WASHINGTON -- Federal banking and thrift regulators plan to finish a long-awaited relaxation of the real estate appraisal rules today.

As of today, a bank or thrift will not need a certified appraisal on real estate loans under $250,000. The cutoff had been $100,000 since 1990.

The new rules also will exempt business loans under $1 million as long as real estate is not the primary means of repayment.

The change, designed to free up more credit for real estate, has been in the works since March 1993. Vehement protests from the appraisal industry -- and 5,000 letters over two comment periods -- delayed the agencies.

Lawmakers Pushing Reversal

Ironically, as regulators finish their work, some members of Congress want to roll the rules back.

House Banking Committee Chairman Henry B. Gonzalez plans to propose an amendment to the Housing Reauthorization Act that would require appraisals by a certified or licensed professional for all real estate loans.

The law would amend the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which first mandated professional appraisals for real estate loans.

Under the Texas Democrat's plan, bank employees could perform the evaluations as long as they were licensed appraisers.

Backing for Amendment

The Housing bill is scheduled to be considered by the Banking Committee June 15 and 16. The amendment also is backed by committee members Rep. Floyd H. Flake, D-N.Y.; Rep. Charles E. Schumer, D-N.Y.; and Rep. Peter Deutsch, D-Fla.

"Basically it would take it [the threshold] down to zero," Edward Yingling, the American Bankers Association's lead lobbyist, said of Rep. Gonzalez's amendment. "It's going to be a very tough fight."

Diane Casey, executive director of the Independent Bankers Association of America, concurred: "We're treating it as a real threat."

Mr. Yingling pledged "an all-out effort" to defeat the amendment but acknowledged that "it does have strong sponsorship."

If the amendment is approved by the House, it would still need to pass the Senate.

Mr. Yingling said he is hopeful the change would be rejected in the Senate, which is where support for the relaxation originated in 1992.

Criticism of Appraisals

The banking industry has pushed for the changes, arguing that certified appraisals have delayed mortgage loans, driven up the cost of lending, and added to the industry's paperwork burden.

Consumer advocates have countered that relaxing appraisal requirements could lead to sloppy lending, which could result in writeoffs.

It is considered "must" legislation this year, so any amendment attached to it has a good chance of being enacted into law.

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