6.1 Business Credit Notices and Appraisal Delivery

Consumer vs. Business Credit Adverse Action Rules (§1002.9(a)(3))

Regulation B establishes distinct operational tiers based on business revenue:

• Small Businesses (Gross Revenues of $1 Million or Less):
  • Creditors must provide notice of action taken within 30 calendar days.
  • The notice may be given orally or in writing.
  • The statement of specific reasons may be provided concurrently or through a written disclosure of the right to request reasons (request within 60 days, fulfillment within 30 days).
  • If the application is made by phone, the right-to-request disclosure may be made orally.
  • A business credit application form may contain the right-to-request disclosure upfront at the time of application, provided the disclosure contains the necessary regulatory contact information.
• Large Businesses (Gross Revenues Exceeding $1 Million):
  • The creditor must notify the applicant of action taken, orally or in writing, within a reasonable time (standard practice is within 30 days).
  • A statement of specific reasons is required only if the applicant requests it in writing within 60 calendar days of notification.

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3. Regulation B Appraisal Delivery Rule (§1002.14)

Pursuant to Dodd-Frank Act amendments to ECOA, 12 CFR §1002.14 establishes transparent valuation disclosure standards for residential mortgage lending.

Scope and Coverage

• Covered Transactions: Applications for credit to be secured by a first lien on a dwelling (1-to-4 family residential structure, whether attached or detached, including individual condominium units, cooperative units, manufactured homes, or mobile homes, regardless of owner occupancy status).
• Exempt Transactions: Second liens or subordinate mortgages (though covered by other mortgage disclosure rules, they are exempt from §1002.14), commercial loans secured by real estate other than 1-4 unit dwellings, and non-dwelling personal property loans.

Core Delivery Mandate and Timing (§1002.14(a)(1))

A creditor must provide a copy of each appraisal or other written valuation developed in connection with an application for credit covered by §1002.14:

1. Free of Charge: The creditor shall not charge the applicant for providing a copy of the appraisal or written valuation report. A creditor may charge a reasonable fee to recover the actual cost of conducting the valuation (e.g., paying an independent appraiser or automated valuation model [AVM] vendor fee), but cannot impose copy, processing, scanning, or delivery surcharges.
2. Timing of Delivery: Valuation copies must be delivered promptly upon completion, or at least 3 business days prior to consummation (for closed-end credit) or account opening (for open-end credit), whichever is earlier.

Written Valuations Defined (§1002.14(a)(3))

The delivery requirement applies to all written valuations developed, not merely full interior appraisals. This includes:

• Full appraisal reports prepared by licensed or certified appraisers;
• Automated Valuation Model (AVM) reports and outputs;
• Broker Price Opinions (BPOs);
• Internal bank evaluation memorandums containing an estimate of the property's value;
• Review appraisal reports that estimate value or revise original valuation estimates.

Applicant Waiver and Higher-Priced Mortgage Loans (HPML)

An applicant may waive the statutory 3-day pre-consummation timing requirement under §1002.14(a)(1) and agree to receive valuation copies at or before consummation. However:

• The waiver must be obtained at least 3 business days prior to consummation (unless the waiver pertains solely to a valuation containing clerical or typographical adjustments to an earlier disclosed valuation);
• Critical Regulatory Exception: A borrower CANNOT waive the 3-day timing rule if the loan is a Higher-Priced Mortgage Loan (HPML) subject to TILA appraisal requirements under 12 CFR §1026.35(c), which requires delivery of the HPML appraisal no later than three business days before consummation; Regulation B permits limited timing waivers, but the separate HPML timing requirement cannot be waived.

Notice of Right to Receive Appraisal (§1002.14(a)(2))

Creditors must furnish a written disclosure notifying the applicant of the right to receive a free copy of all appraisals and valuations within 3 business days of receiving an application for a covered first-lien transaction.

Timing details for valuation copies

An applicant may waive the Regulation B advance-copy timing requirement, not the right to receive copies. Ordinarily the waiver must be received at least three business days before consummation or account opening, and copies are then supplied at or before that event. A waiver solely for a revised valuation with clerical changes has a narrower late-waiver exception. If the transaction does not close, copies remain due no later than 30 days after the creditor determines it will not close. The initial notice of the right to copies is due within three business days of application. The creditor may charge a reasonable appraisal cost but not a fee for supplying the copies. Business-purpose first-lien dwelling credit is covered by this copy rule too. These are separate duties from whether the valuation must be an appraisal, an evaluation or a higher-priced-mortgage appraisal.