ALEXANDRIA, Va. – NCUA said yesterday a credit union need not obtain an appraisal when selling a participation interest in a seasoned member business loan.
In a new legal opinion posted yesterday, NCUA told CU Business Group, LLC, that NCUA’s regulations requiring loan appraisals include certain exemptions for loans that met the appraisal requirements at the time of origination, such as those being sold by the Portland, Ore., MBL CUSO. Those loans, according to the CUSO, have been held on the originating credit union’s books for several years, are in current repayment status, and have a loan-to-value ratio of less than 80%, with no deterioration in the subject property. The terms, conditions and pricing of the loan at origination remain the same at the time of the participation sale, says the CUSO.
“Under the facts you presented, the sale of a participation interest in and MBL secured by commercial real estate is exempt from the appraisal requirement provided the note meets the criteria discussed (in guidelines clarifying the appraisal rule),” wrote NCUA Associate General Counsel Hattie Ulan, in a legal opinion dated April 10.
The guidelines clarify the appraisal rule and provide supervisory guidance regarding prudent appraisal and evaluation programs for institutions involved in real estate lending. Under the rule, no new appraisal is required in connection with the purchase, sale, investment in, exchange of or extension of credit that, in turn, is secured by a loan or loans backed by an interest in real property and that met appraisal rule requirements when first issued.
