The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BANK OF NEW YORK [ Circular No. 1 0 6 7 9 ~| December 3 1 ,1 9 9 3 J EQUAL CRED IT OPPORTUNITY Amendments to Regulation B Regarding the Right o f Credit Applicants to R eceive Copies o f Appraisal Reports To All Depository Institutions, and Others Concerned, in the Second Federal Reserve District: The following statement has been issued by the Board of G overnors of the Federal Reserve System: The Federal Reserve Board has issued amendments to its Regulation B (Equal Credit Opportunity) regarding the right of credit applicants to receive copies of appraisal reports. The amendments define the coverage of the appraisal requirements to be loans secured by a lien on a residential structure containing one to four units. The regulation provides alternative methods of compliance with the law. Creditors may choose to automatically provide a copy of appraisal reports to all applicants for covered loans. Or, they may choose to provide a copy upon the applicant’s request and be subject to other provisions in the regulation. For creditors that do not automatically provide copies of appraisal reports, the regulation includes a requirement that applicants be notified of the right to receive a copy and limits when an applicant must request (and the creditor must provide) it. The Regulation B amendments implement and clarify the amendments to the Equal Credit Opportunity Act contained in the Federal Deposit Insurance Corporation Improvement Act of 1991 which took effect in December 1991. The amendments to the regulation are effective on December 14, 1993, but compliance with the regulatory requirements is optional until June 14, 1994. Enclosed — for depository institutions in the Second Federal Reserve D istrict and others who maintain sets of regulations of the Board of Governors — is the text of the amendments to Regulation B , which has been reprinted from the Federal R egister of D ecem ber 16; additional, single copies may be obtained at this Bank (33 Liberty Street) from the Issues Division on the first floor, or by contacting the Circulars Division (Tel. No. 2 1 2 -7 2 0 -5 2 1 5 or 5 2 1 6 ). Questions regarding Regulation B may be directed to our Compliance Exam inations Department 2 1 2 -7 2 0 -5 9 1 4 ). W il l ia m J. M cD o nough, President. (Tel. No. Board of Governors of the Federal Reserve System EQUAL CRED IT OPPORTUNITY Amendments to Regulation B (Effective D ecem ber 14, 1993; com pliance optional until June 14, 1994) This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, m ost ot which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 IT.S.C. 15t0. The Code of Federal Regulations is sok t by the Superintendent of Documents. Prices ot new books are listed in the first FEDERAL REGISTER issue of each week. FEDERAL RESERVE SYSTEM 12 CFR Part 202 DATES: E ffective date. 1993. December 14, C om pliance date. Compliance is optional until June 14,1994. FOR FURTHER4NFORMATOW CONTACT: Michael Bylsma, Senior Attorney, or Jane Ahrens, Jane Gell or Mary Jane Seebach, Staff Attorneys, at (202) 4523667; for the hearing impaired only, contact Dorothea Thompson, Telecommunications Device for the Deaf (TDD), at (202) 452-3544, Board of Governors of the Federal Reserve System, Washington. DC 20551. [R egulation B; Docket No. R-0782] SUPPLEMENTARY INFORMATION: Equal Credit Opportunity; Appraisals and Enforcement (1) Background The Equal Credit Opportunity Act (ECOA), 15 U-S.C. 1691-1691£, makes it unlawful for creditors to discriminate in any aspect of a credit transaction on the SUMMARY: The Board is adopting a final basis of gender, marital status, race, rule revising Regulation B to implement national origin, color, religion, age amendments to the Equal Credit (provided the applicant has the capacity Opportunity Act contained in the to contract), because all or part of an Federal Deposit In s u ra n c e Corpora*km applicant’s income derives from any Improvement Act of 1991. The law public assistance, or because an provides credit applicants with a right applicant has in good faith exercised to receive copies of appraisal reports. any right under the Consumer Credit Regulation B is amended to provide Protection Act, 15 U.S.C, 1601 el seq. alternative methods of compliance with The ECOA also provides that a credit the law. Creditors may automatically applicant has the right to obtain a provide a copy of an appraisal report to written statement of reasons for a denial all applicants for certain dwellingof crediL The Board is authorized to secured loans, or they may provide a prescribe rules that in its judgment are copy upon the applicant's request necessary or proper to effectuate the (subject to other provisions in the final purposes of the ECOA, to prevent rule). For creditors that do not circumvention or evasion of the act, or automatically provide copies of to facilitate or substantiate compliance appraisal reports, the regulation with the act. The act is implemented by includes limits on when an applicant the Board’s Regulation B, 12 CFR part may request (and a creditor must 202. A staff commentary to the provide) a copy of an appraisal report, regulation, 12 CFR pert 202 Supp. k and a requirement that applicants be applies and interprets the requirements notified of the right to receive a copy. of Regulation