Get ready to update those policies and procedures!
On September 27, 2019, the OCC, FDIC and FRB, in concurrence with the CFPB, published a revision to the appraisal rules at 12 CFR 34, 225 and 323 increasing the threshold amount where a residential real estate transaction requires a state-licensed, certified appraiser from $250,000 to $400,000. This revision was published in the Federal Register and is effective as of October 9, 2019.
There are a few important things to remember:
- A residential real estate transaction is a real estate-related financial transaction that is secured by a single 1-to-4 family residential property.
- The final rule adds to the list of exempt transactions those transactions secured by residential property in rural areas that have been exempted from the Agencies’ appraisal requirement pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act.
- Transactions exempted from the appraisal requirements as a result of the revised threshold or rural area designation require, in lieu of a full appraisal, an evaluation of the real property collateral that is consistent with safe and sound banking practices.
- The final rule also amends the Agencies’ appraisal regulations to require that regulated institutions subject appraisals for federally-related transactions to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice.
The requirements for evaluations shown above and the requirement to review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice become effective on January 1, 2020.
It’s interesting to note the 2017 HMDA data suggests that the $250,000 threshold currently exempts approximately 20 percent of the total dollar volume of regulated transactions and raising the threshold to $400,000 will exempt an additional estimated 14 percent of the dollar volume, or approximately 214,000 residential real estate originations.
TCA is A Better Way to help your institution comply with the dozens and dozens of regulatory rules. Contact us at (800) 934-7347 or by email at [email protected] for assistance with all your compliance needs.