He has a Juris Doctor from the Syracuse University College of Law, a Bachelor of Arts in Broadcasting and Mass Communications from the State University of New York at Oswego, and an honorary Designated Appraiser Residential credential from CNAREA. Furthermore, the Valuation Independence Rule, which implements the Dodd Frank Act independence provisions, requires a valuation to be based on the independent judgment of the person preparing the valuation. See Stipulated Judgment, Paragraph 7. b. Pursuant to 12 U.S.C. The Federal bank regulatory agencies have proposed to increase the residential appraisal threshold level from $250,000 to $400,000, exempting nearly three quarters of residential real estate related financial transactions from appraisal requirements. These reasons include institutional preference, underwriting to secondary market standards for flexibility, ease of valuation policy implementation and, as the Interagency Guidelines recommend, for transactions with elevated risk. Comments beyond the scope of the rule. the official SGML-based PDF version on govinfo.gov, those relying on it for documents in the last year, 356 All federally related transactions that are commercial real estate transactions having a transaction value of more than $500,000 shall require an appraisal prepared by a State certified appraiser. 1376, codified at 12 U.S.C. b. The federal legislation that resulted in state licensing and certification of appraisers in federally related … The letter to the federal banking agencies included a request for a hearing to more fully explore these issues. That, coupled with the ongoing effort to raise the appraisal threshold well beyond its original, de minimus, intent cries out for legislative action. 12/22/2020, 41 Some commenters stated the nature and magnitude of the differences in consumer protection between appraisals and written estimates of market value revolve largely around the physical inspections and USPAP protections discussed above. Transaction values of less than $400,000 do not require an appraisal, but a written estimate of market value. Neither provision substantively alters the rights or obligations of FICUs or other parties, which are addressed in the relevant statutes. Instead of an appraisal, and consistent with the requirement for other transactions that fall below applicable appraisal thresholds, federally insured credit unions (FICUs) are required to obtain written estimates of market value of the real estate collateral consistent with safe and sound practices. 28. on FederalRegister.gov Discussion of Public Comments Received on the Proposed Rule, In November 2019, the Board invited comment on a notice of proposed rulemaking [1] (proposal or proposed rule) that would amend the NCUA's appraisal regulation promulgated pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI). documents in the last year, by the Education Department 3339(3). Public Law 111-203, 124 Stat. For renewal transactions, what is the threshold limit for evaluations? In fact, the NCUA's supervisory experience shows that many FICUs still use appraisals for situations when only a written estimate of market value was required. Summary of Proposed Rule C. Overview of Comments II. 42. Many commenters who supported the proposed threshold noted that it would increase access to credit, reduce the regulatory burden on credit unions, and lead to cost savings for members. Safety and soundness. One appraisal organization stated that the proposal would lead more consumers to lose out on the benefits of an appraisal that has been conducted in accordance with the USPAP. [34] He lives in Potomac, Maryland with his wife and two children. 7100-0250). In contrast, commenters supportive of the proposed rule did not foresee an increased risk to FICUs or individual transactions. 1691 et seq., by the Dodd Frank Act section 1474. The NCUA used 2018 HMDA data to estimate the effect of the residential threshold increase. [15] Written estimates of market value performed in accordance with the NCUA's regulations provide FICUs with suitable alternatives to appraisals. Federally related transaction means a real-estate-related transaction that (a) requires the services of an appraiser and (b) is engaged in, contracted for, or regulated by a federal financial institution regulatory agency. On some level, it begs the question of whether and when Congress will revisit appraiser regulation and recalibrate so that we don’t see only 8-12% of all mortgage lending activity fall under what was, at the outset, intended to be a broad definition. 15. In response to the comments concerning on-site inspections of real estate, the Board notes that USPAP does not require an on-site inspection of the subject property. Federal Register. 20. Of course, with changes at the GSEs both in terms of the willingness to let the QM “patch” expire and a possible return to privatization, how you fully capture that risk will depend on where that process sits. In the proposed rule, the Board noted that in 2001, an estimated 95 percent of residential transactions and 80 percent of the dollar amount of residential transactions were exempt when the current $250,000 threshold was set. documents in the last year, 10 One stated that the proposal contradicts the position taken by the federal banking agencies and the NCUA in their 2017 Economic Growth and Regulatory Paperwork Reduction Act [27] Thus, for a select group of loans, the HPML Rule requires that the information in an appraisal will be available for some first time or low-income borrowers mentioned by some commenters as being most affected by the threshold increase. documents in the last year, by the Homeland Security Department Third, FICUs' residential real estate-secured loans have performed well with relatively low delinquencies and net charge-off rates in an analysis of performance from 1994 to 2018. Net charge-offs represent losses to financial institutions. Increasing the threshold reduces burdens and restores flexibility to credit unions and their members. Document page views are updated periodically throughout the day and are cumulative counts for this document. A related-party transaction is an arrangement between two parties that have a preexisting business relationship. Section 1473(q) of the Dodd-Frank Act requires that automated valuation models used to estimate collateral value for mortgage lending comply with quality control standards designed to ensure a high level of confidence in the estimates produced by automated valuation models; protect against manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and account for other factors the agencies deem appropriate. All the courses listed would benefit a professional appraiser because they touch on topics that must be understood in order to prepare a well-reasoned appraisal report. 