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Daily Rules, Proposed Rules, and Notices of the Federal Government

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1002

[Docket No. CFPB-2012-0032]

RIN 3170-AA26

Equal Credit Opportunity Act (Regulation B)

AGENCY: Bureau of Consumer Financial Protection.
ACTION: Proposed rule; request for public comment.
SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is proposing to amend Regulation B, which implements the Equal Credit Opportunity Act (ECOA), and the official interpretation to the regulation, which interprets the requirements of Regulation B. The proposed revisions to Regulation B would implement an ECOA amendment concerning appraisals that was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). In general, the proposed revisions to Regulation B would require creditors to provide free copies of all written appraisals and valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling. The proposal also would require creditors to notify applicants in writing of the right to receive a copy of each written appraisal or valuation at no additional cost.
DATES: Comments must be received on or before October 15, 2012, except that comments on the Paperwork Reduction Act analysis in part VIII of the Supplementary Information must be received on or before October 22, 2012.
ADDRESSES: *Electronic: http://www.regulations.gov. Follow the instructions for submitting comments.

*Mail:Monica Jackson, Office of the Executive Secretary, Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20552

*Hand Delivery/Courier in Lieu of Mail:Monica Jackson, Office of the Executive Secretary, Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20552.

All submissions must include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. In general, all comments received will be posted without change tohttp://www.regulations.gov. In addition, comments will be available for public inspection and copying at 1700 G Street NW., Washington, DC 20552, on official business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect the documents by telephoning (202) 435-7275.

All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or social security numbers, should not be included. Comments will not be edited to remove any identifying or contact information.

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

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

1Public Law 111-203, 124 Stat. 1376, section 1474 (2010).

• Cover applications for credit to be secured by a first lien on a dwelling.

• Require creditors to notify applicants within three business days of receiving an application of their right to receive a copy of written appraisals and valuations developed.

• Require creditors to provide applicants a copy of all written appraisals and valuations promptly after receiving an appraisal or valuation, but in no case later than three business days prior to consummation of the mortgage.

• Permit applicants to waive the timing requirement to receive copies three days prior to consummation. However, applicants who waive the timing requirement must still be given a copy of all written appraisals and valuations at or prior to closing.

• Prohibit creditors from charging additional fees for providing a copy of written appraisals and valuations, but permit creditors to charge applicants a reasonable fee to reimburse the creditor for the cost of the appraisal or valuation unless otherwise required by law.

II. Statutory Background A. The Equal Credit Opportunity Act

The ECOA2 makes it unlawful for creditors to discriminate in any aspect of a credit transaction on the basis of sex, race, color, religion, national origin, marital status, age (provided the applicant has the capacity to contract), because all or part of an applicant's income derives from public assistance, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. ECOA applies to all credit—commercial as well as consumer—without regard to the nature or type of the credit or the creditor.

215 U.S.C. 1691et seq.

Historically, section 701(e) of ECOA has provided that a credit applicant has the right to request copies of appraisal reports used in connection with his or her application for mortgage credit. The right to request copies of appraisals was added to ECOA in December 1991 as part of the Federal Deposit Insurance Corporation Improvement Act (FDICIA).3 The Senate report on FDICIA suggests that one purpose of ECOA section 701(e) was to make it easier for loan applicants to determine whether aloan was denied due to a discriminatory appraisal.4

3Public Law 102-242, 105 Stat. 2236 (1991).

4For additional legislative history on the appraisal provision as originally added by the FDICIA see S. Rep. No. 167, 102d Cong., 1st Sess.; S. Rep. No. 461, 101st Cong. 2d Sess.; 137 Cong. Rec. S2519 (daily ed. February 28, 1991); 136 Cong. Rec. S14592, 14598-99 (daily ed. October 5, 1990).

With the enactment of the Dodd-Frank Act,5 general rulemaking authority for ECOA transferred from the Board of Governors of the Federal Reserve System (Board) to the Bureau on July 21, 2011. Pursuant to the Dodd-Frank Act and ECOA, as amended, the Bureau published for public comment an interim final rule establishing a new Regulation B, 12 CFR part 1002, implementing ECOA (except with respect to persons excluded from the Bureau's rulemaking authority by section 1029 of the Dodd-Frank Act). 76 FR 79442 (Dec. 21, 2011). This rule did not impose any new substantive obligations but did make technical and conforming changes to reflect the transfer of authority and certain other changes made by the Dodd-Frank Act. The Bureau's Regulation B took effect on December 30, 2011.

5Public Law 111-203, 124 Stat. 1376, section 1474 (2010).

B. Dodd-Frank Act Amendments Concerning Appraisals

Congress enacted the Dodd-Frank Act after a cycle of unprecedented expansion and contraction in the mortgage market sparked the most severe U.S. recession since the Great Depression.6 The Dodd-Frank Act created the Bureau and consolidated various rulemaking and supervisory authorities in the new agency, including the authority to implement ECOA.7 At the same time, Congress imposed new statutory requirements governing mortgage practices with the intent to restrict the practices that contributed to the crisis and provide additional protections to consumers.

6For more discussion of the mortgage market, the financial crisis, and mortgage origination generally, see the Bureau's 2012 TILA-RESPA Proposal,available at http://www.consumerfinance.gov/regulations/.