B. The final rule applies to applications for The Federal Deposit Insurance credit to be secured by a Hem on a Corporation Improvement Act of 1991 residential structure containing one-to(FDICIA) was enacted Into law in four family units. Board o f Governors o f the Federal Reserve System. ACTION: Final rule. AGENCY: [Enc. Cir. No. 10679] December 1991 (Pub. L. 102-242,105 Stat. 2236). Section 223 of the FDICIA contains amendments to the ECOA that took effect on the date the law was enacted. The law requires creditors to furnish applicants, upon written request, with a copy of an appraisal report used in connection with an application fora loan secured by residential real property. The law provides that creditors may require the applicant to reimburse the creditor for the cost of the appraisal. The law also expands the enforcement activities of the federal financial supervisory agencies when information about possible violations of the ECOA becomes known. The law specifies when the Department of Justice (DOJ) must be contacted regarding suspected violations of the ECOA, and when the Department of Housing and Urban Development (HUD) must be notified of suspected violations of the ECOA that may also be violations of the Pair Housing Act (FHAX On December 7,1992, the Board published a proposed rule to implement the FDICIA amendments to the ECOA (57 FR 57697). The Board received nearly 240 comment letters on the proposal, mostly from institutions that would be covered by the regulation. A number o f commenters raised concerns about the burden and costs the new requirements would impose. Many commenters raised specific questions about various provisions in the proposal. The Board has responded to many of those concerns by adopting both substantive sod technical changes to the proposal. A creditor's duty to provide appraisals upon request began on December 19,1991. Creditors must begin complying with the regulation's requirements on June 6,1994, which allows institutions to familiarize themselves with the rule, prepare disclosures, and train personnel (2) Regulatory Provisions with the law. For example, some industry commenters suggested that “residential real property” could be Section 701(e) of the ECOA requires a interpreted to indude only one- to fourcreditor promptly to furnish an unit dwellings, while others thought the applicant, upon a written request made term could be interpreted to include all within a reasonable period of time of the dwellings. application, a copy of the appraisal Based on the comments received and report used in connection with a loan upon further analysis, the Board is that is or would have been secured by adopting a rule that defines and a lien on residential real property. The interprets the key terms and text of Board proposed to implement the section 701(e) of the ECOA. The Board appraisal provision by defining the believes a consistent understanding scope of residential real property; among creditors and consumers alike imposing time limitations for applicants about the law, including which loans to request copies of appraisals and for trigger the duty to provide appraisal creditors to provide copies; and reports and what information comprises requiring creditors to provide a written an appraisal report, will ease notice to credit applicants of their right compliance, avoid conflict and potential to obtain copies of appraisal reports liability, and effectuate the purposes of upon written request. These rules were the ECOA. proposed to minimize the potential for Section 202.5a—Rules on Providing civil liability (due to the uncertainty of the scope of the law) and to aid uniform Appraisal Reports S co p e o f coverage. Section 701(e) of and objective assessments of creditors’ the ECOA provides that the right to compliance with the ECOA in an obtain a copy of an appraisal report examination by federal enforcement applies to an application for credit that agencies. In addition to soliciting comment on is or would have been secured by a lien the specific provisions of the proposal, on residential real property. The term “residential real property” is not the Board solicited comment on two alternative approaches to implementing defined in the statute. In the proposed the ECOA appraisal provision: (1) rule, the Board defined the scope of Incorporating the text of section 701(e) coverage to be credit applications, into Regulation B without elaboration, regardless of their purpose (whether or (2) interpreting and defining only a business or consumer purpose), that are to be secured by a dwelling. A few key terms found in section 701(e) “dwelling” was defined as a one- to (such as the scope of the law) in the f o u r -u n it r e s i d e n t i a l s t r u c t u r e . T h e regulation. Of the 240 commenters, proposed coverage included loans to be approximately a dozen favored adopting secured by mobile homes and only the statutory text or not individual cooperative units, whether or incorporating the statutory provision not such dwellings are considered real into the regulation at all, suggesting that property under state law, and excluded self-regulation would be adequate to loans to be secured by land only. ensure compliance. Most commenters Coverage would not have been limited favored defining and interpreting terms to first-lien transactions. In