February 1, 2019 – The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency proposed raising the residential appraisal threshold from $250,000 to $400,000.
The Appraisal Institute and numerous other groups are opposing this increase. That is understandable. But, the hyperbole that these organizations and appraisers put out there is no different than the Fake News problem.
Based on my experience of over 25+ years in banking, I estimate that less than one-hundredth of 1% of residential appraisals will be affected. Probably less than that.
GSEs are responsible for 90%-95% of residential loans and, thus, residential appraisals. All such loans are exempt from FIRREA. So, the Federal Agencies can increase the residential threshold from $250,000 to $1 Trillion and it wouldn’t be noticed by 99%+ of residential appraisers! Also, it will have no effect on the national economy.
For the most part, the only residential properties that stay under FIRREA are second/vacation homes, model homes in subdivisions, and rental homes (e.g. an investor rents 20 houses around a city). Some ‘regular’ house loans remain under FIRREA – this is when the bank does not sell the loans to the secondary market. Banks typically don’t keep many of these loans on their books. But, yes, they do keep some.
Appraisers just need to keep an eye on the GSEs. They are the ones who make decisions that affect the entire residential appraisal industry in a significant way. Don’t worry about the FIRREA issue at hand. As they say, it is a nothing burger:)
Remember, Spend Forward, Use Forward!