b'Lenders MUST Provide Borrowers with the AppraisalBreaking Down the ECOA Valuation RulebyNema Daghbandan, Esq.Geraci LLPT heres a fair amount of confusionverify if there is an application for credit.Does the Rule Cover Denied related to the coverage requirementsAn application for credit is defined asand Withdrawn Applications of the Equal Credit Opportunity Acta formal request for an extension offor Credit? (ECOA) Valuations Rule (Valuationscredit submitted in accordance with theThe short answer is yesthe rule does not Rule)which updated Federal Regulationappropriate procedures for that particularprovide any exceptions in the event of an B by requiring lenders to offer borrowerstype of credit. Credit is defined as the rightapplication being denied or withdrawn complimentary copies of all appraisalsgranted by a creditor to an applicant to:and thus is applicable if an application and valuations produced for ALL loans(i) defer payment of a debt, (ii) incur debtis approved, withdrawn, denied or (including business purpose loans) securedand defer its payment, or (iii) purchaseincomplete.Accordingly, in the event of by a first lien on 1-4 family residentialproperty or services and defer paymenta denied or withdrawn applicationas property and to provide notification tothereof.A creditor is defined as a personlong as it is secured by a first lien on a applicants of their right to receive appraisalwho, in the ordinary course of business,dwelling and there is an appraisal or other copies in no more than three business days.regularly participates in a credit decision,valuation prepared in connection with the including setting the terms of the credit.applicationthen the lender must provide A lender must affirmatively answer thethe disclosure and the appraisal to the following three questions in determiningPutting all of this technical jargon together,borrower.In such instances, the lender whether a given transaction falls under theonce a borrower submits a request for amust also provide applicants with a written purview of the Valuations Rule:loan (or forbearance) to a lender, regardlessnotice of their right to obtain copies of all Is there an application for credit?of whether the loan (or forbearance) iswritten appraisals prepared in connection If so, is the loan secured by a firstextended, there is an application for creditwith the application for credit within three lien on a dwelling?under ECOA.business days.Is there either an appraisal orAre Business Purpose Loan written valuation affiliated with theApplications ConsideredIs the Credit Application application? Applications for Credit?Secured by a First Lien on a Dwelling?Determining an answer to each of theAccording to the regulations governingAfter verification that there is an existing preceding inquiries can be nuanced andECOA, if a loan is secured by a first lien oncredit application, the second step in every situation is different. To provide somea dwelling it falls under the purview of thedetermining if the Valuation Rule is clarity, the following is a Q&A addressingValuations Ruleregardless of whetherapplicable is to see if the application is some of the more commonly askedor not the credit is being granted for thesecured by a first lien on a dwelling.A questions related to the Valuation Rule.purpose of businessdue to the fact thatdwelling is defined as a residential structure the term credit is defined by ECOA andcontaining between one to four units and Does an ApplicationRegulation B as being applicable to bothincludes individual condos, coop units and for Credit Exist?consumer and business purposes.mobile/manufactured residences.The The initial step to determine if a transactionstructure need not be owner-occupied is covered by the Valuations Rule is tocontinued on page 14Points of InterestSummer 2020Page 13'