New Appraisal Thresholds for Residential Real Estate Loans

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Michael P. Kurtz, CPA

In September 2019, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency, the Agencies, issued an amended rule adjusting the threshold for appraisals on residential real estate loans from $250,000 to $400,000. Prior to the new appraisal guidelines, any transaction over $250,000 would require an appraisal, while any transaction under the threshold would require a property evaluation.

 The following points come from the rule, as announced by the FDIC:

  • Creates a new definition of residential real estate transactions and raises the threshold for requiring an appraisal for such transactions from $250,000 to $400,000.
  • For transactions exempt under the applicable thresholds requires an appropriate evaluation of the real property collateral that is consistent with safe and sound banking practices but does not need to be performed by a licensed or certified appraiser or meet the other Title XI appraisal standards.
  • Incorporates the appraisal exemption for rural residential properties added to Title XI by Section 103 of EGRCCPA and requires evaluations for these transactions.
  • Requires appraisals for federally related transactions to be subject to appropriate review for compliance with the USPAP, under Title XI, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI) requires the Agencies to adopt regulations prescribing standards for appraisals used in connection with federally related transactions within the jurisdiction of each agency, and that they are performed by certified or licensed appraisers. Title XI authorizes the Agencies to establish a threshold level below which appraisals are not required.   

The rule will be effective the first day after publication in the Federal Register, except for provisions related to appraisal review and the evaluation requirement pertaining to the rural residential exemption, which becomes effective January 1, 2020.