response to the comments received in the regulation. Most commenters also and upon further analysis, the Board is made specific suggestions and raised adopting the scope of coverage as questions about the proposed proposed. The definition of dwelling regulation. The commenters favoring precise that was included in the proposal has rules (including financial institutions been adopted. The definition includes and community representatives) argued mobile homes and individual that it would help creditors by clarifying cooperative units, whether or not they how to comply with the amendments, are considered real property under state and help credit applicants by ensuring law, to ensure that the coverage of that they are treated consistently, residential appraisals is not limited by regardless of the creditor from whom property classification. The Board notes they seek credit. that this definition is consistent with The Board believes, in light of the the definition of dwelling contained in volume and variety of issues raised in § 202.13(a). comments regarding the scope of In general, most commenters coverage, timing, and other statutory supported the proposed rule’s coverage terms, that merely incorporating the text of dwellings containing one to four of section 701(e) could produce widely units and opposed any broadening inconsistent approaches by creditors beyond that. Several commenters (and even regulators) to compliance supported expanding the coverage of the Right to A pp ra isal Report 2 regulation to include all dwellings, no matter how many units a dwelling comprises. They stated that discriminatory practices in residential appraisals can include “underappraising” a multifamily building based on the characteristics of the residents of the building or of the neighborhood in which it is located.1 Tne Board believes that extending the coverage of the appraisal requirements to include multifamily dwellings could impose a significant burden on institutions which could outweigh the benefits to consumers. Such coverage, for example, would extend the right to receive a copy of an appraisal report to developers of multifamily properties, who generally were not identified by the Congress as experiencing lending discrimination through the appraisal process or as having difficulty in receiving copies of appraisals. Nevertheless, while the final rule does not cover multifamily dwellings, creditors are reminded that the rules prohibiting discrimination under Regulation B are applicable to transactions involving multifamily dwellings (as are the provisions of the Fair Housing Act). For example, the regulation prohibits a creditor from denying an application for credit to be secured by an apartment building based on the race or national origin of the applicant, or of the tenants in the building (or the neighborhood in which it is located). Furthermore, the Board w i ll m o n i t o r c o m p l a i n t s a n d information obtained through the examination process about loan denials in connection with multifamily properties. If the Board has reason to believe that applicants for multifamily loans are not receiving copies of appraisal reports upon request (or are experiencing discrimination), it may consider broadening the coverage of § 202.5a. Some commenters opposed the coverage of transactions secured by a consumer’s dwelling that are for a business purpose, such as loans to start a small business. These commenters discussed the potential difficulty in training commercial loan staff to comply with the new requirements, particularly 1Some commenters referred to a recent settlement of litigation (G reen v. A v e n u e B an k o f O a k P ark), approved by a federal district court in Illinois, as an indication that credit on multifamily properties could be denied based on redlining and underappraLsaLs. This lawsuit involved allegations that a loan officer's assessment of the value of a multifamily property— based on his perceptions about conditions in the low-income neighborhood where it was located— was used to deny a mortgage application, although no formal appraisal was made. if a notice is required to be given to all applicants. The statute does not exempt applications for business loans secured by residential real property from the right to obtain a copy of an appraisal report, and nothing in the legislative history suggests that coverage should be so limited. Further, business-purpose loans presently are subject to Regulation B and its requirements to provide notices about the action taken on an application. Therefore, the Board believes that the requirements of § 202.5a can be readily incorporated into existing procedures—particularly since, as described below, the notice requirement for appraisal reports may be incorporated into other commonly used documents or required notices. The burden on institutions by extending the right to receive a copy of an appraisal report to both consumer- and business-purpose loans secured by a dwelling will be minimized in the final rule, because multifamily dwellings are not covered. D efinition o f appraisal report. The statute does not define an appraisal report; however, the legislative history suggests that it is the complete appraisal report signed by the appraiser, including all information submitted to the lender by the appraiser