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NCUA, NAFCU offer further guidance on real estate appraisal relief
In a Letter to Credit Unions released this week, the NCUA provided further guidance on rules approved during its April board meeting, including two rules related to real estate appraisals, which will become effective upon publication in the Federal Register.
The NCUA’s final rule raised the real estate appraisal threshold from $250,000 to $400,000 and, in addition to providing parity with banks, the rule will ensure that credit unions are not unfairly disadvantaged in the marketplace.
The board also approved an interim final rule, in alignment with a recent rule from the banking regulators, to defer the requirement to obtain an appraisal or evaluation for up to 120 days following the closing of a transaction for certain residential and commercial real estate transactions in order to help credit unions offer immediate liquidity and credit to members amid the coronavirus pandemic.
The NCUA notes that there is no limit on transaction size under the interim rule and all residential real estate loans, and all commercial real estate loans except acquisition, development, construction loans are covered.
NAFCU sent members Final Regulation Alerts yesterday with key considerations for both rules.
The Final Regulation on the interim final rule highlights that:
- the interim rule does not waive the requirement to obtain a required appraisal;
- the interim rule does not apply to transactions for acquisition, development, and construction of real estate;
- credit unions should make best efforts to obtain a credible valuation of real property collateral before the loan closing, and otherwise underwrite loans consistent with safety and soundness principles.
In addition, the NCUA advises that credit unions should only use a delayed appraisal decision when additional flexibilities are not possible within the scheduled closing date. This interim final rule will expire Dec. 31, 2020, unless extended by the board, and credit unions may submit comments on the rule up to 45 days after it is published in the Federal Register.
In the Final Regulation on the threshold increase, NAFCU notes that:
- transactions that fall below the $400,000 threshold will require a written estimate of market value consistent with safe and sound practices; and
- the final rule removes additional requirements for the appraisal exemption for certain residential real estate transactions in rural areas.
NAFCU will continue to work with the NCUA and other regulators to ensure immediate action is taken to provide credit unions with much needed relief in the wake of the coronavirus pandemic.
The association has several resources available online to assist credit unions, including an updated summary table of regulator actions, detailing actions taken by the NCUA and other agencies to provide guidance and relief to financial institutions.