[rcooper]

A question we received from a member:

Does anyone use Automated Valuation Model (AVM) & Real Condition Reports as evaluations? We’ve been told that Regulators aren’t fans of this but would like to hear if anyone else has other experiences.

Topic

[rcooper]

Answer from Eric Collinsworth:

AVM’s themselves (along with the condition reports and photos) would not generally conform or qualify as an evaluation. The results of an AVM are based on a mathematical calculation and do not include human input or logic to conclude an estimated market value. While they can be used as part of an evaluation (as a source for the sales used, for example), they should not be relied up as an evaluation in whole without further support included.

Eric will discuss this and other mistakes you could encounter during while reviewing appraisals and evalutaions in his upcoming program, Identifying Common Mistakes During the Appraisal Compliance Review. For more information on Eric’s webinar click here: https://mycomplianceresource.com/event-registration/?ee=261.

[Sandy]

I have a loan in the amount of $44,000 on 4 residential lots and will be written for 12 months (temporary loan). The four lots are worth $12,000 apiece. There are exemptions in Dodd-Frank on not needing to have an appraisal. One exemption is TEMORARY BRIDGE LOAN (FOR TWELVE MONTHS OR LESS). Does that mean no appraisal OR evaluation needs to be completed?

[rcooper]

I believe you are talking about the appraisal requirement in the Reg Z HPML rule, correct? The HPML rule outlines certain requirements for appraisals on HPMLs and also has a second appraisal requirement for flip transactions. There is an exemption in 1-26.35(c)(2)v)from the requirements for “a loan with maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer’s principal dwelling.”

You need to follow the interagency appraisal guidelines and your agency’s appraisal regulations. If an appraisal isn’t required an evaluation should be performed. Here’s a link to the FDIC’s appraisal regulations https://www.fdic.gov/regulations/laws/rules/2000-4300.html#fdic2000part323.3 and a link to the interagency FAQs https://www.occ.treas.gov/news-issuances/bulletins/2018/bulletin-2018-39a.pdf.

Let us know if you have additional information or questions.

[Author]

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