Photo credit: Ron Frazier

Appraisers shouldn’t fear the new rules

The new TILA-RESPA Integrated Disclosure (TRID) rule for mortgage loan applications is here, and while there’s been many stories about how TRID will affect lenders and borrowers, there’s not much information on how appraisers would be affected.

With the newly implemented TRID, once borrowers receive the Loan Estimate (LE), with its loan terms and estimated costs from the lender-including appraisal fees, the appraiser cannot charge the borrower a higher fee than the initial estimate. This is because appraisal fees are in a category of costs which should be as close as possible to the lender’s initial estimate.

For example, an appraiser accepts an assignment for an agreed upon fee, but later finds that the property is more complicated than thought, which requires a higher fee according to the appraiser’s fee schedule. The appraiser cannot go back to the borrower and request a higher fee. The exception to this is if there’s a valid ‘change of circumstance’.

There are property attributes which may be considered atypical for the market areas and therefore fall under a valid ‘change of circumstance’. Although properties in rural areas may be considered complex by the appraiser, because the property address was listed at the time of disclosure, the rural location would not be considered a valid ‘change of circumstance’.

Here’s a short list of property attributes that may place a property in a valid ‘change of circumstance’ category:

• Manufactured housing
• Unique architectural style – log home, dome home, berm home
• Homes with garage apartments, guest houses or in-law suites
• Luxury homes and/or large homes
• Homes on large acreage lots
• Property that is unique for its market
• Historic homes
• Vacation-type homes (mountain, lakefront, ocean front homes)

Adding appraisal-related questions to the application process could save lenders the possible expense of incurable LE under-disclosures and delays relating to re-disclosures, and this could become a part of a lender’s best practice. This will be covered in more detail next week.

As appraisers and AMCs consider the implications and solutions for this issue, PEMCO Limited will stay abreast of all regulatory developments regarding TRID’s effect on the appraisal profession.

This article is being provided as informational purposes only and is not intended for 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 ‘change of circumstance’.