NCUA one-ups bank regulators in easing appraisal limit

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Bank regulators doubled the appraisal threshold for most commercial real estate loans to $500,000 earlier this year. Now, the National Credit Union Administration plans to take things several steps further.

NCUA’s board Thursday proposed a rule to increase the appraisal threshold for non-residential properties to $1 million from the current $250,000 level.

Federal credit unions and other interested parties have 60 days to comment on the proposal.

In addition to the higher CRE threshold, NCUA is also seeking comment on a plan to increase the $250,000 appraisal threshold for residential real estate loans.
“Much like an Advance Notice of Proposed Rulemaking, we’d like comments on whether we should consider changes” to the residential real estate appraisal standard, Larry Fazio, director of NCUA’s Office of Examination and Insurance, said Thursday.

Agency officials said the proposed rule unveiled Thursday offers an opportunity to provide regulatory relief to thousands of small-dollar borrowers without unduly impacting safety and soundness, since larger transactions will continue to require appraisals.

In transactions that fall below the proposed $1 million threshold, a written estimate of market value will still be required.

A seemingly mundane feature of most real estate loans, appraisals have been an increasingly hot topic in recent months as banks and credit unions, especially those in rural areas, have struggled with what many have called a shortage of qualified appraisers. Indeed, a provision of the recently enacted Economic Growth, Regulatory Relief and Consumer Protection Act (S-2155) contains a provision waiving appraisal requirements for rural properties under $400,000 if one can’t be done in a timely manner.

Last month, North Dakota sought a federal waiver from appraisal requirements citing long waits for appraisers.

NCUA included a review of real estate appraisal rules on the spring rulemaking agenda it released in May.

Credit union groups were quick to express support for the proposal.

Lucy Ito, president and CEO of the National Association of State Credit Union Supervisors commended NCUA “for proposing a rule that would provide relief to credit unions.”

Ryan Donovan, chief advocacy officer at the Credit Union National Association, commended the regulator on the move and said CUNA “looks forward to commenting on the proposal.”

In other actions, the board approved a member business lending rule proposed by Texas that provides parity with recent changes made at the federal level. In June, NCUA approved an amendment to its regulation exempting loans on one-to-four dwellings from counting as member business loans.

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Commercial real estate lending Appraisals Commercial lending Commercial mortgages NCUA