7Sections 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 activities, including requirements relating to appraisal independence, appraisals for higher-risk mortgages, regulation of appraisal management companies, automated valuation models, and providing copies of appraisals and valuations.8 Many of the Dodd-Frank Act appraisal provisions are required to be implemented through joint rulemakings involving several federal agencies. The amendment to ECOA section 701(e), however, does not require a joint rulemaking. As discussed below, the amendments to section 701(e) overlap with the notice and copy requirements of a Dodd-Frank Act amendment to the Truth in Lending Act (TILA) applicable to higher-risk mortgage loans. The Dodd-Frank Act amendment to TILA, which adds section 129H, is required to be implemented through joint rulemaking. See TILA section 129H(b)(4)(A); 15 U.S.C. 1639h(b)(4)(A).

8 SeeTILA sections 129H and 129E as established by Dodd-Frank Act sections 1471 and 1472, 15 U.S.C. 1639h; sections 1124 and 1125 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) as established by Dodd-Frank Act sections 1473(f)(2), 12 U.S.C. 3353, and 1473(q), 12 U.S.C. 3354; and sections 701(e) of ECOA as amended by Dodd-Frank Act section 1474, 15 U.S.C. 1691(e).

ECOA Appraisal Requirements

Section 1474 of the Dodd-Frank Act9 amended ECOA section 701(e) to require that creditors provide copies of appraisals and valuations to loan applicants at no additional cost and without requiring applicants to affirmatively request such copies. Amended ECOA section 701(e) generally provides that:

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

• A creditor shall furnish to an applicant a copy of any and all written appraisals and valuations developed in connection with the applicant's application for a loan that is or would be secured by a first lien on a dwelling. The appraisal documentation must be provided promptly, and in no case later than three days prior to closing of the loan, whether the creditor grants or denies the applicant's request for credit or the application is incomplete or withdrawn. However, the applicant may waive the timing requirement that such appraisals or valuations be provided three days prior to closing, except where otherwise required by law.

• The creditor shall provide a copy of each written appraisal or valuation at no additional cost to the applicant, though the creditor may impose a reasonable fee on the applicant to reimburse the creditor for the cost of the appraisal.

• At the time of application, the creditor shall notify applicants in writing of the right to receive a copy of each written appraisal and valuation under ECOA section 701(e).

Amended ECOA section 701(e)(6) defines the term “valuation” as including “any estimate of the value of a dwelling developed in connection with a creditor's decision to provide credit, including those values developed pursuant to a policy of a government sponsored enterprise or by an automated valuation model, a broker price opinion, or other methodology or mechanism.”

Higher-Risk Mortgage Appraisal Requirements

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

C. Other Rulemakings

In addition to this proposal and the higher-risk mortgage rulemaking discussed above, the Bureau currently is engaged in six other rulemakings relating to mortgage credit to implement requirements of the Dodd-Frank Act:

TILA-RESPA Integration:On July 9, 2012, the Bureau released a proposed rule and forms combining the TILA mortgage loan disclosures with the Good Faith Estimate (GFE) and settlement statement required under RESPA pursuant to Dodd-Frank Act section 1032(f) as well as sections 4(a) of RESPA and 105(b) of TILA, as amended by Dodd-Frank Act sections 1098 and 1100A, respectively (2012TILA-RESPA Proposal).10 12 U.S.C. 2603(a); 15 U.S.C. 1604(b).

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

HOEPA:On the same day that the Bureau released the 2012 TILA-RESPA Proposal, the Bureau also released a proposal to implement Dodd-Frank Act requirements expanding protections for “high-cost” mortgage loans under HOEPA, pursuant to TILA sections 103(bb) and 129, as amended by Dodd-Frank Act sections 1431 through 1433 (2012 HOEPA Proposal).11 15 U.S.C. 1602(bb) and 1639.

11 Id.

Servicing:The Bureau is in the process of developing a proposal to implement Dodd-Frank Act requirements regarding force-placed insurance, error resolution, and payment crediting, as well as forms for mortgage loan periodic statements and “hybrid” adjustable-rate mortgage reset disclosures, pursuant to sections 6 of RESPA and 128, 128A, 129F, and 129G of TILA, as amended or established by Dodd-Frank Act sections 1418, 1420, 1463, and 1464. The Bureau has publicly stated that in connection with the servicing rulemaking the Bureau is considering proposing rules on reasonable information management, early intervention for troubled and delinquent borrowers, and continuity of contact, pursuant to the Bureau's authority to carry out the consumer protection purposes of RESPA in section 6 of RESPA, as amended by Dodd-Frank Act section 1463. 12 U.S.C. 2605; 15 U.S.C. 1638, 1638a, 1639f, and 1639g.

Loan Originator Compensation:The Bureau is in the process of developing a proposal to implement provisions of the Dodd-Frank Act requiring certain creditors and mortgage loan originators to meet duty of care qualifications and prohibiting mortgage loan originators, creditors, and the affiliates of both from receiving compensation in various forms (including based on the terms of the transaction) and from sources other than the consumer, with specified exceptions, pursuant to TILA section 129B as established by Dodd-Frank Act sections 1402 and 1403. 15 U.S.C. 1639b.

