CHICAGO (Dec. 4, 2018) – The nation’s largest professional association of real estate appraisers joined 17 other organizations Monday in saying it “strongly opposed” the National Credit Union Administration’s plan to reduce the number of non-residential real estate loans requiring appraisals.
The Appraisal Institute said it opposed the NCUA’s proposal to quadruple – from $250,000 to $1 million – the appraisal threshold for non-residential 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 non-residential real estate loans that would not require an appraisal.
Saying it was “deeply concerned,” the Appraisal Institute’s letter cautioned the NCUA that its proposal could recreate conditions that led to the housing market meltdown of the late 2000s. “The proposed rule is written purely through the lens of regulatory relief – not safety and soundness. It ignores the fact that the United States suffered through a financial crisis less than a decade ago,” the letter said. “If anything, the current market conditions beg for heightened due diligence by regulated institutions today – not a loosening of a fundamental risk management activity. “
The Appraisal Institute’s letter noted that the federal banking regulatory agencies – the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve Board – earlier this year approved increasing the commercial appraisal threshold from $250,000 to $500,000.
“We are deeply concerned the NCUA proposal, if finalized at $1 million for commercial real estate transactions, will result in a regulatory ‘arms race’ between the Agencies and the NCUA,” the letter said. “This would result in the NCUA – the agency with the least direct experience in overseeing business and commercial real estate lending – effectively driving the appraisal policies for the entire financial regulatory system.”
The Appraisal Institute and the other groups also noted that legislation adopted this year by the U.S. House (and awaiting action by the Senate) would link commercial appraisal threshold levels for two of the U.S. Small Administration’s most popular loan programs to those established by the federal banking regulatory agencies. “This (NCUA) proposal will likely impact not just credit unions and banks, but SBA lenders and risks associated with SBA loans,” the letter said.
The NCUA did not propose changes to the appraisal threshold for residential loans. “We support the NCUA’s proposal to maintain the $250,000 threshold level for residential real estate transactions,” the letter said.
Also signing the Appraisal Institute’s letter to the NCUA were:
- Appraisers’ Coalition of Washington
- Coalition of Appraisers of Nevada
- Coalition of Pennsylvania Real Estate Appraisers
- Collateral Risk Network
- Illinois Coalition of Appraisal Professionals
- Louisiana Real Estate Appraisers Coalition
- Mississippi Coalition of Appraisers
- National Association of Appraisers
- New York Coalition of Appraiser Professionals
- North Dakota Appraisers Association
- Professional Appraisers Association of South Dakota
- Real Estate Appraisers Association
- Real Estate Appraisers of Southern Arizona
- Rhode Island Real Estate Appraiser Association
- South Carolina Professional Appraisers Coalition
- Tennessee Appraiser Coalition
- Utah Coalition of Appraisal Professionals.