CFR > Title 12 - Banks and Banking > CHAPTER II—FEDERAL RESERVE SYSTEM > SUBCHAPTER A—BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (parts 200 to 269b) > PART 226—TRUTH IN LENDING (REGULATION Z) > SUBPART E—Special Rules for Certain Home Mortgage Transactions (§226.31 to §226.43-226.45) > 226.36—Prohibited acts or practices in connection with credit secured by a consumer's principal dwelling.

226.36—Prohibited acts or practices in connection with credit secured by a consumer's principal dwelling.

(a) Mortgage broker defined. For purposes of this section, the term “mortgage broker” means a person, other than an employee of a creditor, who for compensation or other monetary gain, or in expectation of compensation or other monetary gain, arranges, negotiates, or otherwise obtains an extension of consumer credit for another person. The term includes a person meeting this definition, even if the consumer credit obligation is initially payable to such person, unless the person provides the funds for the transaction at consummation out of the person's own resources, out of deposits held by the person, or by drawing on a bona fide warehouse line of credit.
(b) Misrepresentation of value of consumer's dwelling— (1) Coercion of appraiser. In connection with a consumer credit transaction secured by a consumer's principal dwelling, no creditor or mortgage broker, and no affiliate of a creditor or mortgage broker shall directly or indirectly coerce, influence, or otherwise encourage an appraiser to misstate or misrepresent the value of such dwelling.
(i) Examples of actions that violate this paragraph (b)(1) include:
(A) Implying to an appraiser that current or future retention of the appraiser depends on the amount at which the appraiser values a consumer's principal dwelling;
(B) Excluding an appraiser from consideration for future engagement because the appraiser reports a value of a consumer's principal dwelling that does not meet or exceed a minimum threshold;
(C) Telling an appraiser a minimum reported value of a consumer's principal dwelling that is needed to approve the loan;
(D) Failing to compensate an appraiser because the appraiser does not value a consumer's principal dwelling at or above a certain amount; and
(E) Conditioning an appraiser's compensation on loan consummation.
(ii) Examples of actions that do not violate this paragraph (b)(1) include:
(A) Asking an appraiser to consider additional information about a consumer's principal dwelling or about comparable properties;
(B) Requesting that an appraiser provide additional information about the basis for a valuation;
(C) Requesting that an appraiser correct factual errors in a valuation;
(D) Obtaining multiple appraisals of a consumer's principal dwelling, so long as the creditor adheres to a policy of selecting the most reliable appraisal, rather than the appraisal that states the highest value;
(E) Withholding compensation from an appraiser for breach of contract or substandard performance of services as provided by contract; and
(F) Taking action permitted or required by applicable federal or state statute, regulation, or agency guidance.
(2) When extension of credit prohibited. In connection with a consumer credit transaction secured by a consumer's principal dwelling, a creditor who knows, at or before loan consummation, of a violation of paragraph (b)(1) of this section in connection with an appraisal shall not extend credit based on such appraisal unless the creditor documents that it has acted with reasonable diligence to determine that the appraisal does not materially misstate or misrepresent the value of such dwelling.
(3) Appraiser defined. As used in this paragraph (b), an appraiser is a person who engages in the business of providing assessments of the value of dwellings. The term “appraiser” includes persons that employ, refer, or manage appraisers and affiliates of such persons.
(c) Servicing practices. (1) In connection with a consumer credit transaction secured by a consumer's principal dwelling, no servicer shall—
(i) Fail to credit a payment to the consumer's loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency, or except as provided in paragraph (c)(2) of this section;
(ii) Impose on the consumer any late fee or delinquency charge in connection with a payment, when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment, and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period; or
(iii) Fail to provide, within a reasonable time after receiving a request from the consumer or any person acting on behalf of the consumer, an accurate statement of the total outstanding balance that would be required to satisfy the consumer's obligation in full as of a specified date.
(2) If a servicer specifies in writing requirements for the consumer to follow in making payments, but accepts a payment that does not conform to the requirements, the servicer shall credit the payment as of 5 days after receipt.
(3) For purposes of this paragraph (c), the terms “servicer” and “servicing” have the same meanings as provided in 24 CFR 3500.2(b), as amended.
(d) This section does not apply to a home equity line of credit subject to § 226.5b.