Ability to Repay:The Bureau is in the process of finalizing a proposal issued by the Board to implement provisions of the Dodd-Frank Act requiring creditors to determine that a consumer can repay a mortgage loan and establishing standards for compliance, such as by making a “qualified mortgage,” pursuant to TILA section 129C as established by Dodd-Frank Act sections 1411 and 1412 (Ability to Repay Rulemaking). 15 U.S.C. 1639c.

Escrows:The Bureau is in the process of finalizing a proposal issued by the Board to implement provisions of the Dodd-Frank Act requiring certain escrow account disclosures and exempting from the higher-priced mortgage loan escrow requirement loans made by certain small creditors, among other provisions, pursuant to TILA section 129D as established by Dodd-Frank Act sections 1461 and 1462 (Escrows Rulemaking). 15 U.S.C. 1639d.

With the exception of the requirements being implemented in the TILA-RESPA proposal, the Dodd-Frank Act requirements referenced above generally will take effect on January 21, 2013, unless final rules implementing those requirements are issued on or before that date and provide for a different effective date. To provide an orderly, coordinated, and efficient comment process, the Bureau is generally setting the deadlines for comments on this and other proposed mortgage rules based on the date the proposal is issued, instead of the date the notice is published in theFederal Register. Because the precise date of publication cannot be predicted in advance, this method will allow interested parties that intend to comment on multiple proposals to plan accordingly and will ensure that the Bureau receives comments with sufficient time remaining to issue final rules by January 21, 2013. However, consistent with the requirements of the Paperwork Reduction Act, the comment period for the proposed analysis under that Act will end 60 days after publication of this notice in theFederal Register.

The Bureau regards the foregoing rulemakings as components of a larger undertaking; many of them intersect with one or more of the others. Accordingly, the Bureau is coordinating carefully the development of the proposals and final rules identified above. Each rulemaking will adopt new regulatory provisions to implement the various Dodd-Frank Act mandates described above. In addition, each of them may include other provisions the Bureau considers necessary or appropriate to ensure that the overall undertaking is accomplished efficiently and that it ultimately yields a regulatory scheme for mortgage credit that achieves the statutory purposes set forth by Congress, while avoiding unnecessary burdens on industry.

Thus, many of the rulemakings listed above involve issues that extend across two or more rulemakings. In this context, each rulemaking may raise concerns that might appear unaddressed if that rulemaking were viewed in isolation. For efficiency's sake, however, the Bureau is publishing and soliciting comment on proposed answers to certain issues raised by two or more of its mortgage rulemakings in whichever rulemaking is most appropriate, in the Bureau's judgment, for addressing each specific issue. Accordingly, the Bureau urges the public to review this and the other mortgage proposals identified above, including those previously published by the Board, together. Such a review will ensure a more complete understanding of the Bureau's overall approach and will foster more comprehensive and informed public comment on the Bureau's several proposals, including provisions that may have some relation to more than one rulemaking but are being proposed for comment in only one of them.

III. Outreach and Consumer Testing

The Bureau has conducted consumer testing relating to implementation of ECOA section 701(e) requirements in conjunction with the 2012 TILA-RESPA Proposal. A more detailed discussion of the Bureau's overall testing and form design can be found in the reportKnow Before You Owe: Evolution of the Integrated TILA-RESPA Disclosures,which is available on the Bureau's Web site.12

12Kleimann Communication Group, Inc.,Know Before You Owe: Evolution of the Integrated TILA-RESPA Disclosures(July 9, 2012),http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf.

In January 2011, the Bureau contracted with a communication, design, consumer testing, and research firm, Kleimann Communication Group, Inc. (Kleimann), which specializes in consumer financial disclosures. The Bureau and Kleimann developed a plan to conduct qualitative usability testing, consisting of one-on-one cognitive interviews, over several iterations of prototype integrated disclosure forms. Between January and May 2011, the Bureau and Kleimann worked collaboratively on developing a qualitative testing plan, and several prototype integrated forms for the disclosure to be provided in connection with a consumer's application (i.e.,a form integrating the RESPA good faith estimate and the early TILA disclosure).13 The qualitative testingplan developed by the Bureau and Kleimann was unique with respect to qualitative testing performed by other federal agencies in that the Bureau planned to conduct qualitative testing with industry participants as well as consumers. Each round of qualitative testing included at least two industry participants, including lenders from several different types of depository (including credit unions) and non-depository institutions, mortgage brokers, and closing agents.

13This discussion is limited to the testing of the disclosure to be provided in connection with a consumer's application, which is the portion of the testing relevant to the appraisal-related disclosure in proposed § 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 integrateddisclosure forms to be provided in connection with the closing of the mortgage loan and real estate transaction.Seethe 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 it conducted the qualitative testing of the prototypes, which it titled “Know Before You Owe.”14 This initiative consisted of publishing and obtaining feedback on the prototype designs through an interactive tool on the Bureau's Web site or through posting the prototypes to the Bureau's blog on its Web site and providing an opportunity for the public to email feedback directly to the Bureau.

14 See http://www.consumerfinance.gov/knowbeforeyouowe.

From May to October 2011, Kleimann and the Bureau conducted a series of five rounds of qualitative testing on revised iterations of integrated disclosure prototype forms. This testing was conducted in five different cities across different U.S. Census regions and divisions: Baltimore, Maryland; Los Angeles, California; Chicago, Illinois; Springfield, Massachusetts; and Albuquerque, New Mexico. After each round, Kleimann analyzed and reported to the Bureau on the results of the testing. Based on these results and feedback received from the Bureau's Know Before You Owe public outreach project, the Bureau revised the prototype disclosure forms for the next round of testing.