6 For ease of reference, this final rule explicitly incorporates the existing statutory requirement that appraisals be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). c. General support and concerns. However, USPAP states that inspections are often conducted and that some appraisers use third parties to conduct inspections. Rec. More information and documentation can be found in our This rulemaking will not have a substantial direct effect on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. 47. on documents in the last year, 29 Each document posted on the site includes a link to the The NCUA reviewed a sample of open examinations across all of its regional offices for a defined, limited period to gather feedback on typical FICU practices for real estate appraisals under the $250,000 threshold. Federal Register issue. The Commission of Real Estate Appraisers, Appraisal Management Companies and Home Inspectors licenses and regulates individuals who perform real estate appraisal services in connection with federally related transactions. [6] One commenter stated that the historically sound valuation practices of the credit union industry warrant the increased appraisal threshold. The proposed residential appraisal threshold level of $400,000 would exempt a similar number of transactions and dollar volume of transactions as did the current threshold of $250,000 when it was set in 2001 thereby restoring the level of exempted transactions. Another commenter, however, raised the possibility of a valuation contingency clause in future residential contracts.51 Register (ACFR) issues a regulation granting it official legal status. A few commenters supporting the proposed threshold increase specifically discussed the impact of the proposal on FICUs serving rural communities. All federally related transactions having a transaction value of $1,000,000 or more shall require an appraisal prepared by a state certified appraiser. The NCUA has authority to determine those real estate-related financial transactions that do not require the services of a state-certified or state-licensed appraiser and are therefore exempt from the Title XI appraisal requirements. estate-settlement service involving a federally related mortgage loan shall be referred to any person. [44] 7100 0261). One credit union trade association encouraged the NCUA to adopt the same “at or below” language to maintain consistency with the federal banking agencies. It is not an official legal edition of the Federal better and aid in comparing the online edition to the print edition. Specifically, the proposed rule would increase the monetary threshold below which FICUs would not be required to obtain appraisals in connection with residential real estate transactions from $250,000 to $400,000. 12/22/2020, 296 19. (FREAB) Finally, the Board asked for input on the extent to which useful and accurate property valuation information is readily available to borrowers through public sources. This period, which included two major recessionary periods, shows the prior threshold changes in 1995 and 2001 did not have a negative impact on loan performance. The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency by rule creates a new paperwork burden on regulated entities or modifies an existing burden (44 U.S.C. [32] 40. All commenters who discussed the extent to which useful and accurate property valuation information is readily available to borrowers through public sources acknowledged the broad availability of consumer-facing property valuation information through public sources, including websites such as Zillow, Trulia, and Realtor.com and the Multiple Listing Service. All provisions of the rule are effective upon publication of the final rule in the Federal Register. as well as a conforming amendment to remove additional requirements for the appraisal exemption for certain residential real estate transactions in rural areas. Some appraiser organizations commented that, regarding time and cost savings, the fee structure between appraisers and AMCs is not transparent to the consumer. Written estimates of market value must also be conducted by individuals qualified and experienced to perform such estimates for the type and amount of credit being considered. The ASC also maintains national 4 The GSEs include Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs). publication in the future. There are no new information collection requirements associated with this final rule. In the event a borrower requires further information about the physical condition of a property, the borrower always retains the option of engaging a licensed property or building inspector. So, the question is what should the ambit of a new regulatory system look like? 07/14/2019. (d) Transactions requiring a State certified appraiser - (1) All transactions of $1,000,000 or more. Several credit union commenters stated that all of their written estimates of market value are performed by individuals who are independent of the loan or production process and have the necessary qualifications and experience. Urge the Federal Banking Regulators to Protect Consumers and Safety and Soundness! A few credit union commenters provided time and cost estimates of appraisals as evidence of borrowers' potential savings. documents in the last year, 988 Interagency Guidelines at 77460. (2) Commercial real estate transactions of more than $500,000. However, the Board also observes that Congress did not amend the NCUA's long-standing authority in Title XI to establish a threshold level at or below which a certified or licensed appraiser is not required to perform an appraisal in connection with federally related transactions. Public Law 111-203, 124 Stat. a. About the Federal Register 44. Through the EGRRCPA amendment, Congress mandated that rural transactions meeting specific statutory criteria be exempted from the appraisal regulations; however, there is no indication that Congress intended to restrict the NCUA's authority to provide additional exemptions pursuant to its existing authority. [8] AVMs cannot be the sole source of collateral valuation, but may be used in the process of generating an appraisal, written estimate of market value, or even for credit union portfolio management purposes. Kenneth Acuña, Senior Credit Specialist, (703) 518-6613, Office of Examination and Insurance, Uduak Essien, Director—Credit Markets, (703) 518-6399, Office of Examination and Insurance. Supra note 1, at 65712. I was lucky to be involved, for example, in efforts surrounding Title XIV of the Dodd-Frank Act and its appraisal modernization provisions. Several commenters expressly agreed with the safety and soundness considerations discussed in the proposed rule. While at ASA, I’ve also worked on issues affecting business valuation and personal property appraisal. Year in Review – What Happened for Appraisers in 2020? in terms of structure and content or the preparer's training and credentialing requirements, written estimates of market value provide sufficient consumer protections for transactions under $400,000.[50]. Appraisal Standards for Federally Related Transactions Pursuant to Regulations H and Y (FR H-4; OMB No. Consumer protections, in general. 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