Federal Regulators Approve Doubling Appraisal Threshold for CRE Transactions

Filed in Housing Finance by on April 4, 2018 0 Comments

Federal regulators have increased the threshold for commercial real estate (CRE) transactions that require an appraisal from $250,000 to $500,000.

The final rule issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency allows a financial institution to use an evaluation of the real property collateral rather than an appraisal for CRE transactions with a value at or below $500,000.

The agencies originally proposed to raise the threshold for CRE transactions to $400,000, but determined that increasing the threshold to $500,000 would provide greater relief from regulatory burden without posing a threat to the safety and soundness of financial institutions.

The regulators estimate that this new threshold could result in about 32% of CRE loans being exempt from the appraisal requirement, or about 16% more transactions than under the $250,000 threshold.

The threshold for transactions secured by single 1-to-4 family residential properties will remain at $250,000.

The rule generally applies to loans held in a bank’s portfolio, and does not apply to loans insured or guaranteed by the FHA, VA or USDA or purchased by Fannie Mae and Freddie Mac.

The rule will become effective when published in the Federal Register. For more information, contact Jessica Lynch at 800-368-5242 x8401.

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