NCUA increases commercial loan appraisal threshold!
In their July Board meeting, NCUA’s Board approved a final rule, which increases the loan value threshold for when a commercial real estate appraisal is not required from $250,000 to $1,000,000. In addition to the threshold adjustment, the final rule also includes an exemption for real estate transactions in rural areas as well as other clarifying revisions and amendments. NAFCU previously blogged about the proposed rule and examination expectations which may provide additional information. This is a welcome relief for credit unions and presents a good opportunity to review NCUA’s appraisal rules, which we have not blogged about in some time.
Appraisal Thresholds. Section 722.3 generally requires an appraisal for federally related real estate transactions unless an exception applies. The Final Rule amends several of these exceptions, the first being a threshold exception. NCUA’s appraisal rules do not apply to most residential loans if the transaction value is $250,000 or less. Generally, any residential loan with a transactional value of $26,700 or less requires only a “written valuation” that meets specific requirements under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). A residential loan valued between $26,700 and $250,000 only requires a formal appraisal if it is a “higher-priced” mortgage loan, and most residential loans of $250,001 or more require a formal appraisal. See, 12 Part 1026, Supp. I, Comment 35(c)(2)(ii)-3(vi). As previously discussed, an appraisal is required for non-residential loans valued at $1,000,000 or more.
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