A valuation method that does not provide a property’s market value or sufficient information and analysis to support the value conclusion is not acceptable for an evaluation. Construction and development loans. A loan to finance maintenance, repairs, or improvements to an existing income producing property that does not change its use or materially impact the property is not a construction or development loan. The NCUA is committed to providing maximum flexibility and relief during these challenging times while maintaining a safe and sound credit union system. A written estimate of market value: For more information on the appropriate use of written estimates of market value, see the 2010 Interagency Appraisal and Evaluation Guidelines (opens new window). October 16, 2018. The federal financial institution regulatory agencies 1 (collectively, the agencies) are issuing the attached Interagency Appraisal and Evaluation Guidelines (Guidelines) to clarify the agencies’ real estate appraisal regulations and to provide institutions and examiners with supervisory guidance for a prudent appraisal and evaluation program. https://www.fdic.gov/coronavirus/faq-fi.pdf, https://content.govdelivery.com/accounts/USDARD/bulletins/2839847, https://www.hud.gov/sites/dfiles/OCHCO/documents/20-05hsgml.pdf, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26_20_11.pdf, https://guide.freddiemac.com/app/guide/bulletin/2020-5, https://singlefamily.fanniemae.com/media/22321/display, https://singlefamily.fanniemae.com/media/22326/display, https://singlefamily.fanniemae.com/originating-underwriting/appraisers, https://www.ficras.com/bin/cfpb_tila-respa-integrated-disclosure_rescission-pandemic-interpretive-rule.pdf, https://www.ficras.com/bin/cfpb_mortgage-origination-rules_faqs-covid-19.pdf, http://www.appraisalfoundation.org/iMIS/TAF/Coronavirus_and_Appraisers.aspx. Outsourcing the appraisal review ensures the reviewer is insulated from influence by loan production or other affiliated partners. Complex means a transaction in which the property to be appraised, the form of ownership, or market conditions are atypical. If you have any questions about appraisals and evaluations, please contact your NCUA regional office or state supervisory authority. Anyone can point you to other resources, to tell you how to access the Interagency Appraisal and Evaluation Guidelines or other pertinent information; however, no one else can direct you to the level of expertise available to you through FICRAS. Related Tools These guidelines reflect the June 1994 amendments to the agencies' real estate appraisal regulations3 and supersede the Board's September 1992 Guidelines for Real Estate Appraisal and Evaluation Programs. Increasing the threshold reduces burdens and restores flexibility to credit unions and their members. These new measures closely align with the appraisal flexibilities offered by Fannie Mae and Freddie Mac, including desktop appraisals and exterior-only inspections for certain real estate transactions. As detailed further, existing USPAP principles provide appraisers the flexibility to conduct their work with minimal contact with property owners. Dave Brown is a state certified general real estate appraiser with more than 20 years of industry experience. The plan should maintain a reasonable balance between safety and soundness and the credit union’s mission to serve members, especially during this challenging period. issuing the enclosed Interagency Appraisal and Evaluation Guidelines. The interim final rule is consistent with the interim final rule approved by other banking agencies on April 10, 2020 (opens new window). Current USPAP standards may be satisfied by a desktop or exterior-only appraisal (also referred to as a “drive-by” appraisal) completed by a properly licensed professional. The collateral valuation for securing a construction or development loan depends on the satisfactory completion of the proposed construction or renovation where the loan proceeds are disbursed in increments as the work is completed. In his career... Getting compliant with FICRAS is a simple, cost effective process. Credit unions that use this flexibility should be aware that written estimates of market value must still comply with safe and sound practices. That is why a simple Brokers Price Opinion (BPO) is not acceptable, nor an Automated Valuation Model (AVM) or Tax Assessment Value (T… Given these flexibilities, if a credit union is able to engage an appraiser to conduct a desktop or exterior-only appraisal that meets USPAP standards, it should seek those services at the time of the loan rather than delay obtaining an appraisal. Appraisal Firewall offers solutions to make mortgage lenders’ appraisal compliance worries a thing of the past. Credit unions that exercise this deferral must continue to underwrite real estate loans prudently, which includes an analysis of the borrower’s repayment capacity and a reasonable method to establish collateral value in the absence of an appraisal or written estimate of market value. Ralph... Dr. Golicz is a Founding Member of the Designated Appraiser Coalition (DAC). In addition, recent announcements from Fannie Mae, Freddie Mac, and other federal agencies provide flexibility for desktop appraisals and exterior-only appraisals for certain real estate loan transactions. Dear Boards of Directors and Chief Executive Officers: The NCUA Board approved a final rule on April 16, 2020, to increase the residential appraisal threshold from $250,000 to $400,000. Safety and Soundness Considerations for Raising the Residential Real Estate Threshold 4. A construction or development loan means any financing arrangement to enable the borrower to acquire property or rights to property, including land or structures, with the intent to construct or renovate an income producing property, such as residential housing for rental or sale, or a commercial building, such as may be used for commercial, agricultural, industrial, or other similar purposes. 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