NCUA Proposes to Amend Threshold for Real Estate Appraisals
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
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
IFSB Consults on Revised Capital Adequacy Standard for Islamic BanksRelated Articles
EBA Launches Stress Tests for Banks, Issues Other Updates
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
