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NCUA Adopts Two New Appraisal Rules

by Todd Paradis | Apr 22, 2020

Defers Appraisals for up to 120 Days During COVID-19 Pandemic; Finalizes Increased Residential Appraisal Threshold

On April 16, the National Credit Union Administration (NCUA) adopted two new rules impacting real property appraisers and the need for their services by credit unions.

First, in alignment with an earlier move by the federal banking agencies, the NCUA is taking immediate action to provide relief to institutions that are facing challenges in obtaining appraisals due to the COVID-19 pandemic. This relief is in the form of deferral of the procurement of an appraisal in connection with a retained loan for up to 120 days after the closing date of the loan.

While every state has issued different guidance’s regarding stay at home orders and how they define essential workers, the NCUA acknowledges the challenges parts of the country are facing to obtain appraisals for mortgage or refinance loans. Many appraisers and homeowners are uncomfortable with being around other individuals for the health and safety of their families. The interim final rule (IFR) states that in the event credit unions are unable to obtain a written estimate of market value (either an appraisal or evaluation, where appropriate) at the time they close the transaction, they will be able to defer the requirement to obtain the appraisal for up to 120 days after loan closing.

Before credit unions take advantage of the relief provided by the IFR, these institutions must make every effort to obtain a market value of the property. The IFR pertains to any loan transactions that are purchased or refinance residential or commercial real estate properties, except for acquisition and development construction loans, which are excluded due to the risks these properties possess.

The NCUA also adopted a final rule on the real estate threshold amount below which appraisals are not required for 1-4 unit residential real estate transactions from $250,000 to $400,000. This is the first increase on the threshold since 2002 and aligns with an earlier increase made by the federal bank regulators. ASA, along with other industry groups, wrote to oppose both sets of threshold increases, pointing out that seven in ten Americans would be denied the benefits of an appraisal under Title XI of FIRREA.

To read ASA’s prior comments on the threshold increase, click here.