Federal Agencies Amend Appraisal Threshold for Residential Real Estate Loans
The OCC, the Board of Governors of the Federal Reserve System (Board), and the FDIC issued a notice for proposed rulemaking and request for comment. The proposed rule, titled the Real Estate Appraisal, would increase the threshold level at which appraisals would be required for residential real estate transactions from $250,000 to $400,000. Additionally, the proposed rule would expand the rural residential appraisal exemption.
The threshold increase for appraisal requirements is an attempt by the federal banking agencies to reduce the regulatory burden on regulated institutions. The Board expects an approximate 29 percent increase in the number of residential real estate transactions exempted as a result of the proposed rule. It is also expected that small entities will make up a large number of the additional exempted entities.
The proposed rule would also amend the rural residential appraisal exemption. Currently, under this exemption, mortgage loans under $400,000 secured by property in rural areas are exempt from the appraisal requirement when, among other criteria, the regulated institution can document that they are unable to obtain an appraisal at a reasonable cost and within a reasonable timeframe. Under the proposed rule, loans at or under $400,000 secured by property in rural areas would be exempted without requiring regulatory institutions to meet the additional requirements currently in place. The proposed rule also states that evaluations consistent with safe and sound banking practices will continue to be required for those real estate transactions exempted by the raised threshold and the modification to the residential appraisal exemption.
Finally, the proposed rule would amend appraisal regulations to require regulated institutions’ appraisals of federally related transactions to undergo Uniform Standards of Professional Appraisal Practice compliance reviews.
The notice is expected to be published in the Federal Register soon and comments will be accepted 60 days after publication.
The entire text of the proposed rule may be found here.
