ABA voices concern over impact of CFPB appraisal rule on home builders

200px-American_Bankers_Association_LogoThe American Bankers Association voiced concerns regarding the CFPB’s appraisal rule—in particular, its impact on home builders—in a letter to the watchdog agency arlier this month.

Under the CFPB’s appraisal rule, creditors are required to notify consumers within three days of receiving a loan application of their right to receive a copy of all appraisals. Creditors must provide the appraisal copies and other home-value estimates to consumers promptly, or before closing, whichever is earlier.

The ABA said the rule, which is scheduled to take effect on Jan. 18, “is creating challenges for lenders when a dwelling is securing business credit,” adding that lenders that issue loans to developers and home builders will be most impacted by the rule.

The rule would require commercial lending divisions to send copies of appraisals for all home builder inventories, regardless of whether they request them or not. The ABA said less than three percent of builder clients request copies of valuations and other estimates.

“It is important to note that there are not thousands of individuals commercial customers who would be receiving a single appraisal, but rather hundreds or thousands of appraisals that would be going to single clients,” the ABA said. “Accordingly, the Appraisal Rule adds little to no value to home builder clients; it will in fact burden them with documentation they have asked not to receive, and the process and resources required to provide such information will be very costly to the lender and, ultimately, more costly to the borrowers.”

Additionally, the ABA said the assumptions used in the CFPB’s burden estimation methodology “may not be valid…for commercial lending business units and their related underwriting and lending platforms.”

“For all of these reasons, we respectfully request that the CFPB reconsider the applicability of the Appraisal Rule to business credit and if necessary establish an exemption consistent with the treatment of business credit under other rules,” the ABA said.

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