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December 07, 2018

US Agencies (FDIC, FED, and OCC) proposed a rule to increase the threshold level at or below which appraisals would not be required for the residential real estate transactions from USD 250,000 to USD 400,000. Comments will be accepted for 60 days from publication in the Federal Register.

As per the proposal, Agencies would continue to require evaluations that are consistent with safe and sound business practices for transactions exempted by the increased threshold. Additionally, the proposal would require regulated institutions to obtain evaluations for transactions secured by residential property in rural areas that have been exempt from the US Agencies’ appraisal requirement pursuant to the Economic Growth, Regulatory Relief and Consumer Protection (EGRRCP) Act (rural residential appraisal exemption). Pursuant to the Dodd-Frank Act, the proposed rule would amend the US Agencies’ appraisal regulations to require regulated institutions to subject appraisals for federally related transactions 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 real estate transactions secured by a single 1-to-4 family residential property (residential real estate transactions), supervisory experience, comments received from the public in connection with the EGRRCP Act process, and the rule-making to increase the appraisal threshold for commercial real estate appraisals (CRE Final Rule). The US Agencies are proposing several conforming and technical amendments to their appraisal regulations. The US Agencies also proposed to define a residential real estate transaction as a real estate transaction secured by a single 1-to-4 family residential property, which is consistent with the current references to appraisals for residential real estate in the US Agencies’ appraisal regulations and in Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI). Adding this definition would not change any substantive requirement, but would provide clarity to the regulation.

The US Agencies proposed to add the rural residential appraisal exemption to the list of transactions that do not require appraisals. The proposed rule would require evaluations for transactions exempt from the US Agencies’ appraisal requirement by this exemption, which is consistent with the requirement for regulated institutions to obtain an evaluation for certain other exempt residential real estate transactions. Furthermore, the US Agencies are proposing to implement the appraisal review provision in Section 1473(e) of the Dodd-Frank Act, which amended Title XI to require that the US Agencies’ appraisal regulations include a requirement for institutions to subject appraisals for federally related transactions to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice. The proposed rule would implement this statutory requirement, which is consistent with the US Agencies’ long-standing recognition of the importance of appropriate appraisal reviews for safety and soundness. Under Title XI, the US Agencies must receive Bureau of Consumer Financial Protection (BCFP) concurrence that the proposed threshold level provides reasonable protection for consumers who purchase 1-to-4 unit single-family residences. Accordingly, the US Agencies are consulting with BCFP regarding the proposed threshold increase and will continue this consultation in developing the final rule.

 

Related Links

Comment Due Date: February 05, 2019

Keywords: Americas, US, Banking, Dodd Frank Act, EGRRCP Act, Residential Real Estate, Appraisal Requirements, Exemption Threshold, US Agencies

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