For clarification of the regulation on the Closing Disclosure?

Appraisal report- Appraised value
Evaluation performed by a certified appraiser meets appraisal guidelines– estimated property value

If we have a refinance or home equity loan and the borrower purchased the property less than a year ago we would use the purchase price or the appraisal value, whichever is less. If we use the purchase price in our LTV approval do we disclose purchase price as estimated property value?


8(a)(3)(vii) Sale price.
1. No seller. In transactions where there is no seller, such as in a refinancing, § 1026.38(a)(3)(vii)(B) requires the creditor to disclose the appraised value of the property. To comply with this requirement, the creditor discloses the value determined by the appraisal or valuation used to determine approval of the credit transaction. If the creditor has not obtained an appraisal, the creditor may disclose the estimated value of the property. Where an estimate is disclosed, rather than an appraisal, the label for the disclosure is changed to “Estimated Prop. Value.” The creditor may use the estimate provided by the consumer at application but, if it has performed its own estimate of the property value for purposes of approving the credit transaction by the time the disclosure is provided to the consumer, the creditor must disclose the estimate it used for purposes of approving the credit transaction. For transactions involving construction where there is no seller, the creditor must disclose the value of the property that is used to determine the approval of the credit transaction, including improvements to be made on the property if those improvements are used in determining the approval of the credit transaction.

Yes.

That seems kind of odd to me. I've never related that number exactly to underwriting. As an example, if I have an evaluation for $85,000 but $20,000 of that is a titled MH, my stated estimated value would be $65,000 on my CD although I may have considered the entire $85k for LTV purposes.

I'm not sure I agree with John's answer. IMO since they have an appraisal in file that is the value they should disclose.

To comply with this requirement, the creditor discloses the value determined by the appraisal or valuation used to determine approval of the credit transaction. If the creditor has not obtained an appraisal, the creditor may disclose the estimated value of the property. Where an estimate is disclosed, rather than an appraisal, the label for the disclosure is changed to “Estimated Prop. Value.”

For a purchase transaction the sales price must be disclosed on the CD. Under regulatory guidelines the lesser of the sales price or the appraised value is required to be used to determine LTV.

Since this is a refinancing and they have an appraisal in file disclosing the sales price as the estimated value would not be compliant IMO.

I did want to verify that if a evaluation was completed by a certified appraiser, met all the require guidelines, and used for LTV it would still be coded as "estimated property value" on the Closing Disclosure?

I don't see where the Reg. gives specific guidance on that scenario. The following is taken from the OSI:

Where an estimate is disclosed, rather than an appraisal, the label for the disclosure is changed to “Estimated Prop. Value.”

I guess what would have to be determined is does the evaluation constitute an appraisal? Reg. Z does not give a definition of an appraisal or evaluation that I am aware of but Reg. B in 1002.14 defines an evaluation as:

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 of the property's value or opinion of 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.


In reality an appraisal is nothing more than an estimate of the property's market value. So does the evaluation prepared by the appraiser escalate to the level of an appraisal. Again it is something you will have to determine.

FWIW, since the evaluation was completed by an certified appraiser, and leaning on Reg. B's definition, I most likely would disclose it as the appraised value.

After thinking about this some more I am going to opine the value determined by an appraisal or an evaluation is disclosed as the appraised value.

To comply with this requirement, the creditor discloses the value determined by the appraisal or valuation used to determine approval of the credit transaction.

This statement IMO is not saying to disclose the value used in the approval process. It is saying you disclose the value determined by the appraisal or evaluation used in the approval process. In other words if you used an appraisal or evaluation in the approval process then you disclose the value determined by that appraisal or evaluation.

Of course in a purchase transaction you are going to disclose the sales price.

Dan, I still consider an evaluation as an estimated value as opposed to a full out certified appraisal [appraised value].