WASHINGTON -- The Federal Reserve Board on Wednesday said a joint proposal by bank regulatory agencies to relax appraisal rules doesn't go far enough.

Though the Fed governors voted unanimously to approve the proposal, they urged bankers to write in and request more loosening before a final plan is adopted later this year.

As reported Tuesday in American Banker, the agencies proposed raising from $100,000 to $250,0000 the minimum loan requiring an examination by a certified or licensed appraiser.

But several Fed governors said they would favor a minimum as high as $500,000 or $1 million.

"The higher threshold of $250,000 certainly is moving in the right direction," said Fed member Wayne D. Angell.

"But I really don't understand why it shouldn't be $500,000."

Reducing the Burden

The aim of the plan is to reduce some of the industry's regulatory burden and make it easier for banks to lend.

While the proposal was jointly developed by the four regulators in conjunction with President Clinton's regulatory relief initiative, each agency must individually consider and adopt it.

The regulators will accept comments until early July before producing a final version.

Mr. Angell said the agencies had no solid data demonstrating that loans slightly in excess of $250,000 were in any greater need of certified appraisal than those of lesser value.

The Fed has consistently argued for higher limits.

Just last year, the Federal Deposit Insurance Corp., Office of Thrift Supervision, and Office of the Comptroller of the Currency raised their appraisal exemptions from $50,000 to $100,000, bringing them in line with the Fed's higher exemption.

Blanket Exemption Sought

Several Fed governors predicted that unless a higher threshold is adopted, the matter would come before the board again soon.

The interagency proposal also exempts from appraisal rules all business loans under $1 million, as long as the real estate backing the loan is not the primary source of repayment.

Some Fed governors argued for a blanket exemption for these loans, regardless of value.

"Why not just eliminate the $1 million all together?" Mr. Angell said.

Like the Fed, the banking industry has lobbied for higher exemptions. But bankers cheer any easing of the appraisal rules.

|$250,000 Is Great'

"We applaud the actions taken today to help ease the regulatory burden and stimulate lending," said James R. Lauffer, chairman and chief executive of First National Bank of Herminie, Irwin, Pa., and president of the Independent Bankers Association of America.

"We think that for business loans, a $500,000 limit can be justified," said James McLaughlin of the American Bankers Association. "But $250,000 is great."

Treasury Secretary Lloyd Bentsen also praised the changes.

He contrasted President Clinton's initiatives to end the credit crunch with those of the Bush administration, which he said were "little more than jaw-boning."

"We don't know on what the administration is basing this radical retreat to the 1980s loan documentation standards," said Chris Lewis of the Consumer Federation of America.

"We believe the elimination of documentation requirements generally increases the portfolio risks in the banking system."

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