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May a loan officer order an appraisal before a refinance application is submitted?

One of the bank’s existing loan customers is considering refinancing her mortgage loan secured by her primary residence. She made significant improvements to the property and has asked the loan officer to order an appraisal before completing an application to assist in her refinance decision. May the loan officer order the appraisal at the customer’s request prior to receipt of an application for the refinance?

Yes, with an important caveat that will likely dissuade the loan officer from doing so. The appraisal may be ordered before an application has been received, but the appraisal fee may not be charged to the customer because the fee may not be imposed on the customer prior to completion of Regulation Z’s requirements that the lender (1) provide the Loan Estimate (LE) and (2) receive the documented indications of the consumer’s intent to proceed. (See §1026.19(e)(2)(i)(A)) (February 2021)

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