Federal financial regulators have adopted a rule that increases the threshold for residential real estate transactions requiring an appraisal from $250,000 to $400,000.
The last time the appraisal threshold was changed was in 1994. Considering the price appreciation that has occurred over time in residential real estate transactions, this rule change will provide burden relief without posing a threat to the safety and soundness of financial institutions.
For transactions that don’t meet the new appraisal requirement, the final rule requires institutions to get an evaluation to estimate the market value of real estate collateral. This is crucial because evaluations are typically not as burdensome as appraisals. Further, the evaluations have been required since the 1990s.
The final rule also incorporates the appraisal exemption for rural residential properties provided by the Economic Growth, Regulatory Relief, and Consumer Protection Act. This bill also requires evaluations for these transactions. Additionally, the final rule requires institutions to review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice.
The rule has been approved by the federal regulators, including the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. The agencies have consulted with the Consumer Financial Protection Bureau (CFPB) and got the bureau’s approval for the increased threshold.
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