JULY 25, 2024 – The Federal Agencies have issued the Final Rule on Real Estate Valuations: Quality Control Standards for Automated Valuation Models. Hopefully, you can cut and paste the URL below. If not, go to an Agency website and type in the above words in Search and it should come up.
https://www.fdic.gov/news/financial-institution-letters/2024/final-rule-real-estate-valuations-quality-control-standards?source=govdelivery&utm_medium=email&utm_source=govdelivery
This guidance was desperately needed because we all know computer models actively seek out the skin color and/or gender of borrowers. Once they find this information and the borrower(s) is not of a specific hated class, then the AVM will apply a -20% adjustment to whatever initial value it generates. If the borrower is of a specific hated class, then obviously no downward adjustment is applied. Who knows, maybe even an upward adjustment is applied heh heh
Yes, sarcasm intended. What a freakin’ joke! Gotta watch out for them darn racist and sexist computer models;)
Shalom,
The Mann
Tag Archives: federal agencies
Reconsiderations of Value for Residential Real Estate Valuations
JULY 21, 2024 – The Federal Agencies have issued the ‘Interagency Guidance on Reconsiderations of Value for Residential Real Estate Valuations.’ You can cut and paste this link to get to the website that will provide you additional information.
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20240718a.htm
The only item I will point is the following quote:
“This final guidance is supervisory guidance that does not have the force and effect of law or regulation and does not impose any new requirements on supervised institutions.”
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20240718a.htm
The only item I will point is the following quote:
“This final guidance is supervisory guidance that does not have the force and effect of law or regulation and does not impose any new requirements on supervised institutions.”
Facilitating Real Estate-Related Transactions Affected by COVID-19
Summary
The Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System (collectively, the agencies) issued an interim final rule (IFR) that allows institutions supervised by the agencies to defer obtaining an appraisal or evaluation for up to 120 days after the closing of certain residential and commercial real estate loans. The agencies, with the National Credit Union Administration and the Consumer Financial Protection Bureau, in consultation with the state financial regulators, also issued an Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions Affected by the Coronavirus (Statement). The Statement outlines existing flexibilities provided by industry appraisal standards and the agencies’ appraisal regulations and highlights temporary changes to Fannie Mae and Freddie Mac appraisal standards to facilitate real estate transactions.
Statement of Applicability to Institutions under $1 Billion in Total Assets:
This Financial Institution Letter (FIL) applies to all FDIC-supervised institutions.
Suggested Distribution
FDIC-Supervised Banks
Highlights:
The agencies recognize that the National Emergency declared in connection with coronavirus disease 2019 (COVID-19) presents challenges for individuals performing appraisals and evaluations to perform inspections and complete valuation assignments in a timely manner.
- The IFR:
- Defers 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, excluding transactions for acquisition, development, and construction of real estate
- States that the agencies are providing this relief to allow regulated institutions to expeditiously extend liquidity to creditworthy households and businesses in light of recent strains on the U.S. economy as a result of COVID-19.
- Indicates regulated institutions should make best efforts to obtain a credible valuation of real property collateral before the loan closing, and otherwise underwrite loans consistent with the principles in the agencies’ Standards for Safety and Soundness and Real Estate Lending Standards.
- States that this temporary change to the appraisal rules expires on December 31, 2020.
- The Statement:
- Outlines existing flexibilities in the Uniform Standards of Professional Appraisal Practice and the agencies’ appraisal regulations.
- Advises that there are temporary changes to Fannie Mae and Freddie Mac appraisal standards that can assist lenders during this challenging time.
RESIDENTIAL APPRAISAL THRESHOLD INCREASE – MUCH ADO ABOUT NOTHING
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:)
The Mann
NEW INTERAGENCY GUIDANCE ISSUED
October 16, 2018 – The Federal Agencies have issued an updated guidance titled ‘Frequently Asked Questions on the Appraisal Regulations and the Interagency Appraisal and Evaluation Guidelines.’ This rescinds a similar document issued in 2005.
You can download this 14-page document at the following URL:
https://www.fdic.gov/news/news/financial/2018/fil18062a.pdf
Please pass this document along to your in-house appraisal staff and other bankers.
Reportedly, there are no significant changes. Simply, an update of a 13-year old document with some needed clarification.