for the purpose of determining the value of residential property. The proposed definition was based on the legislative history, and stated that an appraisal report referred to the documents relied upon by a creditor in evaluating the market value of residential property containing one-to-four family units on which a lien will be taken as collateral for an extension of credit, including reports prepared by the creditor. The proposal stated that an appraisal report would not be limited to reports prepared by third parties Tne final rule provides the same meaning for an appraisal report as was proposed, but the definition has been shortened for clarity. A consumer who requests a copy of the appraisal report will be entitled to receive a copy of any third party appraisal that has been performed. For consistency with the rules implementing the prohibitions of the Fair Housing Act on discrimination in apprising residential real property, an appraisal report includes all written comments and other documents submitted to the creditor in support of the appraiser1* estimate or opinion of value. (See 24 CFR 100.135(b).) The "appraisal report” does not include copies of “review appraisals,” agency-issued statements of appraised value, or any interna) documents if a third party appraisal report was used to establish the value of the security. Even when a third party appraisal has been performed, however, a consumer requesting a copy of the report also must receive a copy of documents that reflect the creditor’s valuation of the dwelling when that valuation is different from that stated in the third party appraisal report. Such documents would include staff appraisals or other notes indicating why the value assigned by the third party appraiser is not the appropriate valuation. The right to receive a copy of an appraisal report provided under Regulation B includes, but is not limited to, transactions in which appraisals by a licensed or certified appraiser are required by federal law. ff the value of the dwelling has been determined by the creditor and a third party appraiser has not been used, the appraisal report would be the report of the creditor’s staff appraiser, where applicable, or theother documents of the creditor which assign value to the dwelling. A lternative M eans o f C om pliance 1. Paragraph (a)(1)—Routine Delivery The proposal provided that creditors routinely giving copies of appraisal reports to all applicants, whether credit is grunted or denied, would not be subject to the proposed timing requirements las providing an applicant with a notice of the right to receive a copy of an appraisal report. However, the proposal also provided that such creditors would remain subject to the proposed timing rules for responding (o a written request for a report, if the request was made prior to the time the creditor routinely provided it. In response to comments received and upon further analysis, the Board is adopting a final rule that differs from the proposal. Paragraph (a)(1) of the final role provides that a creditor may comply with the law by routinely giving each applicant a copy of the appraisal report (whether credit is granted or denied or the application is withdrawn). Creditors that routinely provide copies when the appraisal is completed, or later in the application process (for example, when notice is given of action taken on the application), will be in compliance with the regulation. A creditor complying with the law pursuant to paragraph (a)(1) is exempt from the requirements of paragraph (a)(2), the notice and timing rules. The Board believes this approach will provide consumer benefits, simplify the regulation, and substantially ease the compliance burden for creditors. 3 2. Paragraph (a)(2)—Upon Request The requirements are more detailed for creditors who provide a copy of an appraisal report only upon the written request of the applicant: T im e w hen requ ests m ust b e m ade. The law provides that an applicant must make a request "within a reasonable period of time of the application.” The legislative history states thata reasonable period1of time depends on a balancing of factors, such as how long lenders routinely maintain loan fifes and how long a loan applicant might need to identify and act upon suspected discrimination. The Board proposed that applicants must make written requests for an appraisal report no later than 90 days after receiving the notice from the creditor. The Board’s proposal noted that the 90-day period for requesting an appraisal report could be viewed as too short, given the regulation’s requirements for keeping records and the statute of limitations for filing an ECOA lawsuit.2 The Board stated the belief that the proposed 90day time limit would reasonably tie the period in which an appraisal report must be requested close to the period in which the applicant would be likely to request it, and in which the creditor likely would still have the files “on sitei” Most commenters supported the proposed 90-day period, stating that it was a reasonable interpretation of the statute, which did not specify any period. Some commenters recommended that requests be required to be made in a shorter period of rime, such as within 30 to 60 days of the date the consumer receives the notice of action taken on the application. The commenters