On April 14, 2020 the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, National Credit Union Administration, and the Consumer Financial Protection Bureau (jointly, the agencies) issued an interim final rule to temporarily defer real estate-related appraisals and evaluations under the interagency appraisal regulations. The agencies are providing this temporary relief to allow regulated institutions to extend financing to creditworthy households and businesses quickly in the wake of the national emergency declared in connection with COVID-19.
Interim Final Rule
The interim final rule 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. 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. The interim final rule is effective April 17, 2020 through December 31, 2020.
Joint Statement
In addition, the agencies, in consultation with the Conference of State Bank Supervisors, issued a joint statement to address challenges relating to appraisals and evaluations for real estate-related financial transactions affected by COVID-19.
The interagency statement outlines other flexibilities in industry appraisal standards and in the agencies’ appraisal regulations and describes:
- Flexibility for Physical Property Inspections;
- Temporary changes to Fannie Mae and Freddie Mac appraisal standards; and
- Existing exceptions in Appraisal Regulations.
Compliance Concerns
Solving one problem often gives rise to another; that may the case here. The agencies now 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. However rules contain in Regulation B (§ 1002.14) and Regulation Z (§ 1026.35(c)) require that the borrower receive a copy of each written appraisal no later than three business days prior to consummation of the loan.