With the advent of the new TILA-RESPA Integrated Disclosure Rule (“TRID”),
there is an issue to consider which will have an affect on both appraisers
and lenders come August 1st when the rule goes into effect. The new Loan
Estimate (LE) and Closing Disclosure (“CD”) form will replace
both the GFE and HUD-1 forms, and the appraisal fee must now be disclosed
and signed off by the borrower before proceeding.
What does that mean? That means the new requirement will not allow credit
card information to be collected, nor may appraisal fees be charged until
the initial disclosures are signed off. As is already law, the LE must
be delivered to the customer no later than three days after application.
In addition, once the associated appraisal fees are included in the CFPB's
zero tolerance section, they may not be increased except in instances
where a valid change of circumstance arises. Consequently, AMCs and appraisers
cannot use standard up charges to cope with situations that may cost more,
such as complicated property assignments.
The new rules specify that a rural or larger property appraisal does not
qualify for the “change of circumstance” exception since the
address of the home is known from the outset. One possible solution advocated
by some in the appraisal industry is a regular overestimation of the fee,
followed by a refund of unused funds once the costs have been finalized.
However, this solution seems to contradict directly the rules laid out
by TRID. The appraisal fee can be increased when a valid exception exists.
For example, an appraiser can run into a situation where the actual property
did not match the description of the property on the assignment, making
it subject to an entirely different schedule of fees. This instance would
provide a valid reason to alter the amount of the appraisal fees due to
change of circumstance.
Industry experts have expressed that 'padding' of the fees to create
a cushion is not permissible under TRID. The rules clearly indicate that
the fees must be based on the best information available. It is therefore
recommended that lenders evaluate the information about the area they
are conducting business to ensure they are disclosing the correct appraisal
fees from the onset.
Regardless of how experienced the lender is, there will be certain circumstances
in which appraisal fees will need to be altered in light of additional
information or unforeseen circumstances. However, to remain compliant
with TRID, altering the appraisal fees must not occur unless there is
a valid justification to do so.
Contact Geraci Law Firm at (949) 298-8050 today, or contact
for more information.