As part of the larger Know Before You Owe public outreach project, the Bureau tested two versions of the new appraisal-related disclosures required by both TILA section 129H and ECOA section 701(e).15 The Bureau believed that it was important to test both appraisal-related disclosures together in order to determine how best to provide these two overlapping but separate disclosures in a manner that would minimize consumer confusion and improve consumer comprehension. Testing showed that consumers tended to find the TILA and ECOA disclosures confusing when they were given together using, in both cases, the specific language set forth in the statute.16 Consumer comprehension improved when the Bureau developed a slightly longer plain language disclosure that was designed to incorporate the elements of both statutes. Based on the results of that testing, the Bureau has developed the following appraisal disclosure language: “We may order an appraisal to determine the property's value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost.”

15Kleimann Communication Group, Inc.,Know Before You Owe: Evolution of the Integrated TILA-RESPA Disclosures254-256 (July 9, 2012),http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf.

16 Id.

IV. Legal Authority

The Bureau is issuing this proposed rule pursuant to its authority under ECOA, and the Dodd-Frank Act. On July 21, 2011, section 1061 of the Dodd-Frank Act transferred to the Bureau all of the “consumer financial protection functions” previously vested in certain other Federal agencies, including the Board.17 The term “consumer financial protection function” is defined to include “all authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law, including performing appropriate functions to promulgate and review such rules, orders, and guidelines.”18 ECOA and title X of the Dodd-Frank Act are Federal consumer financial laws.19 Accordingly, the Bureau has authority to issue regulations pursuant to ECOA, as well as title X of the Dodd-Frank Act.

17Public Law 111-203, 124 Stat. 1376, section 1061(b)(7); 12 U.S.C. 5581(b)(7).

1812 U.S.C. 5581(a)(1).

19Dodd-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 1022(b)(1) of the Dodd-Frank Act authorizes the Bureau to prescribe rules “as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof[.]” 12 U.S.C. 5512(b)(1). Section 1022(b)(2) of the Dodd-Frank Act prescribes certain standards for rulemaking that the Bureau must follow in exercising its authority under section 1022(b)(1). 12 U.S.C. 5512(b)(2).

Section 1405(b) of the Dodd-Frank Act provides that, “[n]otwithstanding any other provision of [title XIV of the Dodd-Frank Act], in order to improve consumer awareness and understanding of transactions involving residential mortgage loans through the use of disclosures, the [Bureau] may, by rule, exempt from or modify disclosure requirements, in whole or in part, for any class of residential mortgage loans if the [Bureau] determines that such exemption or modification is in the interest of consumers and in the public interest.” 15 U.S.C. 1601 note. Section 1401 of the Dodd-Frank Act, which amended TILA section 103(cc), 15 U.S.C. 1602(cc), generally defines residential mortgage loan as any consumer credit transaction that is secured by a mortgage on a dwelling or on residential real property that includes a dwelling other than an open-end credit plan or an extension of credit secured by a consumer's interest in a timeshare plan. Notably, the authority granted by section 1405(b) applies to “disclosure requirements” generally, and is not limited to a specific statute or statutes.

Section 703(a) of ECOA authorizes the Bureau to prescribe regulations to carry out the purposes of ECOA. Section 703(a) further states that such regulations may provide for such adjustments and exceptions for any class of transactions, that in the judgment of the Bureau are necessary or proper to effectuate the purposes of ECOA, to prevent circumvention or evasion thereof, or to facilitate or substantiate compliance. 15 U.S.C. 1691b(a). Pursuant to this authority, the Bureau proposes to implement the amended ECOA appraisal provision. 15 U.S.C 1691(e). The proposed rule would amend existing § 1002.14 of Regulation B.

V. Section-by-Section Analysis Section 1002.14Rules on Providing Appraisals and Valuations Overview

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

14(a) Providing Appraisals and Valuations

Currently, § 1002.14(a) of Regulation B sets forth the general requirement thata creditor shall provide a copy of the appraisal report used in connection with an application for credit that is to be secured by a lien on a dwelling. Section 1002.14(a) states that a creditor must comply with either § 1002.14(a)(1), which provides for routine delivery of copies of appraisal reports to an applicant, or § 1002.14(a)(2), which sets forth rules for providing copies of appraisal reports upon request (for creditors that do not choose to routinely provide appraisal reports to applicants). As discussed in more detail below, the Bureau is proposing to amend § 1002.14(a) to implement changes to the appraisal delivery requirements set forth in the Dodd-Frank Act. Because the Dodd-Frank Act amendments to ECOA section 701(e) eliminate the option for a creditor to provide copies of appraisals or valuations only upon written request, the Bureau is proposing to renumber portions of proposed § 1002.14(a) for clarity.

