What happens if it is determined after the Loan Estimate is delivered to the borrower that the subject property is complex and appraisers request more money for the appraisal assignment?
TRID allows for a fluctuation of the estimated price and production of a new Loan Estimate if there is a “Change in Circumstance”. Change of circumstance is intended to include:
- Extraordinary event beyond the control of any interested party or unexpected event specific to the consumer or transaction.
- Information specific to the consumer or transaction that the creditor relied upon that was found to be inaccurate or changed after the Loan Estimate was provided.
- New information specific to the consumer or transaction that the creditor did not rely on when providing the Loan Estimate.
TRID commentary states that location is not a valid changed circumstance since the property address was known at the time of disclosure.
Other property attributes may be considered a valid changed circumstance. The following is a brief list of property attributes that alone, or combined with other attributes, may put a property in the complex category, thus commanding a higher fee to the appraiser:
- Unique architectural style – log home, dome home, berm home
- Manufactured housing
- Historic homes
- Homes with accessory units (garage apartments, in law suites, guest houses)
- Large and/or high end, luxury homes
- Ocean front, lakefront, mountain homes
- Homes on acreage
- Anything that is atypical or unique for the market
Valuation Management Group wanted to get the thoughts from an expert on TRID. Fowler Williams, President of Crescent Mortgage Company, has become a relied upon resource and has been speaking to many organizations and involved in training webinars. Fowler was appointed by the Mortgage Bankers Association to be the 2015-2016 Chairman of the Mortgage Action Alliance.
Here are the words of Fowler:
“It’s a meaningful change that will require some meaningful planning on the part of lenders. I have stated to the bureau that, while agency guidelines and prudent lending standards won’t allow for a borrower to ‘shop’ for their appraisal, appraisal independence rules prohibit a lender for “shopping” for an appraisal as well. It would have made more sense to make any appraisal management fees, not the fee paid to the appraiser, to be zero tolerance since they should be known by the lender. However, not all appraisers in all areas charge the same price for their valuable service.
Another issue I see is that if a lender retains an appraiser within that 3 day period so that they have a rock solid fee to disclose, you can’t have the borrower pay for the appraisal until a loan estimate is delivered. So, will lenders place orders to execute on the fee quoted prior to a borrower being able to make payment for it?
First, keep in mind you have three days from receiving the new ‘6 pieces’ of information that constitutes an application under TRID, to when you must deliver the loan estimate. Can you find an accurate fee in 3 days? Probably.
Second, look at how your institution currently orders and collects payments from borrowers for these services. Does this need to be moved sooner in the process? Again, keeping in mind you cannot charge the borrower until you issue a Loan Estimate.
Third, if you over quote the fee knowing that it can decrease, how competitive will you be with competition quoting accurate, lower prices.
Certainly the lenders who prepare a process and strategy to receive, and in turn disclose, accurate appraisal fees on the Loan Estimate at first issuance will be a step ahead of competitors who haven’t reconciled their workflows for this important ‘zero-tolerance’ fee under TRID.”
Valuation Management Group will be conducting webinars on September 10, 2015 and September 22, 2015. The webinars will cover the process of requesting bids from Valuation Management Group for properties that are complex. We will be sending out webinar invitations the week of August 30, 2015.
Valuation Management Group is proud to be the appraisal management resource for Fowler and Crescent Mortgage Company.
As a national commercial and residential appraisal management company, Valuation Management Group is able to assist lenders with all of their appraisal management services. Valuation Management Group handles the entire appraisal process for commercial and residential appraisals, from engaging the appraiser to completing robust appraisal reviews. The Valuation Management Group appraisal review ensures an appraisal conforms to appraisal regulations and is acceptable to the lender. Valuation Management Group is proud to be able to assist financial institutions in maintaining appraisal compliance and appraiser independence.
Valuation Management Group is a national, full service appraisal management company that manages the appraisal process for community banks, mortgage bankers and credit unions. We offer the full array of commercial and residential appraisal products and services. We take the appraisal process from ordinary to extraordinary.
This article is being provided as informational purposes only and is not intended to be legal advice. Please consult with your compliance officer or legal counsel for guidance on your company’s policy with regard to what constitutes a valid changed circumstance.