Are you communicating enough with your appraisers? (Part 1)
Effective October 3rd, property appraisals will generally be subject to a zero tolerance threshold under the Integrated Disclosure Rule (“TRID”). TRID provides that fees paid for a third-party settlement service for which the member is not permitted to shop fall into the zero tolerance category. What this means for your credit union is that the appraisal fee you disclose on the Loan Estimate must be exactly what the member is required to pay at closing, absent the occurrence of a valid changed circumstance. In this two-part blog series we’ll identify the challenges associated with this requirement and the steps your credit union can take to be compliant.
What Is All The Fuss About?
Currently under the RESPA rules governing the Good Faith Estimate (“GFE”), the appraisal fee falls within the 10% tolerance category. This means that the member may be asked to pay more for the appraisal if for some reason the cost of the report increases between application and closing. This has led many cooperatives to take the approach of disclosing a “ballpark” appraisal fee on the GFE. Obviously after October 3rd this approach will no longer work. Remember the old idiom – close only counts in horseshoes (and hand grenades).
So what happens if upon further inspection of the property some of its features have your appraiser calling and asking for more money to complete the report? Is the answer to just inflate the cost of every appraisal on the Loan Estimate? Because the rule only provides that the member cannot pay MORE at closing, right? Not so fast. Regulation Z provides that a credit union must disclose an estimate of settlement charges on the Loan Estimate in good faith and consistent with the best information reasonably available at the time of the disclosure. So now what?continue reading »