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Subject: Real Estate Appraisal -- Final Rule
Date: June 7, 1994
To: Chief Executive Officers of National Banks, Department and Division Heads and all Examining Personnel
Description: Final Rule
This issuance informs you that the Office of the Comptroller of the Currency (OCC) has issued a final rule amending its real estate appraisal regulation, 12 CFR Part 34, on June 7, 1994. The attached final rule addresses the use of real estate appraisals and real estate evaluations to support real estate-related financial transactions by national banks. The final rule is effective immediately.
Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) required member agencies of the Federal Financial Institutions Examination Council (FFIEC) and the Resolution Trust Corporation (RTC) to issue real estate appraisal regulations. The OCC originally issued a final rule on August 24, 1990, and amended that rule on April 9, 1992.
The OCC published in the Federal Register on June 4, 1993 a notice of proposed rulemaking (NPRM) to further amend its real estate appraisal regulation (see Banking Bulletin 93-32, dated June 9, 1993). On November 10, 1993 the OCC published a notice of the availability of supplemental information (Banking Bulletin 93-55, dated November 9, 1993).
Highlights Of The Amended Regulation
This final rule expands, modifies, and clarifies exemptions to the appraisal regulation and identifies additional transactions that are exempt from the appraisal requirements of Title XI.
With the exception of three categories of transactions, the final rule eliminates the evaluation requirement for real estate-related financial transactions that do not require appraisals. It also eliminates duplicative regulatory appraisal standards and allows a regulated institution to accept an appraisal prepared for another financial services institution, under certain conditions.
Changes to Exemptions
The final rule:
Changes to Requirements for Evaluations
Changes to Appraisal Standards
The final rule:
The agencies wish to reemphasize that each appraisal must contain the real estate's market value, as defined by this regulation. However, more than one value estimate, such as a prospective value, may be included in a Title XI appraisal to aid the institution's loan underwriting and loan disbursement processes. Any additional value estimate must be clearly described and reflect the projected date when the future event could occur.
Changes to Use of Appraisals for Others
The regulation continues to provide that a regulated institution, or its agent, shall engage the appraiser directly, and that the appraiser shall have no interest, direct or indirect, in the property or the transaction.
The regulation now permits regulated institutions to accept appraisals prepared for other financial services institutions, if the appraiser has no interest in the property or transaction and the regulated institution determines the appraisal conforms to this regulation and is otherwise acceptable.
The agencies have addressed certain consumer protection issues raised during the comment period by reminding banks of the protections provided by the Real Estate Settlement Procedures Act (RESPA) and Federal Reserve Board Regulation B in the preamble.
The OCC encourages institutions to inform the consumer whether they intend to use the services of a licensed or certified appraiser to prepare the estimate of value for a real estate-related financial transaction. This should be done early enough in the loan application process to allow the consumer to make an informed decision that the intended method of estimating the real estate's value meets his or her needs.
The OCC has attached to this banking issuance a more detailed summary of the regulation to facilitate national banks' understanding of this regulation. The table lists the regulatory text and a brief explanation of that text. Please consult the preamble to the regulation for a detailed discussion of the regulatory changes.
The OCC is interested in receiving your comments on the usefulness of the attached summary. Comments, which are optional, should be forwarded to: Office of the Chief National Bank Examiner, 250 E Street, SW, Washington, DC 20219, Attention: NBE Thomas E. Watson, Mail Stop 7-2.
For Further Information Contact: Thomas E. Watson, National Bank Examiner, Office of the Chief National Bank Examiner, (202) 874-5170; or Horace G. Sneed, Senior Attorney, or Stephen Freeland, Attorney, (202) 874-4460. Bank Operations and Assets Division.
Jimmy F. Barton