Is the bank required to provide an appraisal notice when it takes real estate as an abundance of caution?
If a loan is secured by a dwelling, the appraisal notice is required. If the dwelling is an abundance of caution, an appraisal itself, however, would not be required. Abundance of caution specifically exempts the lender from hanging to get an appraisal, as long as it is a true abundance of caution. The bank should not invoke this exemption if its credit analysis reveals that the transaction would not be adequately secured by sources of repayment other than the real estate, even if the contributory value of the real estate collateral is low relative to the entire collateral pool and other repayment sources.
See Appendix A in the Interagency Appraisal and Evaluation Guidelines here: https://www.fdic.gov/regulations/laws/rules/5000-4800.html
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