Executive Summary

• &nbspThe National Credit Union Administration (NCUA) has recently issued a proposed rule regarding appraisals and the availability to applicants and requirements for transactions involving an existing extension of credit. Specifically, the proposed rule would revise two of NCUA’s regulations regarding appraisals: § 701.31(c)(5) and § 722.3(a)(5).

• &nbspThe proposed rule would eliminate the duplicative requirement that federal credit unions (FCUs) make available, to any requesting member/applicant, a copy of an appraisal used in connection with that member’s application for a loan secured by a first lien on a dwelling. The proposal would narrow the scope of this requirement to cover only loans secured by a subordinate lien on a dwelling. FCUs would still be subject to § 1002.14 of the CFPB’s Regulation B requirement that all creditors must automatically provide applicants with free copies of all appraisals and other written evaluations developed in connection with an application for a loan to be secured by a first lien on a dwelling. Additionally, the proposal would amend §701.31(c)(5) to require that the appraisal be available for a period of 25 months after the applicant has received notice from the FCU of the action taken by the credit union on the application for a loan secured by a subordinate lien on a dwelling.

• &nbspAlso, the proposed rule would amend § 722.3(a)(5) of NCUA’s regulations to exempt a transaction from the appraisal requirement that involves an existing extension of credit at the lending federally-insured credit union (FICU), provided that: (1) there is no advancement of new monies, other than funds necessary to cover reasonable closing costs; or (2) there has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the credit union’s real estate collateral protection after the transaction, even with the advancement of new monies. These amendments would provide parity between NCUA and banking regulatory agencies’ exemptions from the requirement to obtain an appraisal for certain transactions involving extensions of credit. Additionally, this would facilitate the ability of FICUs to refinance or modify a real estate-related loan held by the FICU more easily to assist borrowers in times when distressed housing market conditions exist.

• &nbspIn addition, the proposed rule would make a technical amendment to the definition of “application,” as contained in § 701.31(a)(1) to align NCUA’s definition with the CFPB’s definition under § 1002.2(f) in Regulation B.

• &nbspComments for the proposed rule are due to NCUA by August 25, 2014; please submit your comments to CUNA by August 18, 2014.

• &nbspIf you have any questions or comments, please contact CUNA Assistant General Counsel for Regulatory Research Dennis Tsang at dtsang@cuna.com.

• &nbspFor further details, please see NCUA’s proposed rule.


Questions to Consider Regarding the Proposed Rule

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* 1. Does your credit union support the proposed elimination of the duplicative requirement that FCUs make available, to any requesting member/applicant, a copy of an appraisal used in connection with that member’s application for a loan secured by a first lien on a dwelling?

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* 2. Also, does your credit union support the proposed change to exempt a transaction from the appraisal requirement that involves an existing extension of credit at the lending FICU, provided that: (1) there is no advancement of new monies, other than funds necessary to cover reasonable closing costs; or (2) there has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the credit union’s real estate collateral protection after the transaction, even with the advancement of new monies?

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* 3. In addition, do you support the proposed technical amendment that would align NCUA’s definition of “application” with the CFPB’s definition under Regulation B?

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* 4. Do you have any other concerns, comments, or suggestions?

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* 5. (Optional) What is your credit union's asset size?

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* 6. (Optional) Please provide information about yourself and your credit union.

Thank you for your input and time - CUNA Regulatory Advocacy Team

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