Individual home loans not part of proposed appraisal change
“Real estate-related financial transactions,” not everyday home loans, are the subject of a proposed federal rule change raising the threshold of transactions requiring a property appraisal from $250,000 to $400,000. The proposal was developed jointly by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corp. “The agencies believe raising this threshold for residential real estate transactions from the current level of $250,000, last increased in 1994, could provide meaningful burden relief from the appraisal requirements, without posing a threat to the safety and soundness of financial institutions,” the Comptroller’s office said. The impact is in the details and would go unnoticed by everyday homebuyers and sellers, said Steven Plaisance, president and CEO of Arvest Bank’s mortgage division. “Loans guaranteed or insured by Fannie Mae, Freddie Mac, the Federal Housing Administration, Veterans Affairs, etc., would still generally require an appraisal,” Plaisance said. “This rule mostly affects bank portfolio lending, and, as noted, adjusts a threshold that has not changed since 1994 when it went from $100,000 to $250,000.” Realtor Brian Preston of RE/MAX at Home in Edmond at first was concerned that “it removes checks and balances, which makes it a predatory market, (and) people will take advantage,” then credit would tighten in response to lenders’ exposure. After consulting with the Oklahoma Association of Realtors, Preston said, “This looks like it will affect a small number of loans. Our usual purchase loans should not be affected. Mortgage companies usually have the Freddie, Fannie, FHA or VA loans, which would still require an appraisal.” Rather than appraisals, the proposal would require evaluations “consistent with safe and sound banking practices,” the Comptroller’s office said. “Evaluations provide an estimate of the market
value of real estate but could be less burdensome than appraisals because the agencies’ 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.”
Plaisance said he was following the rulechanging process.
“It will be interesting to see what comes out of the comment period. There is no question the residential appraisal industry has faced some challenges nationally such as shortages of qualified appraisers, as vaguely referenced by some of the regulators as some of the reasoning behind the proposed change . ...
“I would not say it’s surprising once you dive into the details and net overall effect. Regardless of what lenders may or may not require, prospective homebuyers may choose to get an appraisal on their own outside of the loan transaction if they desire, just as they do for certain private inspections.”