US Agencies Adopt Rule on Appraisals for Real Estate Transactions
US Agencies (FDIC, FED, and OCC) adopted the final rule to amend regulations requiring appraisals of real estate for certain transactions. The 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. The provisions of the final rule will be effective from October 09, 2019, with the exception of provisions related to appraisal review and the evaluation requirement related to the rural residential exemption, which become effective from January 01, 2020.
The final rule defines a residential real estate transaction as a real estate-related financial transaction that is secured by a single one-to-four family residential property. For residential real estate transactions exempted from the appraisal requirement as a result of the revised threshold, regulated institutions must obtain an evaluation of the real property collateral that is consistent with safe and sound banking practices. The final rule makes a conforming change to add to the list of exempt transactions the transactions secured by residential property in rural areas that have been exempt from the agencies’ appraisal requirement pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act. The final rule requires evaluations for these exempt transactions. The final rule also amends the 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 (USPAP).
As part of the response to a December 2018 consultation, the agencies collectively received over 560 comments about the proposal to increase the residential real estate appraisal threshold, with the comments addressing a variety of issues. Comments from financial institutions, financial institution trade associations, and state banking regulators generally supported the proposed increase. Comments from appraisers, appraiser trade organizations, individuals, and consumer advocate groups generally opposed the proposal to increase the threshold. The agencies also received a few comments that are addressed separately concerning the proposed requirement to obtain evaluations for transactions that qualify for the rural residential appraisal exemption or to subject certain appraisals to appropriate review for compliance with USPAP. After carefully considering the comments and conducting further analysis, the agencies are adopting the final rule as proposed.
US Agencies have consulted with, and received concurrence from, CFPB on the increased threshold. CFPB released a letter concurring that the increased threshold provides reasonable protection for consumers who purchase one-to-four unit single-family residences.
Related Links
Effective Date: October 09, 2019/January 01, 2020
Keywords: Americas, US, Banking, Dodd-Frank Act, EGRRCP Act, Residential Real Estate, Appraisal Requirements, Exemption Threshold, US Agencies
Previous Article
BCBS Publishes Additional Information on the 2018 G-SIB AssessmentRelated Articles
EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
BCBS and EBA Publish Results of Basel III Monitoring Exercise
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
PRA Updates Timeline for Final Basel III Rules, Issues Other Updates
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
US Treasury Sets Out Principles for Net-Zero Financing
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
EC Launches Survey on G7 Principles on Generative AI
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
