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appraisal guidelines 2019

The OCC has analyzed the final rule under the factors in the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. Handbook 4000.1, FHA Single Family Housing Policy Handbook, Condominium Project Approval content, " Page 583. 64. By comparison, as referenced above in Table 2, 2017 HMDA data indicates that increasing the threshold from $250,000 to $400,000 will result in an estimated 35 percent of the total dollar volume of regulated transactions being exempt. 10/07/2019 at 8:45 am. The FDIC does not expect the rule to have any substantive effects on the safety and soundness of small, FDIC-supervised institutions. 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. 58. Several commenters rejected assertions that there was an appraiser shortage warranting regulatory relief. As a reflection of the long-standing guidance on appraisal review, many financial institutions may already have review processes in place for these purposes. These commenters represented that those who perform evaluations often do not have the same level of independence from the transaction. The agencies recognize that some consumers may seek to include appraisal contingency clauses in PSAs. For transactions exempt under the applicable thresholds, the Appraisal Rule requires an appropriate evaluation of the real property collateral that is consistent with safe and sound banking practices but does not need to be performed by a licensed or certified appraiser or meet the other Title XI appraisal standards. While exempted transactions would not require an appraisal, they would still require an evaluation that is consistent with safe and sound banking practices. Special Instructions: Advance registration is required by March 25, 2019 . Moreover, although limited in scope, the higher-priced mortgage loan rule (HPML rule),[70] USPAP was adopted by Congress in 1989, and contains standards for all types of appraisal services, including real estate, personal property, business and mass appraisal. Further, many financial institutions already have review processes in place to ensure that appraisals comply with USPAP. stability and public confidence in the nation’s financial The Title XI appraisal regulations require regulated institutions to obtain evaluations for several categories of real estate-related financial transactions that the agencies have determined do not require a Title XI appraisal, including transactions at or below the current thresholds. This document has been published in the Federal Register. on 24. The agencies also invited comment on the appropriateness of the data used in the proposal and requested any suggestions for alternative sources of data. Repair requirements could cause a sale to fall apart unless the buyers and seller can agree on who will pay for the required repairs. In contrast, commenters noted there are no standardized requirements for those who perform evaluations. Many commenters who opposed the increased threshold indicated that evaluations are inadequate substitutes for appraisals and therefore an increased threshold would pose a threat to consumer protection. The agencies recognize that the requirement to obtain an evaluation for transactions exempted by the rural residential appraisal exemption [105] Several commenters noted that financial institutions are only allowed to use evaluations when doing so is consistent with safety and soundness and that the institution always retains the discretion to seek an appraisal. of the issuing agency. As discussed in the proposal and further detailed below, increasing the residential real estate appraisal threshold will provide meaningful regulatory relief for financial institutions without threatening the safety and soundness of financial institutions. The agencies proposed to define a residential real estate transaction as a real estate-related financial transaction secured by a single 1-to-4 family residential property and specifically asked commenters whether the proposed definition is appropriate. Access FDIC Financial Institution Letters (FILs) on the FDIC's website. 3. Definition of Residential Real Estate Transaction 2. 4802(b). The final rule, issue… The agencies received one comment generally supporting the proposed definition and one comment generally opposing the definition, neither of which included any detail regarding the reasoning for the position. Some commenters opposed to an increase raised concerns that free online valuation information and tools may be flawed due to, for example, their reliance on public records with data entry errors. The mortgage originator must be subject to oversight by a Federal financial institutions regulatory agency, as defined in Title XI. Costs of appraisals and evaluations may also be passed on to borrowers. 1. [4], Title XI directs each Federal financial institutions regulatory agency [5] the current document as it appeared on Public Inspection on collection of financial education materials, data tools, The requirement that Title XI appraisals be subject to appropriate review for USPAP compliance could also be viewed as a new mandate. Many commenters who opposed a threshold increase on consumer protection grounds asserted that evaluations are not subject to uniform standards and are not a meaningful substitute for an appraisal that must be conducted in compliance with USPAP. The agencies proposed the Guidelines for public comment in 2008, see 73 FR 69647 (November 19, 2008), and adopted the final Guidelines in 2010, see 75 FR 77450 (December 10, 2010). The OCC, Board, and FDIC (collectively, the agencies) are adopting a final rule to amend the agencies' regulations requiring appraisals of real estate for certain transactions. 