 
instance, a creditor may not charge a consumer a fee for the 
performance of a second appraisal if the second appraisal is 
required under 15 U.S.C. 1639h(b)(2) and 12 CFR 1026.35(c).
    14(b) Definitions.
    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 vs. 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)(2) Dwelling.
    1. ``Motor vehicles'' not covered. The requirements of Sec.  
1002.14 do not apply to ``motor vehicles'' as defined by 12 U.S.C. 
5519(f)(1).
    14(b)(3) Valuation.
    1. Valuations--examples. Examples of valuations include but are 
not limited to:
    i. A report prepared by an appraiser (whether or not licensed or 
certified) including the appraiser's estimate or opinion of the 
property's value.
    ii. A document prepared by the creditor's staff that assigns 
value to the property.
    iii. A report approved by a government-sponsored enterprise for 
describing to the applicant the estimate of the property's value 
developed pursuant to the proprietary methodology or mechanism of 
the government-sponsored enterprise.
    iv. A report generated by use of an automated valuation model to 
estimate the property's value.
    v. A broker price opinion prepared by a real estate broker, 
agent, or sales person to estimate the property's value.
    2. Attachments and exhibits. The term ``valuation'' includes any 
attachments and exhibits that are an integrated part of the 
valuation.
    3. Other documentation. Not all documents that discuss or 
restate a valuation of an applicant's property constitute a 
``valuation'' for purposes of Sec.  1002.14(b)(3). Examples of 
documents that discuss the valuation of the applicant's property or 
may reflect its value but nonetheless are not ``valuations'' include 
but are not limited to:
    i. Internal documents that merely restate the estimated value of 
the dwelling contained in an appraisal or written valuation being 
provided to the applicant.
    ii. Governmental agency statements of appraised value that are 
publically available.
    iii. Publicly-available lists of valuations (such as published 
sales prices or mortgage amounts, tax assessments, and retail price 
ranges).
    iv. Manufacturers' invoices for manufactured homes.
    v. Reports reflecting property inspections that do not provide 
an estimate or opinion of the value of the property and are not used 
to develop an estimate or opinion of the value of the property.
* * * * *

Appendix C--Sample Notification Forms

    1. Form C-9. If not otherwise provided under other applicable 
disclosure requirements, creditors may design their own form, add 
to, or modify the model form to reflect their individual policies 
and procedures. For example, a creditor may want to add:
    i. A telephone number that applicants may call to leave their 
name and the address to which a copy of the appraisal or other 
written valuation should be sent.
    ii. A notice of the cost the applicant will be required to pay 
the creditor for the appraisal or other valuation.

    Dated: January 18, 2013.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2013-01384 Filed 1-28-13; 4:15 pm]
BILLING CODE 4810-AM-P