Recently, the Agencies, including the Office of the Comptroller of the Currency (OCC), the FDIC, and the Federal Reserve, have jointly come up with the final version of the Appraisal Rule. In other words, the Agencies issued an amendment to the Appraisal Rule, and the final rule establishes a new appraisal threshold for transactions linked to residential real estate.
These are those transactions that need an appraisal from $250,000 to $400,000. However, the amended rule needs a further assessment for transactions exempted by the $400,000 threshold.
An FDIC report says that residential real estate transactions are now similar to real-estate-related financial transactions. It further explains that it has to be secured by a single 1-to-4 family residential property.
The report also said, “For residential real estate transactions exempted from the appraisal requirement as a result of the revised threshold, regulated institutions would be required to obtain an evaluation of the real property collateral that is consistent with safe and sound banking practices.”
The OCC, the FDIC, and the Federal Reserve also recommended making further amendments to incorporate the rural
residential appraisal exemption in the final rule. They suggested further examination of these transactions.
According to a report “The Appraisal Rule also incorporates the appraisal exemption for rural residential properties provided by the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRCCPA) and requires evaluations for these exempt transactions.”
Besides, the OCC, the FDIC, and the Federal Reserve also recommended amending agencies’ appraisal regulations. The intention is to allow regulated institutions to govern appraisals for federally related transactions. And ultimately subject those transactions to appropriate review to comply with the Uniform Standards of Professional Appraisal Practice. It has to be according to Title XI, as revised by the Dodd-Frank Act.
Highlights of the Final Rule
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989’s Title XI makes it necessary for the Agencies to accept regulations prescribing standards for appraisals employed for federally related transactions. Each agency should do it for federally related transactions within its jurisdiction, and there must be licensed appraisers to do this task. Title XI empowers the Office of the Comptroller of the Currency, the FDIC, and the Federal Reserve to decide a threshold level under which there is no need for an appraisal.
The final rule constitutes a fresh interpretation of and a distinct category for residential real estate transactions. And when it comes to transactions from $250,000 to $400,000, it also enhances the threshold for claiming an appraisal.
When it comes to exempt transactions, the final rule demands a proper evaluation of the real property collateral compatible with safe and reliable banking practices.
The final rule also includes the appraisal exemption for the properties incorporated by Section 103 of EGRCCPA to Title XI.
The final rule will first have to get published in the Federal Register before becoming effective. In other words, once the final rule gets published in the Federal Register, it will become effective the very next day. However, when it comes to the provisions related to appraisal review and the evaluation requirement associated with the rural-residential-exemption, they will be effective on January 1, 2020.