argued that fifes may not be maintained in the creditor’s office for 9 0 days, for example, if the loan is to be sold or if the files are transferred to another location. Some of the cornraenters questioned whether the valuation contained in the appraisal would have a similarly short “useful life” when market conditions cause property values to change frequently. Other coimnenters opposed the proposal and urged the adoption of a time period for appraisal requests that is uniform with the ZS-month record retention requirements in § 202.12 (12 2 An aggrieved applicant may file suit far an alleged ECOA vkrtalhm up ftr two rears from Hie date of tho afleged rw faBao . FWtiwcimre. ander §202.12 of Regulation B, creditors are required to maintain lo ss ttie* fo« up to 2S month* tl2 months for bwsinaes cmdit) from the time they pvovRio the appfecaat uritfc a notice o ith o actio * takas on the application os » notice oitocora pi— — provided in § 2S2.S. months for business loans). These commenters believed that such a requirement would not impose a much greater burden than already exists since the appraisal must be maintained with the other records used in evaluating the application. Additionally, some coirsmenters noted that a shorter time period for requesting appraisal reports than for retaining records could mean that appraisal reports could only be obtained through litigation, unless the institution voluntarily provided the report after lha* time. Based on the comments and its analysis, the Board is adopting the 90day time period that was proposed. The statutory language indicates an expectation that the period for request should be reasonably dose in time to the application. The 90-day rule should provide applicants the right to request a copy oi the appraisal report during the time they are most likely to be interested in receiving it—around the time the application has been made and the appraisal has been conducted and paid for. A 90-day period also should not present significant compliance difficulties, especially since the final rule provides greater flexibility in how soon the report must be provided following a request. Tim e w hen appraisal reports m ust be p ro v id ed . The law also states that a creditor must “promptly’* furnish a copy of the appraisal report- The Board proposed requiring the creditor to provide a copy of the report within 15 days of receiving a written request or within 15 days at obtaining an appraisal report, whichever occurs later. While many commenters on this provision thought that the 15-day period was a reasonable interpretation of the statute, many other commenters recommended a longer period (with most suggesting a 30-day period). These commenters believed a longer time was necessary for lenders who do not maintain loan files in their office. After consideration of the public comments, the Board has revised the proposal to provide greater flexibility in the final rule. The regulation does not set a specific time by which an appraisal report must be provided. Instead, the regulation requires creditors to provide copies of appraisal reports “promptly,” which it states will be 30 days, but which may be longer in exceptional circumstances. S o m e c o m m e n te r s req u e ste d th a t th e B o a rd c la rify th a t th e tim in g ru le a p p ly o n ly a fte r th e la test o f th re e e v e n ts : th e re q u e st, r e c e ip t o f th e a p p ra isa l by th e le n d e r, a n d th e a p p lic a n t’s re im b u rs e m e n t o f th e c r e d ito r for th e c o s t o f th e a p p ra isa l. T h e B o a rd ag rees that this is the appropriate way to measure the time after which the creditor must “promptly” provide a copy of the report, and the final rule clarifies this. N o tic e o f Right to Copy o f A ppraisal The amendments to ECOA do not specify that creditors shall notify applicants of their right to receive a copy of the appraisal report. The Board proposed that applicants for credit to be secured by a dwelling should be provided a written notice of their right to receive a copy of the appraisal report. This notice generally was to be given no later than 15 days after the creditor received the application. In proposing the notice requirement, the Board noted the Congress’s belief that access to appraisal reports might help in detecting credit discrimination associated with the appraisal of property. The Board also noted that the notice would be particularly important to applicants if there has been a lender practice of not making appraisals available to applicants. Most commenters opposed the proposed notice requirement because of the additional paperwork burden that it would impose and the fact that the Congress did not require it. Some commenters opposed the notice requirement on the general grounds that the cumulative effect of disclosure rules is to overburden the industry. At the other end of the spectrum, a few commenters including a state consumer protection agency recommended that the final regulations require notification to all applicants and a second notice to applicants whose loans are denied. W h i l e t h e n o t i c e w o u l d i m p o s e some burden, the Board believes that it is outweighed by the consumer benefit from receiving the notice. If the notification were to be included on notices of action taken on a