12 CFR 722.3 – Appraisals and written estimates of market value requirements for real estate-related financial transactions
(a) Real estate-related financial transactions not requiring an appraisal under this part. Provided the transaction is not a “higher-priced mortgage loan” under 12 CFR 1026.35, which must meet separate appraisal requirements under section 129H of the Truth in Lending Act, 15 U.S.C. § 1639h, an appraisal is not required for a real estate-related financial transaction in which:
Terms Used In 12 CFR 722.3
- Appraisal: A determination of property value.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Lien: A claim against real or personal property in satisfaction of a debt.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Truth in Lending Act: The Truth in Lending Act is a federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. In general, lenders must provide information on Source: OCC
(1) The transaction involves an existing extension of credit at the lending credit union, provided that:
(i) There is no advancement of new monies, other than funds necessary to cover reasonable closing costs; or
(ii) There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the credit union’s real estate collateral protection after the transaction, even with the advancement of new monies;
(2) A lien on real estate has been taken as collateral through an abundance of caution and where the terms of the transaction as a consequence have not been made more favorable than they would have been in the absence of a lien;
(3) A lien on real estate has been taken for purposes other than the real estate’s value;
(4) A lease of real estate is entered into, unless the lease is the economic equivalent of a purchase or sale of the leased real estate;
(5) The transaction involves the purchase, sale, investment in, exchange of, or extension of credit secured by, a loan or interest in a loan, pooled loans, or interests in real estate, including mortgage-backed securities, and each loan or interest in a loan, pooled loan, or real estate interest met the requirements of this regulation, if applicable, at the time of origination; or
(6) The transaction either qualifies for sale to a United States government agency or United States government-sponsored agency, or involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate.
(b) Real estate-related financial transactions requiring an appraisal by a state-certified appraiser. An appraisal performed by a state-certified appraiser is required for any real estate-related financial transaction not exempt under paragraph (a) of this section in which:
(1) The transaction value is $1,000,000 or more; or
(2) The transaction is complex, involves a residential real estate transaction, and $400,000 or more of the transaction value is not insured or guaranteed by a United States government agency or United States government sponsored agency.
(c) Real estate-related financial transactions requiring an appraisal by either a state-certified or state-licensed appraiser. (1) An appraisal performed by a state-certified appraiser or a state-licensed appraiser is required for any real estate-related financial transaction not exempt under paragraph (a) of this section in which the transaction is not complex, involves a residential real estate transaction, and $400,000 or more of the transaction value is not insured or guaranteed by a United States government agency or United States government sponsored agency.
(2) If, during the course of an appraisal of a residential real estate transaction performed by a state-licensed appraiser, factors are identified that result in the transaction meeting the definition of complex, then the credit union may either:
(i) Ask the state-licensed appraiser to complete the appraisal and have a state-certified appraiser approve and cosign the appraisal; or
(ii) Engage a state-certified appraiser to complete the appraisal.
(d) Real estate-related financial transactions requiring a written estimate of market value—(1) Applicability. Any real estate-related financial transaction must be supported by a written estimate of market value, unless:
(i) An appraisal performed by a state-certified or state-licensed appraiser was obtained;
(ii) An appraisal is not required under paragraphs (a)(2) through (6) of this section; or
(iii) The transaction is fully insured or guaranteed by a United States government agency or United States government-sponsored agency.
(2) Requirements. All written estimates of market value required under this paragraph must be performed by an individual:
(i) Independent of the loan production and collection processes (if independence cannot be achieved, the credit union must be able to demonstrate clearly that it has prudent safeguards to isolate its collateral valuation program from influence or interference from the loan production process and collection process);
(ii) Having no direct, indirect, or prospective interest, financial or otherwise, in the property or the transaction; and
(iii) Qualified and experienced to perform such estimates of value for the type and amount of credit being considered.
(e) Appraisals to address safety and soundness concerns. The NCUA reserves the right to require an appraisal under this subpart whenever the agency believes it is necessary to address safety and soundness concerns.
(f) [Reserved]