Agencies Approve Deferment of Appraisal Requirements for 120 Days

The Federal agencies (the OCC, Federal Reserve, and FDIC on April 17, 2020 (85 FR 21312); NCUA on April 21, 2020 (85 FR 22014)) adopted interim final rules to amend the agencies’ regulations requiring appraisals of real estate for certain transactions. The interim final rule defers the requirement to obtain an appraisal or evaluation for up to 120 days following the closing of a transaction for certain residential and commercial real estate transactions, excluding transactions for acquisition, development, and construction of real estate.

The agencies are providing this relief to allow regulated institutions to expeditiously extend liquidity to creditworthy households and businesses in light of recent strains on the U.S. economy as a result of the National Emergency declared in connection with the Novel Coronavirus disease 2019 (COVID–19).

Regulated institutions should still make best efforts to obtain a credible valuation of real property collateral before the loan closing, and otherwise underwrite loans consistent with the principles in the agencies’ Standards for Safety and Soundness and Real Estate Lending Standards.

Effective Date for Institutions Regulated by the OCC, Federal Reserve, and FDIC: April 17, 2020 through December 31, 2020.

The rule can be found here: https:// www.govinfo.gov/content/pkg/ FR-2020-04-17/pdf/2020-08216. pdf.

Effective Date for Institutions Regulated by the NCUA: April 21, 2020 through December 31, 2020. The rule can be found here: https://www.govinfo.gov/ content/pkg/FR-2020-04-21/ pdf/2020-08435.pdf.

NCUA Adopts Appraisal Exemption Threshold of $400,000 for Residential Transactions

The NCUA amended its regulation requiring appraisals for certain residential real-estate-related transactions. The final rule increases the threshold level below which appraisals are not required for residential real-estate-related transactions from $250,000 to $400,000. Instead of an appraisal, and consistent with the requirement for other transactions that fall below applicable appraisal thresholds, federally insured credit unions are required to obtain written estimates of market value of the real estate collateral consistent with safe and sound practices.

This final rule is consistent with the final rule, effective October 9, 2019, issued by the OCC, Federal Reserve, and FDIC that increases the threshold level at or below which appraisals are not required for residential real estate transactions from $250,000 to $400,000.

Effective date: April 30, 2020. The rule can be found here: https://www.govinfo.gov/ content/pkg/FR-2020-04-30/ pdf/2020-08433.pdf.

 

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