consumer’s loan application (required by Regulation B), Trutn in Lending disclosures, or on application or other forms (instead of creating a separate disclosure), the compliance costs would be limited to the one-time incremental cost of revising documents to add the notice. A fte r re v ie w o f th e p u b lic c o m m e n ts , th e B o a rd b e lie v e s g re a te r effect to th e E C O A a p p ra is a l a m e n d m e n ts is a c h ie v e d by req u irin g th at a p p lic a n ts be n o tified o f th e ir rig h t to a c o p y o f th e a p p ra isa l re p o rt, as p ro p o se d . In th e B o a rd 's v ie w , it is im p o rta n t th at th is m in im a l n o tic e be g iv en to a p p lic a n ts in light o f th e C o n g re s s ’s c o n c e r n ab o u t p o te n tia l d is c rim in a tio n in th e a p p ra isa l p ro c e s s . Ifcis a ls o im p o rta n t to n o tify all c o n s u m e r s o f th e ir sta tu to ry rig h t to a 4 copy of their appraisal, given the anecdotal evidence (confirmed by the commenters) that appraisals previously were not made available to applicants upon request.3 Therefore, pursuant to the Board's authority in section 703 of the ECOA, creditors will be required to provide all applicants with written notice of the right to receive a copy of the appraisal report. As stated above, the notice need not be given by creditors who automatically provide copies to all applicants. To reduce the potential paperwork burden of the notice requirement, the Board will not require that the notice be provided in a form the consumer can keep, as was proposed. Furthermore, in response to commenters’ suggestions for flexibility on timing, the rule would permit creditors to provide this notice as early as the time of application. They may also provide the notice later, but not later than at the time they notify an applicant of the action they have taken on the application. (Under § 202.9 of the regulation, creditors must notify applicants of their approval of, counteroffer to, or adverse action on an application within 30 days of receipt of a completed application.) The notice may be included on or with the adverse action notice, the application, or other documents. R e im b u rs e m e n t. The statute permits a creditor to require reimbursement from the applicant for the cost of the appraisal before a copy is provided. Many commenters responded to the Board’s request for information about the fees that may be charged for a copy of an appraisal. Most commenters that addressed the issue stated that all or part of the cost of having the appraisal conducted is imposed on the applicant. According to several commenters, no other fees are imposed for providing a copy of the appraisal report. Many commenters who charge consumers for having the appraisal performed asked the Board to clarify whether fees for providing a copy of the appraisal (for example, copying fees and postage) could be imposed following the adoption of the final rule. The statute permits the creditor to be reimbursed for the cost of the appraisal and the final rule reflects that. This provision permits a creditor to require the consumer to pay for the cost of the appraisal prior to providing a copy. "Reimbursement" would not be allowed 'In the proposal, the Board asked creditors whether they currently provided appraisal reports automatically. Nearly 30 commenters addressed the issue. About ten of those stated they routinely provide appraisal reports to consumers. as a condition for providing a copy of the appraisal if the fee has already been paid by the consumer—for example, as part of the application fee. The final rule also permits the creditor to require reimbursement of photocopy and postage costs that are incurred in providing the copy of the report, unless prohibited by state or other law. Paragraph (b)— Credit U nions The proposal excepted from the requirements creditors that provide appraisal reports pursuant to NCUA regulations, in keeping with the legislative history to the ECOA amendments. (See S. Rep. No. 167 at 90.) The final rule exempts credit unions from the provisions of § 202.5a if they are subject to, and comply with, the provisions of the NCUA regulations relating to making appraisals available upon request. 12 CFR 701.31(c)(5). Section 202.14—Enforcement, Penalties, and Liabilities Paragraph (b)— Penalties and Liabilities The Board proposed that changes made to section 706 of the ECOA by FDICIA be incorporated into Regulation B. The language of the final rule differs slightly from the proposed text for clarity, but the meaning is unchanged; federal financial supervisory agencies must refer suspected pattern and practice discrimination cases to the DOJ. In addition, the agencies must notify HUD when they have reason to believe violations of the ECOA have occurred that may also constitute violations of the FHA, unless the matter has been referred to the DOJ. wants to give applicants the option to call and leave their name and the address to which an appraisal report should be sent, the creditor may modify the notice accordingly. The reference in the proposed model form to telephone requests for a copy of the appraisal report has been deleted, however, to respond to comments expressing concern that it could be viewed as requiring telephone requests to be honored. In addition, for