No Appraisal, No Problem

Fewer loans that use real estate as collateral will need an appraisal under a new proposal.

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) wants to increase the threshold from $250,00 to $400,000.

In a news release, FDIC said it believes raising the threshold could provide meaningful burden relief from the appraisal requirements, without posing a threat to the safety and soundness of financial institutions. The threshold was last increased in 1994.

Under the proposed rule, residential real estate transactions exempted by the threshold would be required to obtain an evaluation consistent with safe and sound banking practices, instead of an appraisal which would speed up the loan process while lowering the costs to consumers.

Evaluations, which have been required for transactions exempted from the appraisal requirement by the current residential threshold since the 1990s, would provide an estimate of the market value of real estate but could be less burdensome than appraisals. The FDIC’s appraisal regulations do not require evaluations to be prepared by state licensed or certified appraisers. In addition, evaluations are typically less detailed and costly than appraisals.