Appraisals

CAN CREDIT UNIONS DEFER THE REQUIREMENT TO OBTAIN AN APPRAISAL OR WRITTEN ESTIMATE OF MARKET VALUE UNTIL AFTER THE CLOSING OF A REAL ESTATE TRANSACTION?

Yes. On April 16, 2020, the NCUA issued an interim final rule (IFR) to allow credit unions to temporarily defer real estate-related appraisals and evaluations under the agency’s appraisal regulations. The NCUA is providing this temporary relief to allow federally insured credit unions to extend financing to creditworthy households and businesses quickly in the wake of the national emergency declared in connection with COVID-19. 

The IFR defers the requirement to obtain an appraisal or written estimate of market value for up to 120 days following the closing of a transaction for certain residential and commercial real estate transactions. The IFR excludes transactions for acquisition, development, and construction of real estate because these loans present heightened risks not associated with financing existing real estate. Credit unions should make best efforts to obtain a credible valuation of real property collateral before the loan closing, and otherwise underwrite loans consistent with safety and soundness principles. Credit union management is expected to have a plan in place to address any material loan value shortfalls should they occur. The IFR expires Dec. 31, 2020.

What guidance is available regarding appraisals and evaluations for real estate transactions affected by COVID-19?

On April 14, 2020, the NCUA, together with federal banking agencies and the Consumer Financial Protection Bureau, 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 flexibilities in industry appraisal standards and agencies' appraisal regulations, and describes temporary changes to Fannie Mae and Freddie Mac appraisal standards that can assist lenders during this challenging time. The agencies will continue to communicate with the industry, as appropriate, as this situation evolves.

Source: Federal Reserve