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NCUA’s Proposed Rule on Commercial Real Estate Appraisals

The National Credit Union Administration (NCUA) Board issued a proposed rule last week that would increase the threshold below which appraisals would not be required for non-residential real estate transactions from $250,000 - $1 million.

For transactions that would be exempted, federally insured credit unions would still be required to obtain a written estimate of market value of the real estate collateral that is consistent with safe and sound lending practices. (In April 2018, the banking agencies increased the same threshold for banks from $250,000 to $500,000.)

The $1 million threshold is consistent with the requirements of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and would exempt an additional 39 percent of commercial real estate transactions while still covering almost 90 percent of the total dollar volume of such transactions.

The proposed rule would also: a) restructure the regulation to clearly indicate when a written estimate of market value, an appraisal conducted by a state-licensed appraiser, or an appraisal conducted by a state certified appraiser is required; b) implement a provision of S. 2155 exempting from the appraisal requirements real estate transactions where the property is located in a rural area, valued below $400,000, and no state certified or licensed appraiser is available; and c) make conforming amendments to the definitions section.

The California and Nevada Credit Union Leagues will review the proposed rule and post a full summary in PowerComment.

The NCUA Board also received the Share Insurance Fund Quarterly Report, received a briefing on the appointment of Administrative Law Judges, and approved a Texas Member Business Loan (MBL) rule meant to create consistency between the Texas MBL rule and the new NCUA rule that became effective June 5, 2018. For more details on these actions, see NCUA’s Board Action Bulletin.

Lastly, Board Member Rick Metsger was recognized for his five years of service with the NCUA, and Sarah Vega (chief of staff for McWatters) was recognized for her 10 years of service with the NCUA.

PowerComment is the powerful online tool designed to allow you to find up-to-date and easily digestible information on proposed regulations, participate in online discussions to increase your understanding of proposed rules, and write your personalized comment letter to regulators and immediately submit it.