Following these regulations, the FDIC uses a covered entity's affiliated and acquired assets, averaged over the preceding four quarters, to determine whether the covered entity is “small” for the purposes of RFA. 3331 et seq., directs the federal financial institutions regulatory agencies1 to publish appraisal rules for federally related transactions within the jurisdiction of each agency. are not part of the published document itself. Financial institutions may refer to the Guidelines for more information to assist them in the appropriate review of appraisals and evaluations.[80]. • Interagency Appraisal and Evaluation Guidelines (October 7, 1994). 28. Many commenters argued that appraisers are the only independent third party in a real estate transaction and that only appraisers' opinions are independent and unbiased. 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. the Federal Register. The proposed threshold level is also consistent with general measures of inflation across the economy reflected in the CPI since 1994. It is expected that the federal financial institutions regulatory agencies will issue rules clarifying whether a transaction that qualifies for this exemption requires an Some commenters noted the agencies' acknowledgement that there is limited information on the cost and time burden of evaluations versus appraisals and urged the agencies to obtain additional data to quantify any expected savings. As stated in the proposal, the threshold increase will exempt a much smaller percentage of regulated transactions by dollar volume. 66. October 10, 2019, Transcripts and other historical materials, Quarterly Report on Federal Reserve Balance Sheet Developments, Community & Regional Financial Institutions, Federal Reserve Supervision and Regulation Report, Federal Financial Institutions Examination Council (FFIEC), Securities Underwriting & Dealing Subsidiaries, Regulation CC (Availability of Funds and Collection of Checks), Regulation II (Debit Card Interchange Fees and Routing), Regulation HH (Financial Market Utilities), Federal Reserve's Key Policies for the Provision of Financial Services, Sponsorship for Priority Telecommunication Services, Supervision & Oversight of Financial Market Infrastructures, International Standards for Financial Market Infrastructures, Payments System Policy Advisory Committee, Finance and Economics Discussion Series (FEDS), International Finance Discussion Papers (IFDP), Estimated Dynamic Optimization (EDO) Model, Aggregate Reserves of Depository Institutions and the Monetary Base - H.3, Assets and Liabilities of Commercial Banks in the U.S. - H.8, Assets and Liabilities of U.S. On the other hand, commenters who supported the proposed increase in the threshold argued that evaluations are a safe alternative to appraisals, with some noting that individuals who prepare evaluations are also required to be independent under federal law, as discussed further below. Board: 12 CFR 226.42(c)(1); CFPB: 12 CFR 1026.42(c)(1). The OCC estimates the UMRA inflation adjustment using the change in the annual U.S. GDP Implicit Price Deflator between 1995 and 2018, which is the most recent available annual data. documents in the last year, 72 Those opposed to the increase in the threshold generally argued that evaluations would not provide enough support for these transactions and would pose a threat to financial institutions and consumers. See OCC: 12 CFR 34.43(a)(7) and (b); Board: 12 CFR 225.63(a)(7) and (b); FDIC: 12 CFR 323.3(a)(7) and (b). [44] Many commenters opposing the proposal highlighted the benefits that state licensed or state certified appraisers bring to the real estate valuation process. GSEs are responsible for 90%-95% of residential loans and, thus, residential appraisals. Further, the exemption does not apply to loans that are high-cost mortgages, as defined in section 103 of TILA, or if a Federal financial institutions regulatory agency requires an appraisal because it believes it is necessary to address safety and soundness concerns. other specific standards such as the Uniform Appraisal Standards for Federal Land Acquisitions, and requiring appraisers to include specific items in an appraisal, such as all sales of the contributed property within 18 months of the appraisal date. Many commenters opined that appraisals are more accurate and reliable sources of valuation information than evaluations because they are done by professionals with strict training requirements and who are subject to state credentialing and disciplinary review for poor quality work. As discussed in the OCC's Regulatory Flexibility Act section, the costs associated with the final rule, if any, would be de minimis. § 34.44 is amended by: b. Redesignating paragraphs (c), (d), and (e) as (d), (e), and (f), respectively; and. [95] Some commenters opposing the increase asserted that inflationary changes are inadequate justifications for increasing the appraisal threshold. By order of the Board of Governors of the Federal Reserve System, September 23, 2019. Evaluations are not required to be performed in accordance with USPAP or by state certified or state licensed appraisers by federal law. Analysis of Loss Rates. The agencies invited comment on their preliminary finding that the proposed threshold would not pose a threat to the safety and soundness of financial institutions, as well as the data used to support the finding. According to 2017 HMDA data, 13.3 percent of residential real estate loans originated by small, FDIC-supervised institutions and affiliated institutions are subject to the Title XI appraisal requirements and have loan amounts between $250,000 and $400,000. As provided in the rule text, the requirement will only apply to transactions above $400,000. The CPI, which is published by the Bureau of Labor Statistics, is a measure of the average change over time in the prices paid by urban consumers for a market basket of goods and services. The agencies note the rural residential appraisal exemption does not require a safety and soundness determination by the agencies or a concurrence by the CFPB. Federal Register issue. Exemptions from the requirements of the HPML Rule include, among others, “qualified mortgages” under 15 U.S.C. In order to fulfill the agencies' statutory responsibility under the Dodd-Frank Act, the agencies are also adding to the appraisal regulations a requirement that appraisals be subject to appropriate review for compliance with USPAP. 12/22/2020, 41 Safety and Soundness Considerations for Raising the Residential Real Estate. See OCC: 12 CFR 34.203(b); Board: 12 CFR 226.43(b); FDIC (through adoption of CFPB rule): 12 CFR 1026.35(c)(2). New Documents daily Federal Register on FederalRegister.gov will remain an unofficial Some of these commenters expressed particular concern about homes in rural areas that tend to have unusual features or fewer comparable properties and thus are harder to value. Removing the word “or” at the end of paragraph (a)(12); c. Removing the period at the end of paragraph (a)(13) and adding “; or” in its place; The revisions and addition read as follows: (1) The transaction is a residential real estate transaction that has a transaction value of $400,000 or less; (14) The transaction is exempted from the appraisal requirement pursuant to the rural residential exemption under 12 U.S.C. The appraisal threshold was last changed in 1994. in real estate-related transactions by requiring that real estate appraisals used in connection with federally related transactions (Title XI appraisals) be performed in accordance with uniform standards by individuals whose competency has been demonstrated and whose professional conduct will be subject to effective supervision. These guidelines are meant only to assist the Assessor in meeting his/her responsibilities and in no way are intended to be all-inclusive. The new appraisal exemption applies to residential real-estate transactions covered by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA… documents in the last year, 37 See infra, Section II.C. The cost and time savings produced for institutions by obtaining evaluations versus appraisals is difficult to quantify because of limited available data and variation based on the type and complexity of the transaction. legal research should verify their results against an official edition of All provisions of the rule, other than the evaluation requirement for transactions exempted by the rural residential appraisal exemption [82] See https://www.bls.gov/​cpi/​. 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. See OCC: 12 CFR 34.203(d)(7)(H); Board: 12 CFR 226.43(d)(7)(H); FDIC (through adoption of CFPB rule): 12 CFR 1026.35(c)(4)(vii)(H). [61] requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. 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