The Appraisal Foundation (TAF) President David Bunton on Friday raised concerns about the action taken by the National Credit Union Administration (NCUA), which quadrupled the threshold for commercial transactions requiring an appraisal from $250,000 to $1 million, according to a press release from TAF.
On Thursday, the NCUA Board of Directors finalized the rule change for nonresidential real estate loans. The appraisal threshold is the loan amount below which appraisals are not required. Increasing the threshold would drastically increase the number of nonresidential real estate loans that would not require an appraisal.
"The Appraisal Foundation is deeply concerned that the action taken yesterday by the National Credit Union Administration is yet another needless attempt to dilute the federal financial and public policy protections of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which requires real estate appraisals to be used in federally related transactions,” Bunton said in the release.
The Appraisal Foundation was created by Congress and authorized to set the standards and qualifications for real estate appraisers, making it unusual for the body to publicly disagree with federal banking regulators such as NCUA.
In addition to the increase from $250,000 to $1 million, according to the NCUA, the final rule accomplishes three other agency objectives:
- Reorganizes the appraisal regulation to make it easier todetermine when a written estimate or an appraisal is required;
- Exempts real estate transactions located in rural areas from appraisal requirements if certain conditions are met; and
- Amends the definitions section of the rule to reflect these changes.
The final rule will become effective 90 days after publication in the Federal Register.
Bunton emphasized that the proposed rule – combined with the years of accumulated carve outs, waivers, and exemptions – has jeopardized the economy by putting it at greater risk.
“The protections originally envisioned by Title XI are facing a death by a thousand cuts, and unfortunately, the 1000th may be too close for comfort," he said.
The move has been criticized by other appraisal and banking organizations. Valuation Review will have more on this subject in the coming weeks.