brevity, the model form has been revised to eliminate the reference to reimbursing creditors for the cost of the appraisal and copies of the report (although such a reference may be included with the notice). (3) Economic Impact Statement The Board’s Division of Research and Statistics has prepared an economic impact statement on the proposed revisions to Regulation B. A copy of the analysis may be obtained from Publications Services, Board of Governors of the Federal Reserve System, Washington, DC 20551, at (202) 452-3245. (4) Paperwork Reduction Act In accordance with section 3507 of the Paperwork Reduction Act of 1980 (44 U.S.C. 35; 5 CFR 1320.13), the proposed information collection was reviewed by the Board under the authority delegated to it by the Office of Management and Budget after considering comments received during the public comment period. A number of commenters believed that complying with the proposal would place significant paperwork burdens on institutions, particularly small institutions. Some expressed concern Appendix C—Sample Disclosure Forms about the volume ana variety of A sample disclosure notice, Form C- disclosures provided to consumers for 9, has been added to Appendix C. credit transactions secured by Proper use of this form satisfies residential real property, and the compliance with § 202.5a of Regulation potential for consumer confusion. A few commenters reacted to the B. Creditors may design their own form, specific burden estimates that appeared or add to or modify the model form, to in the proposal. They believed that the reflect their individual policies and estimates underreported the burden, procedures. For example, if a creditor Aged, Banks, Banking, Civil rights, Credit, Marital status discrimination, Penalties, Religious discrimination, R eport title: Recordkeeping and Disclosure Requirements in Connection with Regulation B (Equal Credit Opportunity) R eport n u m b er: Not applicable OMB docket n u m b er: 7100-0201 F req u en cy : As needed R eporters: State member banks Estimated time per response (minutes) 125,000 625,000 10 .25 Reporting and recordkeeping requirements, Sex discrimination. For the reasons set forth in the preamble, and pursuant to authority 5 P roposed Inform ation Collection Number of records sub ject to require ment Appraisal report upon request ........................ Notice of right to appraisal............................. List of Subjects in 12 CFR Part 202 particularly the time associated with responding to requests for copies of appraisal reports. The commenters questioned whether institutions typically could retrieve and review files, then copy and send appraisal reports in 5 minutes, as proposed. In response to these comments, the Board has adjusted the burden estimates that were made in the proposal by increasing the estimated time needed to respond to requests for appraisal reports. The requirements will apply to both large and small mortgage lenders. The impact on small creditors will depend upon whether lenders provide appraisals as a matter of course. The model disclosure form in the regulation will somewhat ease compliance burdens on the lenders. In addition, lenders that regularly provide appraisal reports to applicants (whether the loan is approved or denied) need not comply with the notice requirement of the regulation. The following information shout paperwork burden relates only to the effect of the proposal on state member banks of the Federal Reserve System. Lenders that are subject to Regulation B other than state member banks are supervised by other Federal agencies. For purposes of the Paperwork Reduction Act, these agencies will report their own estimates of the paperwork burden imposed by the new ECOA requirement. The Board estimates that the disclosure requirement will result in an annual reporting burden of about 23,000 hours for state member banks. - Estimated total number of hours of an nual reporting burden 20,800 2,600 granted in 15 U.S.C 1691b of the ECOA, the Board amends 12 CFR part 202 as follows: reimbursement from the applicant tor the report, whichever is last to occur. A creditor need not provide a copy when the applicant’s request is received more The authority citation for part 202 than 90 days after the creditor has continues to read as follows: provided notice of action taken on the Authority: 15 U.S.C. 1691-169lf. application under § 202.9 of this part or 90 days after the application is 2. Section 202.1 is amended by withdrawn. revising the last sentence of paragraph (b) Credit unions. A creditor that is (b) to read as follows: subject to the regulations of the National $ 202.1 Authority, scope, and purpose. Credit Union Administration on making * * * * * copies of appraisals available is not (b) * * * The regulation also requires subject to this section. (c) D efinitions. For purposes of creditors to notify applicants of action paragraph (a) of this section, the term taken on their applications: to report dw elling means a residential structure credit history in the names of both spouses on an account; to retain records that contains one to four units whether or not that structure is attached to real of credit applications; to collect property. The term includes, but is not information about the applicant's race limited to, an individual condominium and other personal characteristics in applications for certain dwelling-related or cooperative unit, and a mobile or other manufactured home. The term loans; and to provide applicants with appraisal report means the document(s) copies of appraisal reports used in relied upon by a creditor in evaluating connection with credit transactions. the value of the dwelling. 