NCUA Board Approves Proposed Rule to Change Appraisal Requirement Threshold and Exempt Certain Transactions

On September 20, 2018, the National Credit Union Administration (NCUA) Board approved a proposed rule amending the agency’s real estate appraisal requirements for certain transactions.  The rule is intended to provide some regulatory relief and increase clarity by: (1) increasing the threshold for required appraisals in non-residential real estate transactions; (2) reorganizing the appraisal regulation to make it easier to determine when a written estimate or an appraisal is required; and (3) incorporating the rural exemption contained in the Economic Growth, Regulatory Relief, and Consumer Protection Act.

First, the proposed rule would increase the threshold below which appraisals would not be required for non-residential real estate transactions from the current $250,000 to $1,000,000.  However, federally insured credit unions would still be required to obtain a written estimate of market value of the real estate collateral that is consistent with safe and sound lending practices for those non-residential real estate transactions that would now be exempted from the appraisal requirement under the revised threshold.

Second, the rule would restructure Section 722.3 of the NCUA’s appraisal regulation to clarify its requirements.  The restructure is supposed to make it clearer when a written estimate of market value, an appraisal conducted by a state-licensed appraiser, or an appraisal done by a state-certified appraiser is required for a real estate financial transaction.

Finally, the rule would incorporate the rural exemption from the Economic Growth, Regulatory Relief, and Consumer Protection Act, which exempts from NCUA’s appraisal regulation certain federally related transactions involving real estate where the property is in a rural area, valued below $400,000, and no state certified or licensed appraiser is available.