Code of Federal Regulations

[73 FR 44604, July 30, 2008]

Code of Federal Regulations

Effective Date Notes: 1. At 75 FR 58533, Sept. 24, 2010, § 226.36 was amended by revising the section heading; revising paragraph (a); redesignating paragraph (d) as paragraph (f) and revising it; andadding new paragraphs (d) and (e), effective April 1, 2011. For the convenience of the user, the added and revised text is set forth as follows: § 226.36 Prohibited acts or practices in connection with credit secured by a dwelling. (a) Loan originator and mortgage broker defined. (1) Loan originator. For purposes of this section, the term “loan originator” means with respect to a particular transaction, a person who for compensation or other monetary gain, or in expectation of compensation or other monetary gain, arranges, negotiates, or otherwise obtains an extension of consumer credit for another person. The term “loan originator” includes an employee of the creditor if the employee meets this definition. The term “loan originator” includes the creditor only if the creditor does not provide the funds for the transaction at consummation out of the creditor's own resources, including drawing on a bona fide warehouse line of credit, or out of deposits held by the creditor.
Code of Federal Regulations 456
(2) Mortgage broker. For purposes of this section, a mortgage broker with respect to a particular transaction is any loan originator that is not an employee of the creditor. (d) Prohibited payments to loan originators. (1) Payments based on transaction terms or conditions. (i) In connection with a consumer credit transaction secured by a dwelling, no loan originator shall receive and no person shall pay to a loan originator, directly or indirectly, compensation in an amount that is based on any of the transaction's terms or conditions. (ii) For purposes of this paragraph (d)(1), the amount of credit extended is not deemed to be a transaction term or condition, provided compensation received by or paid to a loan originator, directly or indirectly, is based on a fixed percentage of the amount of credit extended; however, such compensation may be subject to a minimum or maximum dollar amount. (iii) This paragraph (d)(1) shall not apply to any transaction in which paragraph (d)(2) of this section applies. (2) Payments by persons other than consumer. If any loan originator receives compensation directly from a consumer in a consumer credit transaction secured by a dwelling: (i) No loan originator shall receive compensation, directly or indirectly, from any person other than the consumer in connection with the transaction; and (ii) No person who knows or has reason to know of the consumer-paid compensation to the loan originator (other than the consumer) shall pay any compensation to a loan originator, directly or indirectly, in connection with the transaction. (3) Affiliates. For purposes of this paragraph (d), affiliates shall be treated as a single “person.” (e) Prohibition on steering. (1) General. In connection with a consumer credit transaction secured by a dwelling, a loan originator shall not direct or “steer” a consumer to consummate a transaction based on the fact that the originator will receive greater compensation from the creditor in that transaction than in other transactions the originator offered or could have offered to the consumer, unless the consummated transaction is in the consumer's interest. (2) Permissible transactions. A transaction does not violate paragraph (e)(1) of this section if the consumer is presented with loan options that meet the conditions in paragraph (e)(3) of this section for each type of transaction in which the consumer expressed an interest. For purposes of paragraph (e) of this section, the term “type of transaction” refers to whether: (i) A loan has an annual percentage rate that cannot increase after consummation; (ii) A loan has an annual percentage rate that may increase after consummation; or (iii) A loan is a reverse mortgage. (3) Loan options presented. A transaction satisfies paragraph (e)(2) of this section only if the loan originator presents the loan options required by that paragraph and all of the following conditions are met: (i) The loan originator must obtain loan options from a significant number of the creditors with which the originator regularly does business and, for each type of transaction in which the consumer expressed an interest, must present the consumer with loan options that include: (A) The loan with the lowest interest rate; (B) The loan with the lowest interest rate without negative amortization, a prepayment penalty, interest-only payments, a balloon payment in the first 7 years of the life of the loan, a demand feature, shared equity, or shared appreciation; or, in the case of a reverse mortgage, a loan without a prepayment penalty, or shared equity or shared appreciation; and (C) The loan with the lowest total dollar amount for origination points or fees and discount points. (ii) The loan originator must have a good faith belief that the options presented to the consumer pursuant to paragraph (e)(3)(i) of this section are loans for which the consumer likely qualifies. (iii) For each type of transaction, if the originator presents to the consumer more than three loans, the originator must highlight the loans that satisfy the criteria specified in paragraph (e)(3)(i) of this section. (4) Number of loan options presented. The loan originator can present fewer than three loans and satisfy paragraphs (e)(2) and (e)(3)(i) of this section if the loan(s) presented to the consumer satisfy the criteria of the options in paragraph (e)(3)(i) of this section and the provisions of paragraph (e)(3) of this section are otherwise met. (f) This section does not apply to a home-equity line of credit subject to § 226.5b . Section 226.36(d) and (e) do not apply to a loan that is secured by a consumer's interest in a timeshare plan described in 11 U.S.C. 101 (53D).
Code of Federal Regulations 457
2. At 75 FR 66580, Oct. 28, 2010, § 226.36 was amended by removing and reserving (b), effective April 1, 2011.