As discussed in more detail below, proposed § 1002.14(a)(1) would set forth the general requirement to provide copies of written appraisals and valuations to applicants for credit to be secured by a first lien on a dwelling, and would set forth the timing and waiver requirements for providing such copies. Proposed § 1002.14(a)(2) would require that a creditor provide a written disclosure of the applicant's right to receive a copy of such written appraisals and valuations. Proposed § 1002.14(a)(3) would prohibit creditors from charging the applicant for providing a copy of written appraisals and valuations, but would permit creditors to require applicants to pay a reasonable fee to reimburse the creditor for appraisals and valuations. Proposed § 1002.14(a)(4) would clarify that the requirements of § 1002.14(a)(1) apply regardless of whether credit is extended or denied, or if the application is incomplete or withdrawn. Proposed § 1002.14(a)(5) would allow for the copies required by § 1002.14(a)(1) to be provided in electronic form. As is discussed in more detail below, proposed § 1002.14(b) would define certain terms used in proposed § 1002.14(a).

Current comment 14(a)(2)(i)-1 addresses the notice requirements if the application subject to § 1002.14 involves more than one applicant. The Bureau is proposing to renumber current comment 14(a)(2)(i)-1 as proposed comment 14(a)-1, and to make a conforming change so that the comment accurately refers to the disclosure about copies of written appraisals and valuations rather than to a notice about the appraisal report. In addition, the proposed comment would be amended to clarify that the comment also applies to the requirement to provide copies of written appraisals and valuations. Accordingly, the proposed comment would clarify that if there is more than one applicant, the notice about the written appraisals and valuations, and the copies of written appraisals and valuations, need only be given to one applicant, but it must be given to the primary applicant where one is readily apparent.

14(a)(1) In General Scope

Consistent with ECOA section 701(e)(1), proposed § 1002.14(a)(1) would require a creditor to provide an applicant a copy of all written appraisals and valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling. The scope of proposed § 1002.14(a)(1) differs in several important respects from current § 1002.14(a). First, consistent with new ECOA section 701(e)(1), the proposed amendments to § 1002.14(a)(1) would broaden scope of the current requirement to provide copies of “an appraisal report” to include “all written appraisals and valuations developed.” Thus, more types of documents developed to value properties would be covered.

At the same time, the amendments made to ECOA section 701(e)(1) also narrow the types of transactions that are covered by subsection (e). Specifically, the proposed rule would apply to applications for credit to be secured by a first lien on a dwelling. In contrast, current § 1002.14(a) applies to applications for credit secured by a first lien or a subordinate lien on a dwelling. Accordingly, proposed § 1002.14(a)(1) would also add the word “first” to § 1002.14(a) to narrow the scope of the proposed rule to cover only loans secured by a first lien on a dwelling, consistent with the Dodd-Frank Act amendments to section 701(e) of ECOA.

Current comments 14(a)-1 and 14(a)-2 clarify the applicability of the appraisal delivery requirements to credit for business purposes and renewals. The proposal would generally retain comments 14(a)-1 and 14(a)-2 (renumbered as comments 14(a)(1)-1 and 14(a)(1)-2), with several conforming and technical changes. Specifically, proposed comment 14(a)(1)-1 would include an updated cross-reference to the definition of “dwelling” that, as discussed below, is proposed to be moved to § 1002.14(b)(2). In addition, proposed comment 14(a)(1)-1 would be narrowed to cover only loans secured by a first lien on a dwelling, consistent with proposed § 1002.14(a)(1). Thus, proposed comment 14(a)(1)-1 would provide that § 1002.14(a)(1) covers applications for credit to be secured by a first lien on a dwelling, as that term is defined in § 1002.14(b)(2), whether the credit is business credit (see§ 1002.2(g)) or consumer credit (see§ 1002.2(h)).

Proposed comment 14(a)(1)-2 would generally be consistent with current comment 14(a)-2. However, proposed comment 14(a)(1)-2 would use the statutory term “developed” provided in new ECOA section 701(e)(1) in place of the term “obtained” throughout the comment. Thus, proposed comment 14(a)(1)-2 would provide that § 1002.14(a)(1) applies when an applicant requests the renewal of an existing extension of credit and the creditor develops a new written appraisal or valuation. In addition, the proposed comment would also provide that § 1002.14(a) does not apply when a creditor uses the appraisals or valuations that were previously developed in connection with the prior extension of credit in order to evaluate the renewal request.

The Bureau requests comment on whether additional guidance is needed on the application of the requirements of proposed § 1002.14(a)(1) in the case of renewals for consumer or business purpose transactions.

The Bureau is proposing to adopt a new comment 14(a)(1)-3 that would clarify that for purposes of § 1002.14, a “written” appraisal or valuation includes, without limitation, an appraisal or valuation received or developed by the creditor: in paper form (hard copy); electronically, such as by CD or email; or by any other similar media. In addition, the proposed comment clarifies that creditors should look to § 1002.14(a)(5) regarding the provision of copies of appraisals and valuations to applicants via electronic means. The Bureau believes that its proposed interpretation of the term “written” best serves the purposes of the statute, because consumers would receive free copies of appraisals and valuations regardless of whether the creditor receives, prepares or stores these materials in paper or electronic form.

