Me Appraisal Institute is readying a lawsuit that will make fundamental challenges to the federal regulations implementing the appraisal requirements set by the Financial Institutions Reform Recovery and Enforcement,act of 1989.

The smaller National Association of Independent Fee Appraisers already has filed suit challenging the increase by banking and thrift regulators to 100.000 - the threshold value of residential properties for which appraisals must be done by licensed or certified appraisers.

The Appraisal institute had announced last fall it would sue to reduce the threshold back to $50,000. Since then, however, it has decided to make a more fundamental assault on the regulations, according to Donald E. Kelly. vice President for government in the trade groups Washington office. He said his organization has neither decided when to file its suit nor whether to limit it to a single defendant, the Federal Deposit Insurance Corporation.

Thee Fee Appraisers, in a suit filed May 13 in federal district court in Washington, named the FDIC, the Office of the Comptroller of the Currency and the office of thrift Supervision. all of which have increased the threshold since last September.

The Federal Reserve Board has had a $100,000 threshold, but has a proposed regulation to lower it to $50,000, though it is not expected to do so.

In addition to challenging the regulators' authority to set de minimis thresholds. the Appraisal Institute will also assert that other provisions of the regulations are illegal, including:

* The provision permitting licensed appraisers to perform appraisals of nonresidential properties if the amount involved is less than $250,000.

* The provision permitting licensed appraisers to perform in appraisals of complex one- to four-family properties if the amount involved is less than $250,000.

* The provision suggesting that regulated institutions may presume and make a "final" determination that an appraisal is "non-complex" unless it is changed to reflect the fact that any such determination is tentative, pending a licensed appraiser's physical inspection and evaluation of the property.

A "complex" property is one that is atypical in its market, such as a historic building or one adjacent to a contaminated site.

The Appraisal Institute has tried for several years to persuade the bank and thrift regulators to adopt a system that would recognize one level of licensing and two levels of certification. Under that system:

* Licensed appraisers would be authorized to perform appraisals of relatively minimum risk with respect to federally insured institutions, such as noncomplex one-to four-family residential properties with a value of under $1 million.

* State certified residential appraisers would be authorized to perform appraisals of one- to four-family residential properties that are either complex or valued in excess of $1 million.

State certified general appraisers would be authorized to perform all appraisals regardless of the amount involved.

The Appraisal Institute said more than 25 states have adopted model laws incorporating these concepts.

Title XI of FIRREA set appraisal standards, including a requirement the federally regulated lenders have appraisals done by licensed or certified appraisers. It originally was to go into effect last Dec. 3 1, but the FDIC Improvement Act of 1991 extended it to next Dec. 31.

The regulators blame three lobbying groups-the American Bankers Association, the Independent Bankers Association of America and the National Association of Realtors - for delays in getting the appraisal requirements in place.

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