The agencies invited comment on their preliminary finding that the proposed threshold would not pose a threat to the safety and soundness of financial institutions, as well as the data used to support the finding. The authority citation for part 323 continues to read as follows: Authority: documents in the last year, 787 c. Supervisory Experience. The historical loss information in the Reports of Condition and Income (Call Reports) also shows that the net charge-off rate for residential real estate transactions remained relatively unchanged after the increase in the threshold in 1994 through year-end 2007. 54. for better understanding how a document is structured but Public Law 115-174, 132 Stat. These estimated savings would not exceed 5 percent of annualized salary expense or 2.5 percent of annualized noninterest expense for any small, FDIC-supervised institutions.. In this regard, the agencies do not have reason to believe that the incremental increase in exempted transactions will create consumer protection concerns related to PSAs. In this regard, one commenter indicated that evaluations must be consistent with safe and sound banking practices and, according to agency guidelines, they should provide supporting information and an estimate of market value. provide legal notice to the public or judicial notice to the courts.  encourage regulated institutions to establish policies and procedures for obtaining Title XI appraisals when necessary for risk management. Revisions to the Title XI Appraisal Regulations, A. The OCC, Board, and FDIC (collectively, the agencies) are adopting a final rule to amend the agencies' regulations requiring appraisals of real estate for certain transactions. 12 U.S.C. Commenters also noted that appraisals are required to follow established requirements as provided by USPAP, which guarantees a certain level of information and quality, whereas evaluations lack standard requirements for information or structure. 95. documents in the last year, 951 In designing the scope of the threshold increase, the agencies chose to align the definition of residential real estate transaction with industry practice, regulatory guidance, and the categories used in the Call Report in order to reduce the administrative burden of determining which transactions were exempted by the final rule. Weâve made big changes to make the eCFR easier to use. In addition, the Dodd-Frank Act contained provisions that addressed independence requirements applicable to “valuations” for consumer-purpose mortgages secured by a consumer's principal dwelling. See OCC: 12 CFR 34.43(b); Board: 12 CFR 225.63(b); FDIC: 12 CFR 323.3(b). Section 722 of the Gramm-Leach-Bliley Act  As noted in the proposal, and according to data submitted by commenters, the cost of obtaining an evaluation can be substantially less than the cost of obtaining an appraisal, with estimates ranging from evaluations costing $100 less than the cost of an appraisal or less than half (with one estimate of 20 percent) of the cost of an appraisal. The agencies also concluded that automatic adjustments to the threshold or agency commitments to set timetables for future threshold increases would not be appropriate. These data are also consistent with some commenters' assertions that lenders would continue to use a risk-based approach in determining whether to obtain an evaluation or an appraisal for a particular transaction, regardless of the threshold amount. In addition, the agencies have issued guidance to help institutions ensure that they have the proper controls to fulfill independence expectations. and the requirement to subject appraisals to appropriate review for compliance with USPAP (as discussed below) are effective the first day after publication of the final rule in the Federal Register. 43. Finally, by potentially reducing valuation-related costs associated with residential real estate transactions for properties greater than $250,000 but not more than $400,000, the proposed rule could result in a marginal increase in lending activity of small, FDIC-supervised institutions for properties of this type. Analysis of Loss Rates. legal research should verify their results against an official edition of A regulated institution may presume that appraisals for residential real estate transactions are not complex, unless the institution has readily available information that a given appraisal will be complex. The final rule makes a conforming change to add to the list of exempt transactions those transactions secured by residential property in rural areas that have been exempted from the agencies' appraisal requirement pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act. In addition, the proposed rule would have required evaluations for transactions that are exempt from the agencies' appraisal requirement under the rural residential appraisal exemption under section 103 of EGRRCPA. (rural residential appraisal exemption). 3350(5). During this timeframe, the net charge-off rate for small, FDIC-supervised institutions ranged from 1 basis point to 9 basis points. 101. Section 1.07 November 20, 2020 Appraisal Guidelines Page 3 of 151 Correspondent Seller Guide Broker Seller Guide Overview Introduction The safety and soundness of mortgage loans secured by real estate depends upon the adequacy of the underwriting supporting the transaction. An evaluation provides a market value of the real estate collateral. Other commenters supporting a threshold increase supported a higher threshold, such as $500,000. The proposed rule would have amended the agencies' appraisal regulations to reflect the rural residential appraisal exemption under section 103 of EGRRCPA in the list of transactions that are exempt from the agencies' appraisal requirement. 69. This analysis of the 2017 HMDA data indicates that the increased threshold will affect a low aggregate dollar volume but a material number of transactions, suggesting the potential for financial savings and burden relief with limited additional risk. Without FIRREA, depositors in bankrupt S&Ls would have lost all their money. 3350(6). OCC: 12 CFR part 34, subpart G; Board: 12 CFR 226.43; FDIC (through adoption of CFPB rule): 12 CFR 1026.35(c). In addition, the agencies are required by Title XI to weigh safety and soundness implications regarding any proposed threshold increase and obtain CFPB concurrence. 12. After considering the comments received, the agencies have decided to implement the requirement for regulated institutions to obtain evaluations when the rural residential appraisal exemption is used. Finally, the proposal would amend the agencies' appraisal regulations to require regulated institutions to subject appraisals for federally related transactions to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice (USPAP), as required under section 1473(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).  Safety and Soundness Considerations for Raising the Residential Real Estate. The agencies' analysis of the charge-off rates offered no evidence that increasing the appraisal threshold to $400,000 for residential real estate transactions would materially increase the risk of loss to financial institutions. 107. And no one is exempt from the Civil Rights Act of 1866, which prohibits all racial discrimination in the sale or rental of property. 81. The agencies have used these procedures to assess the use of evaluations and ensure that they are prepared according to safety and soundness principles and will continue to examine institutions' evaluation policies and practices. 1639e). The agencies received very few comments on the proposed evaluation requirement. Similarly, in requiring evaluations for exempted rural transactions and adding the appraisal review requirement, the agencies considered the administrative burden of these requirements on IDIs consistent with principles of safety and soundness and the public interest. Some commenters opposed to an increase raised concerns that free online valuation information and tools may be flawed due to, for example, their reliance on public records with data entry errors.  OCC: The Regulatory Flexibility Act (RFA), 5 U.S.C. The purpose of Title XI is to protect federal financial and public policy interests  One of these commenters suggested that the threshold be based on wage growth and housing affordability. See OCC: 12 CFR 34.43(a)(7) and (b); Board: 12 CFR 225.63(a)(7) and (b); FDIC: 12 CFR 323.3(a)(7) and (b). 65. These can be useful 12 U.S.C. One commenter suggested that evaluations may not constitute appraisals for purposes of appraisal contingency clauses and may cause confusion to consumers opting for these contingencies. In 2018, Congress amended Title XI by adding the rural residential appraisal exemption to provide relief for financial institutions engaging in residential real estate transactions in certain rural areas. 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