NCUA Quadruples the Appraisal Threshold

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Dave Towne

Certified Residential RE Appraiser at Towne Appraisals
AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003.
Dave Towne on e-AppraisersDirectory.com
Dave Towne

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NCUA Board Decision Could Potentially Hurt Commercial Appraisers

Like so many things in life, the NCUA Board decision was predicated primarily on greed… This is a lot like the liar loans that infiltrated residential lending not that long ago.

Appraisers, especially Commercial appraisers,

I picked this info up from a message sent out by the Appraisal Institute on July 18, 2019:

“The NCUA Board of Directors today quadrupled – from $250,000 to $1 million – the appraisal threshold for nonresidential real estate loans. NCUA is the National Credit Union Administration.

The appraisal threshold is the loan amount below which appraisals are not required.

Increasing the threshold would drastically increase the number of nonresidential real estate loans that would not require an appraisal.”

That last sentence is somewhat convoluted. (I didn’t write it!)

More simply stated: The decision will REDUCE the number of appraisals needed for Commercial property loans, which originate with Credit Unions.

Secondarily, the other major loan guarantee agencies threshold is half as much, $500,000. So the NCUA Board decision has the potential of significantly impacting all aspects of Commercial appraisals. It presents a possible upheaval in the industry/profession.

This decision also means that any person a CU designates can do a commercial property EVALUATION when the loan amount will be below $1 million. It begs the question: who will value the actual property which will be the collateral for the loan?

Since most loans are written for a percentage of the collateral value, it means a significant amount of commercial property value will not be actually appraised by a Commercial appraiser.

Like so many things in life, the NCUA Board decision was predicated primarily on greed. They hope to generate more business for Credit Unions whereby those local organizations can say to community business people… “We’ll give you a boatload of money and you won’t have to pay for a proper appraisal which will be the evidence basis for the pile of moolah.”

This is a lot like the liar loans that infiltrated residential lending not that long ago.

It’s also akin to the ‘savings and loan crisis’ many of us went through in the late 1970’s – early 80’s.

It’s too bad people cannot learn from past history. “Oh, but it’s different now!” Yah, right… same pile of barnyard stuff, but just wearing a different pair of boots.

Image credit flickr - Chris Christian
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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8 Responses

  1. Avatar Jason says:

    A sad turn of events for commercial appraisers and American taxpayers.

    6
  2. Avatar JM2C says:

    It was a matter of time. smh

    5
  3. Avatar SB says:

    FDIC will be next.

    Big Data and Artificial Intelligence are taking no prisoners.

    Predictive Analytics of Consumer behavior is going to dominate our industry in the next 5 years.

    2
  4. Avatar Koma says:

    Man this is going to be another hard crash that the taxpayers will be on the hook for. Appraisers start talking to the lawyers in your areas because we will be needed to help clean up this mess.

    3
  5. Where did you think this was going? The writing has been on the wall for years so it’s a little late now to voice concerns of a very divided industry. Secondly, what’s the default rate on commercial and residential loans? It’s almost negligible.

    4
  6. Shaun Murphy Jr. on Facebook Shaun Murphy Jr. on Facebook says:

    The shelf life of our profession is 5 years or less…

    If you ask me? It’s good and bad… LOL

    3
  7. Shaun Murphy Jr. on Facebook Shaun Murphy Jr. on Facebook says:

    Lenders hate appraisers… realtors hate appraisers…

    We will go away from about 2025-2030, but they will be begging us back

    3
  8. Credit unions long ago abandoned their core foundation – that of providing inexpensive, easier to qualify CONSUMER loans to their members, while paying a typically higher interest rate on savings (shares) than banks and S&Ls did.

    I worked at Navy Federal Credit Union back when share-draft (checking) was first being explored (1974-80). Banks were up in arms over the encroachment into their business arena and the matter was adjudicated not just through NCUA – but through the courts as well. It was also during this period that MANY credit Unions across America were failing because of too rapid and unstable growth efforts. Alaska Federal (paying nearly a full point more interest than any other CUs) had phenomenal growth-built on an unsustainable house of cards. Mayport Federal, MarCorps West FCU and many others had to be absorbed by the bigger guys. Most often NFCU, or Pentagon FCU.

    It disappoints but does not surprise me that they ventured into commercial and business loans. Membership & asset growth has always been the bottom line for credit unions. At some point service to members becomes a business concept rather than a personal relationship. I seriously question whether the broadened scope of services has ever resulted in higher share dividends for members savings accounts.

    Hopefully, it is a service sufficient in demand by members to justify the increased risk to other members savings.

    I wish credit unions well. Unlike banks, they typically remain not for profit organizations – with the ‘benefits’ of what would otherwise be profit being returned to their membership. Sadly, their practices often mirror the business practices of the banks that they chose to compete with.

    Many CUs* have never held appraisers in high regard. NFCU is such a one – due largely to the preconceived biases of one of the heads of the department that ordered appraisals and processed RE loans. He truly believed all we did was glorified comp checks. Fortunately, until she retired the Director of the Mortgage Services Division was a conscientious long-time employee that understood collateral risk. Her leadership more than offset the other Branch Heads appraisal contempt. But they are gone now. And NFCU seems primarily oriented toward growth – even expanding the field of membership greatly to facilitate this.

    That is their business. As appraisers, we can do little about the line of thinking (obsession with automated processing) that is destroying our profession. Worse, we don’t seem to want to do anything about it.

    More than half a year ago I started citing the publicly visible increasing influence of MISMO policies & objectives directing policies that undermine us. Later I pointed out the PUBLISHED MISMO talking points specifically citing the objectives of eventual (near in time) elimination of not only all residential appraisals but commercial appraisals as well. Specifically through automation. Over the past year+ the Feds have become increasingly visible in their advocacy of automated systems and their belief in the irrefutable accuracy of Big Data (especially as supplied by CoreLogic-despite their egregious record for inaccuracy in the kind of data being supplied).

    Apparently not enough appraisers have ever read the Fable about the Emperor’s New Clothes. Just like our regulators.

    AI, ASA, IFA and all the other professional associations; State Coalitions, and The Guild cannot change or substantially affect the automation trend separately. Indeed, some of ‘us’ keep trying to carve out exceptions that promote bad automation shortcuts and hybrids, at the expense of our profession.

    Appraisers CAN effect changes if they want to, but not by staying on the sidelines and forecasting doom and gloom & bemoaning our fate without trying to do anything about it.

    Those who are already members of an organization need to urge them to get actively involved in opposing ALL bad policies that harm the appraisal profession. Those that are not members of professional associations or coalitions or The Guild need to join and start getting involved.

    To those that already have joined an organization, or who have asked how to get MORE involved with the Guild, a sincere thank you, from one appraiser to another.

    To all the rest, what are you waiting or? We need your help NOW.

    *One notable exception in my experience was the old Rockwell FCU which later became Kinnecta I believe. For years they had a strong in house appraisal base.

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NCUA Quadruples the Appraisal Threshold

by Dave Towne time to read: 2 min
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