OCC Bulletin 2019-45| October 9, 2019
Appraisals for Residential Real Estate Transactions: Final Rule
Chief Executive Officers of All National Banks, Federal Savings Associations, and Federal Branches and Agencies; Department and Division Heads; All Examining Personnel; and Other Interested Parties
The Office of the Comptroller of the Currency (OCC) has adopted a final rule to increase the appraisal threshold for residential real estate transactions (residential transactions) from $250,000 to $400,000. This threshold sets the transaction value above which national banks and federal savings associations (collectively, banks) must obtain appraisals that conform with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and the appraisal rules (title XI appraisals).
The final rule, issued jointly by the OCC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the agencies), makes conforming amendments to the appraisal rules to require that banks obtain evaluations in lieu of title XI appraisals for transactions covered by the residential threshold exemption. The final rule also requires evaluations for certain rural residential transactions that are exempt from the title XI appraisal requirement under section 103 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). In addition, the final rule makes a conforming change to the appraisal rules to add appropriate appraisal review to the minimum requirements for title XI appraisals. The minimum requirement for appraisal review was added to title XI by section 1473(e) of the Dodd–Frank Wall Street Reform and Consumer Protection Act. The final rule adopts the proposed rule without change.
The provisions of this final rule are effective on October 9, 2019, other than the evaluation requirement for transactions exempted by the rural residential appraisal exemption and the requirement to review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice, which are effective on January 1, 2020 .
Note for Community Banks
The final rule applies to all OCC-supervised banks.
The final rule increases the appraisal threshold for residential transactions from $250,000 to $400,000. The new threshold of $400,000 reflects increases in residential real estate transaction values and general indexes of inflation since adoption of the existing threshold in 1994 as well as safety and soundness considerations. The final rule extends the requirement for banks to obtain evaluations on exempt residential transactions from $250,000 to $400,000, although banks retain the discretion to use appraisals. An evaluation provides an estimate of the value of real estate but is not subject to the same requirements as a title XI appraisal. The final rule also makes conforming and technical changes relating to the increase in the residential threshold.
In addition to increasing the residential threshold, the final rule makes conforming changes to the appraisal rules to reflect two requirements in the EGRRCPA and Dodd–Frank. First, the final rule amends the appraisal rule to reflect the appraisal exemption in section 103 of the EGRRCPA for certain residential real estate transactions of $400,000 or less in rural areas where appraisers are not available within the statutory cost and time parameters in section 103. The final rule incorporates this exemption in the list of exempt transactions in the appraisal regulations and requires evaluations for these exempt transactions, although banks retain the discretion to use appraisals. Second, the final rule makes a conforming change to the appraisal regulations to reflect the statutory minimum requirement in section 1473(e) of Dodd–Frank for institutions to review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice.
Please contact Mitchell Plave, Special Counsel, at (202) 649-5490, or Joanne Phillips, Counsel, Office of the Chief Counsel, at (202) 649-5500; or G. Kevin Lawton, Appraiser and Real Estate Specialist, at (202) 649-6670.
Jonathan V. Gould
Senior Deputy Comptroller and Chief Counsel
- “Real Estate Appraisals” (PDF)