12/02/2020, 382 Additionally, although not required by RCDRIA, the agencies did consider the administrative costs and benefits of the residential appraisal threshold increase while developing the proposal. However, because the final rule increases the residential threshold to $400,000 for all residential transactions, institutions, including small entities, will not need to comply with the detailed requirements of the rural residential appraisal exemption in order for such transactions to be exempt from the agencies' appraisal requirement. For sales, leases, purchases, investments in or exchanges of real property, the transaction value is the market value of the real property. The FDIC publishes regular updates on news and activities. 100-1001, pt. A number of commenters opposed to a threshold increase asserted that appraisals are easier for consumers to understand than evaluations. [44] on residential properties by FDIC-insured institutions and affiliated institutions that are not sold to the GSEs or otherwise insured or guaranteed by a U.S. government agency (“regulated transactions”).[39]. system. While financial institutions should continue to conduct safety and soundness reviews of evaluations to ensure that an evaluation contains sufficient information and analysis to support the decision to engage in the transaction, the USPAP review requirement in Title XI does not apply to such a review. The FHFA Index reflects changes in home prices from a base of $250,000 in June 1994, based on the FHFA House Price Index. 10. To ensure that the safety and soundness of Start Printed Page 53594regulated institutions are protected, the agencies will require evaluations for transactions that are exempted by the increased residential appraisal threshold. As discussed above, in section 103 of EGRRCPA, Congress amended Title XI in 2018 to add a rural residential appraisal exemption. Numerous commenters opposed to a threshold increase asserted that an increase to the appraisal threshold would have a disproportionately negative impact on more at-risk consumers, such as low-income individuals, members of certain minority groups, or first-time homebuyers, because at-risk borrowers are more likely to purchase homes priced in lower ranges and, therefore, are more likely to enter into residential transactions without the benefit of an appraisal. An Overview of HUD FHA Guidelines for 2019. A number of commenters disputed that there are appraiser shortages warranting regulatory relief outside of Start Printed Page 53591rural areas, with some offering supporting data from the Appraisal Subcommittee of the Federal Financial Institutions Examination Council and the Appraisal Foundation. have received concurrence from the CFPB that the residential real estate appraisal threshold being adopted provides reasonable protection for consumers who purchase 1-4 unit single-family residences. Multiple Parcels. The agencies have determined that these categories of transactions do not require appraisals by state certified or state licensed appraisers in order to protect federal financial and public policy interests or to satisfy principles of safe and sound banking. The Federal Deposit Insurance Corporation (FDIC) is an When discussing the impact of the threshold increase from $100,000 to $250,000, the preamble to the 1994 rule noted that information from the National Association of Realtors, the Census Bureau, and the Department of Housing and Urban Development indicated that 85 percent of the dollar volume of mortgages financing new homes and 82 percent of the volume of mortgages financing purchases of existing homes would fall below the $250,000 threshold. 1601 et seq., by Dodd-Frank Act section 1472, 15 U.S.C. documents in the last year, by the State Department As detailed below, the agencies have determined that a residential real estate appraisal threshold of $400,000 will not threaten the safety and soundness of financial institutions and have received concurrence from the CFPB that this threshold level provides reasonable protection for consumers who purchase 1-4 unit single-family residences. Numbers and dollar volumes are based on 2017 HMDA data. Federal government websites often end in .gov or .mil. The Guidelines encourage institutions to establish appropriate policies and procedures for determining when to obtain an appraisal in connection with transactions for which an evaluation is permitted. 12 U.S.C. Specifically, the proposal would increase the monetary threshold at or below which financial institutions that are subject to the agencies' appraisal regulations (regulated institutions) would not be required to obtain appraisals in connection with residential real estate transactions (residential real estate appraisal threshold) from $250,000 to $400,000. The 2017 HMDA data suggests that the $250,000 threshold currently exempts approximately 20 percent of the total dollar volume of regulated transactions. The agencies already periodically review their regulations to identify outdated or unnecessary regulatory requirements, such as through the EGRPRA process, and can consider any comments concerning the thresholds through that process. 18. 3350(5). 3311). 