98. 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 agencies' authority to provide additional exemptions pursuant to their existing statutory authority.Start Printed Page 53583. The agencies have implemented examination procedures to frame their review of an institution's valuation practices and the sufficiency of the supporting information in evaluations, as appropriate for the size and nature of the institution's residential real estate lending activities. 12/22/2020, 296 After carefully considering the comments received, and for the reasons discussed previously, the agencies have decided to increase the residential real estate appraisal threshold to $400,000, as proposed. and should contain sufficient information and analysis to support the decision to engage in the transaction,[59] Admittedly, deciding what properties are exempt is an imprecise exercise ... appraisal decision. 65. [72] with a transaction value of $1 million or less, and commercial real estate (CRE) transactions with a transaction value of $500,000 or less do not require Title XI appraisals. establishing the XML-based Federal Register as an ACFR-sanctioned documents in the last year, by the Homeland Security Department documents in the last year, 29 33. 3341(b). The agencies also concluded that automatic adjustments to the threshold or agency commitments to set timetables for future threshold increases would not be appropriate. In contrast, some commenters believed that AVMs could provide valuable information, and that improvements in technology and greater availability of information has improved the quality of evaluations. The FHFA Index reflects changes in home prices from a base of $250,000 in June 1994, based on the FHFA House Price Index. What does FIRREA require? Effective January 1, 2010, § 225.63 is further amended by revising paragraph (b) to read as follows: (b) Evaluations required. The agencies also proposed to make conforming changes to add the rural residential appraisal exemption to the appraisal regulations. 16. While the increased residential threshold may decrease costs for institutions, the extent to which institutions will employ evaluations instead of appraisals is uncertain, given that institutions retain the option of using appraisals for below-threshold transactions. Several commenters supportive of increasing the threshold recommended that the agencies either commit to adjusting the threshold periodically, or automatically adjust the threshold periodically, to reflect changes in housing values, market conditions or inflation. As discussed in the OCC's Regulatory Flexibility Act section, the costs associated with the final rule, if any, would be de minimis. (ii) The institution may engage a certified appraiser to complete the appraisal. In addition, the mortgage originator or its agent, directly or indirectly must have contacted not fewer than three state certified or state licensed appraisers, as applicable, on the mortgage originator's approved appraiser list in the market area, in accordance with 12 CFR part 226, not later than three days after the date on which the Closing Disclosure was provided to the consumer and documented that no state certified or state licensed appraiser, as applicable, was available within five business days beyond customary and reasonable fee and timeliness standards for comparable appraisal assignments. The agencies' appraisal regulations require that all complex 1-to-4 family residential property appraisals rendered in connection with federally related transactions shall have a state certified appraiser if the transaction value is $250,000 or more. [66] Regarding examination experience, the agencies reviewed Reports of Examination of their respective supervised institutions from January 2017 to December 2018 for examiner findings regarding appraisals and evaluations. For the hearing impaired only, TDD users may contact (202) 925-4618. However, the agencies also observe that Congress did not amend the agencies' 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. Because the final rule does not impose new requirements on IDIs, the agencies are not required by RCDRIA to consider the administrative burdens and benefits of the rule or delay its effective date (other than the evaluation provision for transactions exempted by the rural residential appraisal exemption or and the appraisal review provision, as discussed above). Board: Anna Lee Hewko, Associate Director, (202) 530-6260; Virginia Gibbs, Manager, Policy Development Section, (202) 452-2521; Carmen Holly, Lead Financial Institution Policy Analyst, (202) 973-6122, Division of Supervision and Regulation; Laurie Schaffer, Associate General Counsel, (202) 452-2272; Matthew Suntag, Counsel, (202) 452-3694; Derald Seid, Counsel, (202) 452-2246; or Trevor Feigleson, Senior Attorney, (202) 452-3274, Legal Division, Board of Governors of the Federal Reserve System, 20th and C Streets NW, Washington, DC 20551. The agencies have a long history with evaluations as an alternative valuation tool. include documents scheduled for later issues, at the request See https://www.bls.gov/​cpi/​. The agencies also considered comments received during the EGRPRA process and in response to questions posed about the residential threshold in the CRE rulemaking. provide that individuals preparing evaluations should be qualified, competent, and independent of the transaction and the loan production function of the institution. [78] The agencies reviewed the data used in 1994 and determined that the information reviewed by the agencies did not appear to exclude transactions originated by nonbanks or transactions sold to the GSEs or otherwise insured or guaranteed by a U.S. government agency, thus, necessitating the additional analysis. although they may be less structured than appraisals. The agencies also received a few comments that are addressed separately below 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.[27]. 3. By increasing the residential real estate appraisal threshold, the rule is expected to increase the number of residential real estate loans eligible for an evaluation, instead of an appraisal. These data suggest that financial institutions are often exercising discretion in determining when to use evaluations and are not automatically using evaluations whenever permitted. Threshold. The appraisal threshold applicable to residential real estate transactions has not been changed since 1994.[19]. For these reasons, the agencies posited that evaluations could provide a level of consumer protection for transactions at or below the proposed appraisal threshold. ... (FIRREA… This commenter also questioned whether the cost and time to receive an appraisal were burdensome, as its survey reflected that appraisals represented less than 0.2 percent of the total transaction cost and that the typical wait time for an appraisal in 2018 was only 7 days. 1376, codified at 12 U.S.C. Public Law 115-174, Title I, section 103, codified at 12 U.S.C. The agencies also requested comment on the availability of valuation information to consumers through public sources and whether information from those sources help provide consumers with additional protection in residential transactions. The agencies believe rising market prices of residential properties have contributed to increased burden for regulated institutions and consumers in terms of transaction time and costs, given that the threshold has remained the same since 1994. The mortgage originator must be subject to oversight by a Federal financial institutions regulatory agency, as defined in Title XI. For a transaction that does not require the services of a State certified or licensed appraiser under paragraphs (a)(1), (5), (7), (13), or (14) of this section, the institution shall obtain an appropriate evaluation of real property collateral that is consistent with safe and sound banking practices. 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