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Is an increased settlement fee due to COVID-19 considered a valid changed circumstance to justify passing on the increased appraisal fee to the consumer?

My bank has seen a dramatic increase in the amount of appraisal fees since the COVID-19 pandemic hit. At the time the Loan Estimate was provided to the consumer, the bank disclosed the appraisal fee in good faith based on the "best information reasonably available" standard. Is an increased settlement fee due to COVID-19 considered a valid changed circumstance to justify passing on the increased appraisal fee to the consumer?

Yes. The Consumer Financial Protection Bureau clarified this in the 2020 interpretive rule.

Economic disruptions and shortages during the COVID-19 pandemic may affect the ability of stakeholders to provide accurate estimates of some settlement charges. Stakeholders have sought guidance from the Bureau as to whether the COVID-19 pandemic is an extraordinary event that permits creditors to provide consumers with revised estimates reflecting changes in settlement charges. For example, a stakeholder asked to clarify whether, for purposes of establishing good faith, a creditor could provide a revised estimate of the appraisal fee based on changed circumstances where (1) the amount disclosed on the Loan Estimate was based on a reasonable market price at the time of the estimate and (2) the actual appraisal fee was higher because of a shortage of available appraisers due to the effects of the COVID-19 pandemic. Upon consideration of the interpretive issues, the Bureau concludes that, as with wars or natural disasters, the COVID-19 pandemic is an example of an extraordinary event beyond the control of any interested party, and thus is a changed circumstance. Accordingly, for purposes of determining good faith, creditors may use revised estimates of settlement charges that consumers would incur in connection with the mortgage transaction if the COVID-19 pandemic has affected the estimate of such settlement charges. (July 2020)

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