On Oct. 25, The Appraisal Institute (AI) advised real estate appraisers servicing areas affected by recent disasters that the exemption from appraisal requirements recently issued by federal bank regulatory agencies does not itself reduce collateral risks. Rather, regulated financial institutions are seeking greater flexibility in reviewing loan applications and loans held in portfolios, AI announced on its website.
AI noted that appraisal expertise still is essential to evaluating risk, especially since collateral risks likely have increased due to potential environmental damage, dislocation and material changes in market conditions.
“Banks and their regulators want to avoid being in a position of declining loan applications, a forced margin call or failing to help with economic recovery because of statutory appraisal obligations. However, their collateral risks are real — and potentially even greater now than before the hurricanes,” the announcement stated.
According to AI, demand for appraisal and valuation services is expected to increase, and the assignments likely will be complex and require the services of experienced analysts.
AI pointed out that appraisers will continue to be the first line of defense for banks because it makes good business sense to understand collateral risks following major disaster events such as Hurricanes Harvey, Irma and Maria.