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Advisory Clarifies Property Evaluation Expectations

Monday, March 7, 2016 - 10:45AM

The Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (OCC) announced last week an advisory to clarify their expectations for the use of property evaluations by banking institutions. Existing regulations require financial institutions regulated by the agencies to obtain an appraisal by a state-licensed or state-certified appraiser for any real estate-related financial transaction, with some exceptions. The advisory released last week describes the following transaction types that require an evaluation, but not an appraisal: transactions in which the transaction value or loan amount is $250,000 or less; certain renewals, refinances or transactions involving existing extensions of credit; and real-estate secured business loans of $1 million or less and when the sale of, or rental income derived from, real estate is not the primary source of loan repayment. The advisory also addresses alternative valuation approaches and methods that financial institutions may use in areas with limited comparable property sales.

 

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