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Regulators Clarify Use of Evaluations in Place of Appraisals

Monday, March 7, 2016

Three financial regulatory agencies have clarified current rules on the use of appraisals versus property evaluationsThree financial regulatory agencies have clarified current rules on the use of appraisals versus property evaluations in real estate transactions.  The guidance, published by the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) applies to all state member banks, bank holding companies, and nonbank subsidiaries of those holding companies regardless of their size but does not apply to institutions regulated by the National Credit Union Administration.

According to the advisory's cover letter the clarifications arose out of outreach meetings held between the agencies and stakeholders regarding requirements of the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA).  The three agencies are still in the process of conducting a review of their regulations under EGRPRA including their appraisal regulations to evaluate whether they are outdated, unnecessary or unduly burdensome.  The current guidance is issued in response to specific questions raised by financial industry representatives about the two methods of value estimation, when they can be used and how they can support a conclusion about value in the absence of sufficient recent comparable sales.  The advisory stresses that it is not intended to indicate that the agencies have completed their review of appraisal requirements.n and the institution's decision to engage in the transaction.

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