In the world of home mortgages, lenders need to do much more than make sure all of the I’s are dutifully dotted and all of the T’s are correctly crossed — although this can certainly take a lot of time. You must also stay abreast of current rules and regulations governing the real estate appraisal best practices.
A perfect example is the Equal Credit Opportunity Act (ECOA) and the steps it requires lenders to take when electronically sending appraisals to borrowers. With this in mind, check out the following points, which will be helpful when conducting an appraisal review.
What Exactly are the ECOA Valuations Rule and Its Good Friend, the E-Sign Act?
The ECOA was enacted in 1974; its implementing rules, known as Regulation B, prohibit creditors from discriminating on a the basis of a bunch of factors, including race, sex, marital status and more. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the ECOA rules to include guarantees that people who are applying for a loan will receive important info about their home value estimates. In January 2013, the Consumer Financial Protection Bureau finalized an act with the super long name of “Disclosure and Delivery Requirements for Copies of Appraisals and Other Written Valuations Under the Equal Credit Opportunity Act (Regulation B) rule.” For the purposes of keeping it simple, this rule usually goes by its much shorter nickname of ECOA Valuations Rule. In a relatively small nutshell, the ECOA Valuations Rule requires creditors to do a number of things, including send a free copy of home appraisals, regardless of whether the applicant ends up qualifying for a loan. The ECOA Valuations Rule also ensures that creditors tells applicants that they have the right to receive these copies of appraisals and written valuations.
The E-Sign Act, which goes by the longer name of the Electronic Signatures in Global and National Commerce Act, was signed into law on June 30, 2000. It provides a validity rule for electronic records and signatures for transactions that affect interstate or foreign commerce. If the consumer is okay with using electronic records and signatures, the E-Sign Act ensures that electronic records will satisfy rules of law, statutes and legislation.
The reason these two rules are connected boils down to this: consumers are often happy to receive and sign important papers like appraisals electronically via their laptop or smartphone. The ECOA Valuations Rule makes sure creditors send out certain types of paperwork; the E-Sign Act ensures that borrowers can obtain these documents in whatever format they want: paper or electronic.
More on the E-Sign Act Requirements
Just to condense down the E-Sign Act Requirements a bit more — because that first section was definitely chock full of verbiage related to rules and regulations, please keep the following three points in mind: first, the E-Sign Act requires the applicant’s consent to receive the documents electronically. Second, each applicant is provided with a statement of the hardware and software requirements (more on this later) for successful receipt of the electronic document. And finally, there must be confirmation that the application can download and view a PDF before actually downloading the document.
Why Requiring an Applicant to Receive the Document Electronically is Crucial
Let’s say that a lending company is champing at the bit to send out their documents electronically; they like the idea of “going green” with their paperwork and they know most clients like this too. However, unless they explicitly get the consumer’s consent to receive appraisals and other documents in this format, they run the risk of sending out important paperwork that will never be seen by the applicant. Ensuring E-Sign Act compliance is key to protecting both the lender, who wants to make sure the applicant has all available paperwork, and the home owner to be, who doesn’t want to miss any important documents.
Back to the Hardware and Software Requirements
As stated above, part of the E-Sign Act requires that the applicant must be provided with a statement of the hardware and software requirements for successful receipt and retaining of the electronic records. Going back to our “green” lending company above, even if they have permission from their applicant to receive everything electronically, he or she might have a figurative dinosaur of a computer or phone that is literally incapable of opening up or storing a lot information. To prevent this from happening, financial institutions much provide consumers with a statement letting them know what types of hardware and software their computer system must have to receive and access the records electronically.
When it Comes to PDFs, Never Assume!
Lenders should never assume that applicants are able to download and view a PDF. Sure, you can download PDFs all day long. But before sending out anything in this format to an applicant, it is vital that you confirm that the applicant can download and view the PDF. The E-Sign Act requires that consumers provide consent electronically in a way that shows they can access info in that format. If lenders make the assumption that consumers can open PDFs and send them without this consent, they run the risk of applicants not receiving and reading important information, like the appraisals.
DataTree Is Ready and Willing to Help
To be sure appraisals are completed correctly, it is crucial that lenders understand everything about the ECOA Valuations Rule and E-Sign Act. These rules should be followed to the letter, and will help consumers to receive data in a convenient way via computer or smartphone. For appraisers who are looking to increase their efficiency and data accuracy even more, look no further than DataTree; we offer fast and efficient data services relating to appraisals, including advanced property search, verified record and the ability for lenders to compare properties to comps in the area.