Topic: Appraisals and Valuations
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Do you have a sample “Reconsideration of Value” form?
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We found several sample “Reconsideration of Value” or similar forms, which are linked in the resources below. Additionally, we note that the CFPB recently published an article stating that a “lender’s reconsideration of value process must ensure that all borrowers have an opportunity to explain why they believe that a valuation is inaccurate and the…
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If we use an automated valuation model, for how long can we use an appraisal for something like a HELOC? We have used one year as a rule of thumb before, but if the loan amount is under $400k and we adequately address and document all areas of an appraisal, can we use the appraisal even if it is two years old or older?
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The FDIC’s Appraisal Regulations do not specify exactly how long an existing appraisal or evaluation continues to be valid. Rather, an institution may use an existing appraisal or evaluation if it continues to reflect the market value of the property and you meet the other requirements in the federal banking agencies’ Interagency Appraisal and Evaluation…
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A prospective loan customer has agreed to purchase a group of properties, and we obtained an appraisal for the properties that is 15% below the purchase price. The seller will not lower the price, and the prospective loan customer would like us to obtain a different appraisal. Can we order a new appraisal through a different company, or would that violate a regulation? We have been advised that we will need to terminate our relationship with the current appraiser if we proceed with obtaining a second appraisal.
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If the first appraisal passed your bank’s appraisal review process, we do not believe it would be appropriate to obtain a second appraisal simply because your customer requested it. The federal banking agencies’ Interagency Appraisal and Evaluation Guidelines require financial institutions to establish policies for documenting the review of appraisal and evaluations. If you decide…
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Our bank recently completed a safety and soundness examination, and the examiner asked us to expand our training for employees designated to do real estate evaluations. These evaluations are done when a transaction does not require the services of a state certified or licensed appraiser. Do you have any training webinars available that relate to educating employees on the completion of these kinds of evaluations?
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The IBA is offering an upcoming webinar titled “Dealing with Appraisals: Regulations and Requirements” that will cover significant developments in the rules and regulations covering real estate appraisals and evaluations, as well as in-depth details of the appraisal and valuation process. The webinar will take place on Thursday, March 11 from 1:30–3:30 p.m. Central Time.…
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We are preparing an internal valuation for a 1–4 family property for purposes of a mortgage loan. Our internal valuation is based on a prior appraisal of the property as well as price comparisons listed on a public real estate website. Are we required to provide a copy of this internal valuation to our customer, or would this type of valuation be exempt from this requirement?
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Yes, we believe you would be required to provide a copy of your internal valuation to your customer. Under Regulation B, a creditor must provide an applicant with “a copy of all appraisals and other written valuations developed in connection with and application for credit that is to be secured by a first lien on…
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Do you have an appraisal review checklist that includes the new Uniform Standards of Professional Appraisal Practice (USPAP) requirements? I believe the USPAP consists of twelve items that would need to be part of an appraisal review checklist.
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We do not have an appraisal review checklist in our forms library that includes the 2020–21 USPAP standards; however, we have made a request to our Compliance Division Advisory Committee for an updated appraisal review checklist and will send you any submissions we receive. Additionally, although the 2020–21 USPAP standards are not available without purchase,…
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Can a small lender extending a higher-priced mortgage loan (HPML) under $250,000 use a broker price opinion or in-house valuation, or is an appraisal required?
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Appraisals are required for HPMLs unless an exception applies, as discussed below. Regulation Z generally requires lenders to obtain written appraisals for HPMLs, but it contains eight exceptions to the HPML appraisal requirement. Exceptions include loans that meet the criteria for a qualified mortgage (QM) loan, loans that do not exceed $27,200, loans secured by…
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We have two other real estate owned (OREO) properties, each of which has a book carrying value over $100,000. Are we required to obtain annual valuations for these properties? Do the annual valuations have to be appraisals?
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We are not aware of a requirement in Illinois law to obtain annual or periodic appraisals of OREO properties. Instead, we believe your bank is subject to the more flexible OREO standards established by your primary federal regulator, the FDIC, which mandates that banks obtain “appraisals or valuations as required to ensure assets are reported …
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Is our bank required to obtain multiple comparables as part of the appraisal/evaluation review process?
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The answer to your question depends on the property type and loan type, as well as whether your institution is relying on an appraisal or an evaluation. When reviewing appraisals or evaluations, your institution is required to ensure that they “comply with the Agencies’ appraisal regulations and are consistent with supervisory guidance and its own…
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We have a construction-only loan for the construction of a dwelling, and the loan has a twelve-month term. We have a second lien on the land underlying the dwelling and a first lien on the dwelling itself. Do the Equal Credit Opportunity Act (ECOA) appraisal requirements apply?
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Yes, we believe that the ECOA appraisal requirements do apply to this loan. The ECOA appraisal requirements apply to any loan “secured by a first lien on a dwelling,” and there is no exception for construction or temporary loans. For resources related to our guidance, please see: Regulation B, 12 CFR 1002.14(a) (“A creditor shall…