Timing

Proposed § 1002.14(a)(1) would clarify that a creditor must provide a copy of each written appraisal or valuation subject to § 1002.14(a)(1) promptly (generally within 30 days of receipt by the creditor), but not later than three business days prior toconsummation of the transaction, whichever is first to occur. This aspect of the proposal implements ECOA section 701(e)(1), which requires that creditors provide the copies of each written appraisal or valuation promptly, but in no case later than three days prior to the closing of the loan. The statute does not define the term “promptly.” However, current § 1002.14(a)(2)(ii) states that “promptly” means generally within 30 days. For consistency with existing § 1002.14(a)(2)(ii), under proposed § 1002.14(a)(1) the provision of a copy of written appraisals and valuations will generally be considered prompt if the written appraisals and valuations are provided within 30 days of receipt thereof by the creditor. Thus, under the proposed rule a creditor would be required to provide a copy of all appraisals and valuations within 30 days of receipt or three days prior to consummation of the transaction, whichever is first to occur.

In addition, for clarity and to be consistent with other similar regulatory requirements under TILA and RESPA, the proposed rule would use the term “consummation” in place of the statutory term “closing” and clarify that the statutory term “days” means “business days.”

Waiver

ECOA section 701(e)(2) provides that an applicant may waive the three-day requirement provided in ECOA section 701(e)(1), except where otherwise required in law. The Bureau believes that the “3 day requirement” referenced in the statute refers to the timing requirement to provide a copy of an appraisal or valuation three business days prior to closing, as opposed to the general requirement to provide copies of all appraisals and valuations. Specifically, the Bureau believes that a creditor is required to provide a copy of an appraisal or valuation developed promptly (generally within 30 days) even if the application is denied, incomplete, withdrawn, or the applicant waives the three day requirement. In addition, because creditors who order or conduct an appraisal or valuation require it to be completed before consummation of the transaction, the Bureau believes that a creditor should always be required to provide an applicant a copy of written appraisals and valuations by the date of consummation of the transaction. Accordingly, proposed § 1002.14(a)(1) provides that, notwithstanding the other requirements in § 1002.14(a)(1), an applicant may waive the timing requirement to receive a copy of an appraisal or valuation three business days prior to consummation and agree to receive the copy at or before consummation, except as otherwise prohibited by law.

Proposed comment 14(a)(1)-4 would clarify that § 1002.14(a)(1) permits the applicant to waive the timing requirement that written appraisals and valuations be provided no later than three business days prior to consummation if the creditor provides the copy at or before consummation, except as otherwise provided by law. In addition, the proposed comment would provide that an applicant's waiver is effective under § 1002.14(a)(1) if the applicant provides the creditor an affirmative oral or written statement waiving the 3-day timing requirement. Finally, the proposed comment would provide that if there is more than one applicant for credit in the transaction, any applicant may provide the statement.

Delivery Upon Request No Longer Permitted

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

Exemption for Credit Unions Removed

The Board's 1993 Final Rule on Providing Appraisal Reports (1993 Final Rule) provided an exemption from the appraisal delivery requirements in § 1002.14 for credit unions.See58 FR 65657, 65660 (Dec. 16, 1993). In the 1993 Final Rule the Board cited to the legislative history of the 1991 ECOA amendments as the basis for the exemption for credit unions. The reasoning behind this exemption appears to have been that credit unions were already required to comply with substantially similar requirements under the regulations of the National Credit Union Administration (NCUA).20 The Board also cited to a section of the legislative history noting that Congress intended no change to the NCUA's regulations in adding the requirement to provide appraisals in ECOA.21

20 See12 CFR 701.31(c)(5) providing that each Federal credit union shall make available, to any requesting member/applicant, a copy of the appraisal used in connection with that member's real estate-related loan application. The appraisal shall be available for a period of 25 months after the applicant has received notice from the Federal credit union of the action taken by the Federal credit union on the real estate-related loan application.

21The legislative history to the 1991 ECOA amendments cited to in the Board's 1993 Final Rule on Providing Appraisals notes that the NCUA already requires credit unions to make appraisals available, and that the legislation is not intended to modify those NCUA regulations.SeeS. Rep. No. 102-167, at 90 (102nd Cong. 1st Sess. 1991).

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

The Bureau requests comment on the removal of this exemption and whether there are additional factors the Bureau should take into consideration relating to the application of proposed § 1002.14 to credit unions.

14(a)(2) Disclosure

Consistent with ECOA section 701(e)(5), proposed § 1002.14(a)(2) provides that for applications subject to § 1002.14(a)(1), a creditor shall provide an applicant with a written disclosure, not later than the third business day after the creditor receives an application, of the applicant's right to receive a copy of all written appraisals and valuations developed in connection with such application.

Content

Title XIV of the Dodd-Frank Act added two new appraisal related disclosure requirements for consumers. New section 701(e)(5) of ECOA, which is implemented in this proposed rule provides: “At the time of application, the creditor shall notify an applicant in writing of the right to receive a copy of each written appraisal and valuation under this subsection.” 15 U.S.C. 1691(e)(5). Similarly, section 129H(d) of TILA provides:

At the time of the initial mortgage application, the applicant shall be provided with a statement by the creditor that any appraisal prepared for the mortgage is for the sole use of the creditor, and that the applicant may choose to have a separate appraisal conducted at the expense of the applicant.

15 U.S.C. 1639h(d). In the absence of regulatory action to harmonize the two provisions, creditors would be required to provide two appraisal-related disclosures to consumers for certain loans (i.e.,a TILA and an ECOA disclosure for higher-risk mortgage loans secured by a first lien on a consumer's principal dwelling) and just one for others (i.e.,an ECOA disclosure for first-lien, dwelling-secured loans that are not higher-risk mortgage loans, or a TILA disclosure for higher-risk mortgage loans secured by a subordinate lien).

