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ASA, Others Send Comments to NCUA Opposing Increase in Appraisal Threshold

Dec 13, 2018

On December 2, ASA and other appraisal organizations filed comments in connection with a National Credit Union Association (NCUA) proposal to increase its commercial real estate appraisal threshold to $1 million. In the comments, ASA raised opposition to changes in any current appraisal threshold (commercial or residential), and pointed out that the agency’s own statements (and references to other agencies’ writings) make the argument against the various proposals under consideration.

On the residential front, ASA’s comments point to the NCUA’s own distillation of the Joint Agency findings from the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) process:

One, that such an increase would do little if any to alleviate burdens on regulated entities since appraisals would still be required by government guarantors, insurers, or sponsored enterprises; Two, that appraisals provide an essential consumer protection that was further codified into FIRREA as part of the Dodd-Frank Wall Street Reform Act of 2010; and Three, that the 2008 financial crisis exposed the fact that “imprudent mortgage lending can pose significant risks to financial institutions”.

On the commercial front, ASA points to NCUA’s own findings that the collateral valuation component of underwriting has been a strength of the current system, and should not be weakened. ASA’s comments also underscore that the proposed increase would exempt two in three transactions from appraisal requirements, and see a seven fold increase in the total dollar volume of transactions exempted from appraisal requirements. ASA also points out NCUA’s own acknowledgement that the data used to develop the position was lacking in the very kinds of transactions that would now be exempted.

ASA also emphasizes that moving to a single threshold would put NCUA out of step with other financial regulators in the commercial lending space, and would rely on less robust written estimates of value than provided in a USPAP-compliant appraisal while using a minimal cost difference between valuation products to justify their proposal. Finally, ASA points to movements to weaken collateral valuation requirements by other residential and commercial market participants as undermining NCUA’s position that all participants still have prudent appraisal requirements.

ASA was pleased to be joined by the following groups as signatories on the letter:
American Society of Farm Managers and Rural Appraisers
California Coalition of Appraisal Professionals
Delaware Association of Appraisers, Inc.
Maryland Association of Appraisers
Michigan Coalition of Appraisal Professionals
Mississippi Coalition of Appraisers
North Carolina Real Estate Appraiser Association
South Carolina Professional Appraisers Coalition
Tennessee Appraiser Coalition

In addition, the following organizations filed letters associating with the comments:
Louisiana Real Estate Appraisers Coalition
Virginia Coalition of Appraisal Professionals
West Virginia Council of Appraiser Professionals

To read the full text of the comments, click here.