CHICAGO (March 21, 2017) – The nation’s largest professional association of real estate appraisers today cautioned federal regulators over increasing the transaction values requiring an appraisal, also known as the appraisal threshold.
The Appraisal Institute was responding to the Federal Financial Institutions Examination Council’s Joint Report to Congress issued today, which said the federal banking agencies are developing a proposal to increase from $250,000 to $400,000 the threshold for commercial real estate transactions. The report did not propose changes to the current residential real estate threshold of $250,000. The agencies continue to review the $1 million business loan threshold for owner-occupied real estate.
The nation’s banking regulatory agencies – the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve – are required every 10 years by the federal Economic Growth and Regulatory Paperwork Reduction Act of 1996 to review federal banking regulations.
“The Appraisal Institute urges federal regulators to exercise great care with regard to their proposed commercial threshold increase and potential business loan increase, particularly when the Federal Reserve has cited concerns over the commercial real estate market, and when concerns recently have been raised about the use of evaluations over appraisals by regulated institutions,” said Appraisal Institute President Jim Amorin, MAI, SRA, AI-GRS. “We also applaud the agencies’ prudent decision to maintain the current residential threshold.”
Amorin noted that, as part of its mission to serve the public interest, the Appraisal Institute believes that appraisals serve a vital role in risk mitigation, and that lenders and borrowers benefit from the role appraisals play.
He also noted that the Appraisal Institute has provided its recommendations to the regulatory agencies, including:
· Cautioning against an increase of the appraisal threshold levels to the federal bank regulatory agencies during the official EGRPRA comment period in 2014.
· Educating Congressional oversight committees on the importance of the current appraisal threshold levels during regulatory oversight hearings in 2015.
· Attending all of the Economic Growth and Regulatory Paperwork Reduction Act outreach meetings held in 2015, encouraging bank regulatory agencies to maintain the current threshold levels and putting more resources toward educating examined banks about existing exemptions to appraisal requirements.