The Bureau believes that Congress intended the ECOA and TILA disclosures to work together to provide consumers a better understanding of their rights in the appraisal process. Accordingly, the Bureau is proposing to exercise its authority under section 703(a) of ECOA and section 1405(b) of the Dodd-Frank Act to amend form C-9 in Regulation B to include the language developed to satisfy the new appraisal-related disclosure requirements of both ECOA and TILA. The proposed sample disclosure language differs from the express statutory language provided in section 701(e)(5). However, based on the results of the testing described above, the Bureau believes that the additional explanatory text is necessary to promote consumer comprehension and to reduce any confusion associated with the TILA appraisal notification that will also have to be given to applicants for higher-risk mortgage loans. The Bureau believes this approach will also reduce compliance burden for industry by allowing a single disclosure to satisfy both statutory requirements. Accordingly, the Bureau believes that the proposed sample notice language developed to satisfy the disclosure requirements of both TILA and ECOA serves the interests of consumers, the public, and creditors. The Bureau requests comment on the proposed language and whether additional changes should be made to the text of the notification to further enhance consumer comprehension.

In addition, the Bureau notes that the model language in proposed Form C-9 refers only to appraisals, while proposed § 1002.14(a)(2) refers to “all written appraisals and valuations.” The Bureau solicits comment on what, if any, adjustments or clarifications to Form C-9 would be appropriate for creditors that perform valuations rather than, or in addition to, appraisals.

Timing and Method of Delivery

ECOA section 701(e)(5) requires creditors to notify applicants in writing, at the time of application, of the right to receive a copy of each written appraisal and valuation. The Bureau proposes to interpret the phrase “at the time of application” to require creditors to provide the ECOA appraisal disclosure no later than three business days after receiving an application. Proposed § 1002.14(a)(2) would require creditors to notify applicants in writing, not later than the third business day after a creditor receives such application, of the right to receive a copy of all written appraisals and valuations developed in connection with such application.

This approach is consistent with the disclosure requirements of TILA and RESPA.22 Currently, creditors are required to provide disclosures under TILA and RESPA no later than the third business day after receiving a consumer's written application.23 The Bureau has also proposed as part of the 2012 TILA-RESPA Proposal that the ECOA disclosure be provided as part of the Loan Estimate disclosure to be delivered not later than the third business day after application, to eliminate the need for a separate disclosure.24

22 See, e.g.,2012 TILA-RESPA Proposal, at 12 CFR 1026.19(e)(1)(iii) (“Timing.The creditor shall deliver the disclosures required under paragraph (e)(1)(i) of this section not later than the third business day after the creditor receives the consumer's application.”)available at http://www.consumerfinance.gov/regulations/.

23 See, e.g.,12 CFR 1026.19(a)(1)(i) providing in relevant part that in a mortgage transaction subject to the Real Estate Settlement Procedures Act that is secured by the consumer's dwelling * * * the creditor shall make good-faith estimates of the disclosures required by § 226.18 and shall deliver or place them in the mail not later than the third business day after the creditor receives the consumer's written application.

242012 TILA-RESPA Proposal, at 12 CFR 1026.19(e)(1)(iii) and 1026.37(m)(1)available at http://www.consumerfinance.gov/regulations/.

The Bureau believes this approach is warranted because providing the disclosure to applicants at the same time as other similar disclosures—and possibly as part of a broader integrated disclosure document—would allow consumers to read the notification in context with other important information that must be delivered not later than the third business day after the creditor receives the application. Such an approach could reduce the number of pieces of paper that consumers receive and facilitate compliance by creditors.

The Bureau requests comment on whether providing the disclosure at some other time would be more beneficial to consumers, and how the disclosure should be provided where an application is submitted by phone, fax or electronically. For example, the Bureau solicits comment on whether it would be appropriate to require that creditors provide the disclosure at the same time the application is received, or even as part of the application.

The Bureau also seeks comment on the effective date if the Bureau were to finalize the proposal to include the new appraisal disclosure in the TILA-RESPA Loan Estimate. Because the 2012 TILA-RESPA Proposal likely will not be finalized on the same timeline as this proposal, creditors would likely have to revise their current ECOA disclosures to reflect the new language and distribute the disclosures as standalone forms until such time as the TILA-RESPA integrated disclosures must be provided. The Bureau believes that the burden involved would be modest since the forms are currently typically provided as standalone documents and do not require complicated dynamic systems programming to generate. The Bureau believes it is important for consumers to begin receiving information about their rights under ECOA with respect to receiving copies of appraisals. The Bureau therefore is not proposing to delay implementation of the disclosure requirement, as it is with some other mortgage-related disclosures required by the Dodd-Frank Act that the Bureau is proposing to implement as part of the integrated TILA-RESPA forms.25 The Bureau seeks comment on the burden and time involved in implementing the proposed revisions to the ECOA notice.

25 See2012 TILA-RESPA Proposal,available at http://www.consumerfinance.gov/regulations/.

14(a)(3) Reimbursement

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

The Bureau interprets the two provisions to permit creditors to chargeapplicants reasonable fees to reimburse the creditor for costs of the appraisal or valuation itself, but not for photocopying, postage, or similar costs associated with providing one written copy to the applicant. Accordingly, proposed § 1002.14(a)(3) generally implements sections 701(e)(3) and 701(e)(4), and provides additional details for clarity.