3. Section 202.5a is added to read as 4. Section 202.14 is amended by follows: revising paragraph (b)(3) and by adding $ 202.5a Rules on providing appraisal paragraphs (b)(4) and (b)(5) to read as reports. follows: (a) Providing appraisals. A creditor shall provide a copy of the appraisal § 202.14 Enforcem ent, penalties and report used in connection with an lia b ilitte a . application for credit that is to be * * * * * secured by a lien on a dwelling. A creditor shall comply with either (b) Penalties a nd liabilities. * * * * * * * paragraph (a)(1) or (a)(2) of this section. * (1) flout/ne delivery. A creditor may (3 ) If an agency responsible for routinely provide a copy of the administrative enforcement is unable to appraisal report to an applicant obtain compliance with the act or this (whether credit is granted or denied or part, it may refer the matter to the the application is withdrawn). Attorney General of the United States. (2) Upon request. A creditor that does In addition, if the Board, the not routinely provide appraisal reports Comptroller of the Currency, the Federal shall provide a copy upon an Deposit Insurance Corporation, the applicant’s written request. Office of Thrift Supervision, or the (i) N otice. A creditor that provides National Credit Union Administration appraisal reports only upon request has reason to believe that one or more shall notify an applicant m writing of creditors engaged in a pattern or the right to receive a copy of an practice of discouraging or denying appraisal report. The notice may be applications in violation of the act or given at any time during the application this part, the agency shall refer the process but no later than when the matter to the Attorney General. creditor provides notice of action taken Furthermore, the agency may refer a under § 202.9 of this part. The notice matter to the Attorney General if the shall specify that the applicant’s request agency has reason to believe that one or must be in writing, give the creditor's more creditors violated section 701(a) of mailing address, and state the time for the act. making the request as provided in (4) On referral, or whenever the paragraph (a)(2Kii) of this section. Attorney General has reason to believe [ii\ D elivery. A creditor shall mail or that one or more creditors engaged in a deliver a copy of the appraisal report pattern or practice in violation of the act promptly (generally within 30 days) after the creditor receives an applicant’s or this regulation, the Attorney General request, receives the report, or receives may bring a civil action for such relief PART 202— EQUAL CREDIT OPPORTUNITY (REGULATION B) 6 as may be appropriate, including actual and punitive damages and injunctive relief. (5) If the Board, the Comptroller of tin Currency, the Federal Deposit Insurant:* Corporation, the Office of Thrift Supervision, or the National Credit Union Administration has reason to believe (as a result of a consumer complaint, conducting a consumer compliance examination, or otherwise) that a violation of the act or this part ha: occurred which is also a violation of the Fair Housing Act, and the matter is not referred to the Attorney General, the agency shall notify: (i) The Secretary of Housing and Urban Development; and (ii) The applicant that the Secretary o Housing and Urban Development has been notified and that remedies for the violation may be available under the Fair Housing Act. * * * * * 5. Appendix C to Part 202 is amended in the first paragraph of the introductioi by revising the first sentence and addinj a sentence at the end; in the last paragraph of the introduction by adding a sentence at the end: and by adding sample Form C-9 to read as follows: Appendix C to P art 202—Sample Notification Forms T h is ap p e n d ix c o n ta in s nin e sam p le n o tificatio n form s. * • • F o rm C - 9 is designed fo r use in n o tifyin g an a p p lic a n t of th e right to re ce iv e a c o p y o f an ap p raisal u n d er § 2 0 2 .5 a . * * * * * * * * P rop er u se o f Fo rm C - 9 w ill satisfy the req u irem en ts o f § 2 0 2 .5 a o f th is part. * * * * * F o rm C - 9 — S am p le D isclosu re o f Right to R eceive a C o p y o f an A p p raisal Y o u h av e th e righ t to a c o p y o f th e ap p raisal rep o rt u sed in c o n n e c tio n w ith y o u r a p p lica tio n for c r e d i t If y o u w ish a co p y , p lease w rite to u s at th e m ailin g ad d ress w e h a v e p ro v id ed . W e m u st h e a r from yo u n o la te r th an 9 0 d ay s after w e notii yo u ab o u t th e a c tio n tak en on y o u r c re d it a p p lica tio n o r yo u w ith d raw y o u r a p p licatio n . (In y o u r letter, give us the follo w in g in fo rm atio n :) B y o rd e r o f the B o ard o f G o vern ors o f the F e d e ra l R eserve System . D ecem b er 9 . 1 9 9 3 . W illia m W . W iles, Secretary o f th e B o a rd . [FR D o c 9 3 - 3 0 5 3 6 F ile d 1 2 - 1 5 - 9 3 ; 8 :4 5 am M in t; coot 82-te-ot-a
@FedFRASER