1376. The final rule also amends the agencies' appraisal regulations to require regulated institutions to subject appraisals for federally related transactions to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice. 106. Generally, the FDIC considers a significant effect to be a quantified effect in excess of 5 percent of total annual salaries and benefits per institution, or 2.5 percent of total non-interest expenses. The third minimum requirement was added to Title XI by section 1473(e) of the Dodd-Frank Act, as noted supra, and is being implemented by this rulemaking. The agencies note that many commenters suggested that appraisers, unlike those who perform evaluations, cannot be employees of the financial institution making the loan. In addition, although all sources of publicly available valuation information might not always accurately Start Printed Page 53590reflect the market value of a particular property, consumers can use a variety of available information to learn more about the availability of and the potential range of values for properties in a particular area or market. As discussed below, new requirements on insured depository institutions (IDIs) generally must take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form. An evaluation is not required when real estate-related financial transactions meet the threshold criteria and also qualify for another exemption from the agencies' appraisal requirement where no evaluation is required by the regulation. The effective date for the rule will be the first day after its publication in the Federal Register, other than the evaluation requirement for transactions exempted by the rural residential appraisal exemption and the appraisal review provision, which will become effective on January 1, 2020. The amendment to this provision would have been a technical change that would not alter any substantive requirement, because the statutory provision is self-effectuating and the proposed threshold increase to $400,000 would encompass loans that would otherwise qualify for the section 103 rural residential appraisal exemption. The agencies acknowledge that the data presented indicates that a house sold in 1994 would sell for higher than $400,000 today; however, the agencies believe the more conservative approach is appropriate. The OCC estimates that the final rule may impact approximately 734 of these small entities. After considering the comments received, the agencies have decided to implement the requirement for regulated institutions to obtain evaluations when the rural residential appraisal exemption is used. 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. In accordance with the requirements of the Paperwork Reduction Act of 1995 [102] 42. Any loans from Census tracts that are missing geographical identifiers or undefined in the 2013 UIC have been excluded from the analysis of burden relief in rural areas. The agencies proposed that financial institutions obtain evaluations for these transactions because evaluations protect the safety and soundness of financial institutions. As described in the proposal, the 214,000 additional exempted transactions represent only three percent of total HMDA originations in 2017 and, as also reflected in Table 2, 16 percent of regulated transactions. Summary: The FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency (the Agencies) have jointly issued an amended rule (the Appraisal Rule) that increases the threshold for residential real estate transactions requiring an appraisal from $250,000 to $400,000. In addition, the agencies are required by Title XI to weigh safety and soundness implications regarding any proposed threshold increase and obtain CFPB concurrence. of $250,000 or less, certain real estate-secured business loans (qualifying business loans) [17] Ensure lead-based paint is not present. The regulated institution shall be responsible for making the final determination of whether the appraisal is complex. One commenter indicated that only 17 metropolitan statistical areas have a median sales price for single-family homes that exceeds $400,000. § 34.44 is amended by: b. Redesignating paragraphs (c), (d), and (e) as (d), (e), and (f), respectively; and. Rec. [78] Based on the agencies' supervisory experience with appraisals and evaluations since 1994, the agencies believe that property inspections done by appropriately trained individuals for either appraisals or evaluations can provide prospective buyers with detailed information regarding a property's condition and features, may provide consumer protection, and can help ensure that appraisals or evaluations are consistent with safe and sound banking practices. 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. July 15, 2019. Some commenters in support of the proposal indicated that the proposed threshold increase would benefit consumers, arguing that costs and delays due to appraisals could be reduced. See Board: 12 CFR 226.42(c)(2), (d); CFPB: 12 CFR 1026.42(c)(2), (d). 15. [50] The authority citation for part 34 continues to read as follows: Authority: Only official editions of the although they may be less structured than appraisals. rendition of the daily Federal Register on FederalRegister.gov does not The preliminary determination was based on supervisory experience regarding causes of losses at financial institutions, analysis of available Home Mortgage Disclosure Act (HMDA) data, and the fact that evaluations would be required for transactions below the proposed threshold. CHAPTER 12: PROPERTY AND APPRAISAL REQUIREMENTS . In response to these comments, the agencies note that the appraisal review proposed is statutorily required by Title XI. Title XI defines a federally related transaction as a real estate-related financial transaction [10]

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