The NCUA Board proposed to amend the regulation requiring appraisals for certain real estate-related transactions. The proposed rule would increase the threshold level below which appraisals would not be required for residential real estate-related transactions from USD 250,000 to USD 400,000. This proposal is consistent with a final rule that became effective on October 09, 2019 and was issued by the US Agencies (FDIC, FED, and OCC); this final rule increases the threshold level at or below which appraisals are not required for residential real estate transactions from USD 250,000 to USD 400,000. Comments must be received on or before January 28, 2020.
Consistent with the requirement for other transactions that fall below the applicable appraisal thresholds, federally insured credit unions would be required to obtain written estimates of market value of the real estate collateral that is consistent with safe and sound banking practices in lieu of an appraisal. For easier reference, the proposed rule would explicitly incorporate the existing statutory requirement that appraisals be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice. The proposal to raise the residential threshold is based on consideration of available information on residential real estate transactions, supervisory experience, and comments received from the public in connection with the July 2019 NCUA rulemaking on real estate appraisals (July 2019 real estate appraisal rule); as part of this July 2019 rulemaking, the NCUA Board specifically asked about increasing the threshold for residential real estate transactions. Generally, credit-union-related respondents to the July 2019 real estate appraisal rule supported increasing the residential real estate threshold.
The NCUA Board believes that the proposed increase to the residential threshold would reduce burden in a manner that is consistent with federal public policy interests in real estate-related financial transactions and the safety and soundness of federally insured credit unions. The Board has long recognized that the valuation information provided by appraisals and written estimates of market value assists federally insured credit unions in making informed lending decisions and mitigating risk. It also recognizes the role that appraisers play in helping to ensure a safe and sound real estate lending process. However, the Board is aware the cost and time of obtaining an appraisal can result in delays and higher expenses for both federally insured credit unions and borrowers. The Board also acknowledges that appraisals can provide protection to consumers by facilitating the informed use of credit and by helping to ensure that the estimated value of the property supports the loan amount. However, written estimates of market value have provided these benefits for federally insured credit unions and borrowers for transactions below the current USD 250,000 threshold.
Under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI), NCUA must receive the CFPB concurrence that the proposed residential threshold level provides reasonable protection for consumers who purchase “1-4 unit single-family residences.” Accordingly, NCUA is consulting with CFPB regarding the proposed residential threshold increase and will continue this consultation in developing a final rule. The Board notes that, on August 05, 2019, CFPB concurred that the other US Agencies' residential appraisal final rule's threshold of USD 400,000 provides reasonable protection for consumers who purchase “1-4 unit single-family residences.”
Related Link: Proposed Rule
Comment Due Date: January 28, 2020
Keywords: Americas, US, Banking, Real Estate Appraisals, Credit Risk, Residential Real Estate, Credit Unions, CFPB, US Agencies, NCUA
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