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

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

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

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

Proposed comment 14(a)(3)-1 would provide examples of the specific types of charges that are prohibited under the regulation, such as photocopying fees and postage for mailing a copy of written appraisals or valuations.

Proposed comment 14(a)(3)-2 would clarify that § 1002.14(a)(3) does not prohibit creditors from imposing fees that are reasonably designed to reimburse the creditor for costs incurred in connection with obtaining actual appraisal or valuation services, so long they are not increased to cover the costs of providing documentation under § 1002.14. The Bureau does not read ECOA section 701(e)(3) as an attempt to create a proscriptive rate regime for all valuation-related activities. The Bureau notes that where Congress believed direct regulation of the amount of fees in connection with appraisal activities was required, it specified standards in the Dodd-Frank Act.SeeDodd-Frank Act section 1472 (requiring under TILA, with regard to residential mortgage loans, that creditors and their agents pay independent appraisers fees that are “reasonable and customary” for the market area where the property is located, and specifying various sources for determining whether fees meet the standard). The Bureau does not believe that Congress intended ECOA section 701, which focuses on the provision of documentation to loan applicants rather than the substantive performance of appraisal and valuation services, to function in such a manner. Accordingly, the Bureau believes that sections 701(e)(3) and 701(e)(4) are simply designed to prevent direct or indirect upcharging related to the documentation provision that is the focus of the statute.

To further clarify the statutory language stating that creditors' ability to seek reimbursement for the cost of the appraisal does not apply “where otherwise required in law,” proposed comment 14(a)(3)-2 also notes that other sources of law may separately prohibit creditors from charging fees to reimburse the costs of appraisals, and are not overridden by section 701(e)(3). For instance, section 1471 of the Dodd-Frank Act requires creditors to obtain a second interior appraisal in connection with certain higher-risk mortgage loans, but prohibits creditors from charging applicants for the cost of the second appraisal. TILA section 129H(b)(2)(B); 15 U.S.C. 1639h(b)(2)(B).

The Bureau requests comment on the proposed text and whether additional guidance is needed to comply with the requirements of proposed § 1002.14(a)(3).

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

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

14(a)(5) Copies in Electronic Form

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

14(b) Definitions

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

14(b)(1) Consummation

As discussed above, for clarity and to be consistent with other similar regulatory requirements under TILA and RESPA, proposed § 1002.14(a)(1) would use the term “consummation” in place of the statutory term “closing.” In addition, the proposed rule would define the term “consummation” in a manner that mirrors the definition of the term provided in § 1026.2(a)(13) of Regulation Z. 12 CFR 1026.2(a)(13). Accordingly, proposed § 1002.14(b)(1) would define the term “consummation” as the time that a consumer becomes contractually obligated on a credit transaction.

Proposed comment 14(b)(1)-1 would clarify that when a contractual obligation on the consumer's part is created is a matter to be determined under applicable law; § 1002.14 does not make this determination. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation. Consummation, however, does not occur merely because the consumer has made some financial investment in the transaction (for example, by paying a nonrefundable fee) unless, of course, applicable law holds otherwise.

Proposed comment 14(b)(1)-2 would clarify that consummation does not occur when the consumer becomes contractually committed to a sale transaction, unless the consumer also becomes legally obligated to accept a particular credit arrangement.

14(b)(2) Dwelling

Proposed § 1002-1.14(b)(2) would retain the definition of the term “dwelling” in current § 1002.14(c). Specifically, proposed § 1002.14(b)(2) would define the term “dwelling” as a residential structure that contains one to four units whether or not that structure is attached to real property. Proposed paragraph (b)(2) further provides that the term “dwelling” includes, but is not limited to, an individual condominium or cooperative unit, and a mobile or other manufactured home.

14(b)(3) Valuation

Consistent with ECOA section 701(e)(6), proposed § 1002.14(b)(3) defines “valuation” as any estimate of the value of a dwelling developed in connection with a creditor's decision to provide credit. The commentary to the proposed rule would include the list of examples provided in ECOA section 701(e)(6).

Proposed comment 14(b)(3)-1 would amend current comment 14(c)-1 to provide the following examples of valuations:

• A report prepared by an appraiser (whether or not certified and licensed), including written comments and other documents submitted to the creditor in support of the person's estimate or opinion of the property's value.

• A document prepared by the creditor's staff that assigns value to the property, if a third-party appraisal report has not been used.

• An internal review document reflecting that the creditor's valuation is different from a valuation in a third party's appraisal report (or different from valuations that are publicly available or valuations such as manufacturers' invoices for mobile homes).

• Values developed pursuant to a methodology or mechanism required by a government sponsored enterprise, including written comments and other documents submitted to the creditor in support of the estimate of the property's value.

• Values developed by an automated valuation model, including written comments and other documents submitted to the creditor in support of the estimate of the property's value.

• A broker price opinion prepared by a real estate broker, agent, or sales person, including written comments and other documents submitted to the creditor in support of the estimate of the property's value.

The Bureau requests comment on whether this list should include other examples of valuations. In addition, the Bureau requests comments on whether additional clarification is needed about what types of information would not constitute a valuation for purposes of § 1002.14.

The Bur