Raising Appraisal Threshold Levels
Adjusting appraisal threshold levels
On December 2, 2015, Dave Towne called attention to an article on a potential increase in appraisal threshold levels, which appeared in the ABA Banking Journal.
Excerpt:
The banking agencies are revisiting the dollar thresholds for their appraisal requirements, FDIC Chairman Martin Gruenberg said in Arlington, Va., today at the final outreach meeting for the decennial Economic Growth and Regulatory Paperwork Reduction Act review. “Based largely on comments we have received during these outreach sessions, we have formed an define working group to review the appropriateness of dollar thresholds for transactions requiring appraisals and other requirements of the interagency appraisal regulations,” he concluded.
“If the de minimis value is moved up from the current $250,000, it may cause serious disruption to appraisers and the appraisal profession. The various US appraiser organizations should be actively engaged in the discussion about this topic, Dave Towne stated.”
The same day, ASA, along with a coalition of eight other organizations filed comments opposing the suggested increase in the federal appraisal threshold levels.
Coalition comment letter
RE: EGRPRA Review: Transactions Requiring a State Certified or Licensed Appraiser
To Whom It May Concern:
As Federal Banking Regulators (“Regulators”) continue to review regulations mandated by the Economic Growth and Regulatory Paper Reduction Act (“EGRPRA”), the undersigned organizations write today in favor of maintaining the current threshold levels for requiring real estate appraisals in protection of safe and sound real estate lending practices.
Currently, real estate appraisals are required under federal law for any real estate loan with a transaction value equal to or greater than $250,000 and a business loan value equal to or greater than $1 million. We continue to hear suggestions by some that regulators should increase these threshold levels, with suggestions ranging from a cost-of-living increase or to some other fixed figures.
Our organizations believe that increasing the appraisal threshold levels could have a negative impact on safe and sound real estate lending practices, as it likely would prompt many banks to significantly reduce attention to collateral risk management. The last time the question of whether to adjust appraisal threshold levels was addressed by the Government Accountability Office (GAO), not one stakeholder consulted favored an increase. That GAO investigation also reported that many stakeholders actually supported the reduction or elimination of threshold levels, citing potential benefits to risk management and consumer protection.
The subject of appraisal threshold levels has been a passionate one in some of the EGRPRA field hearings, and we expect the subject to be brought up again during the upcoming hearing in Washington, DC, on December 2. Our organizations strongly support safe and sound lending practices, including judicious policies related to real estate appraisal. We urge regulators to affirm the same viewpoint by maintaining current appraisal threshold levels.
Thank you for considering our position on this important issue. Should you have any questions, please don’t hesitate to contact Bill Garber, Director of Government and External Relations for the Appraisal Institute, at 202-298-5586 or b…@appraisalinstitute.org, or John D. Russell, Director of Government Relations for the American Society of Appraisers, at 703-733-2103 or j…@appraisers.org.
Sincerely,
Appraisal Institute
Massachusetts Board of Real Estate Appraisers
American Society of Appraisers
National Association of Independent Fee Appraisers
American Society of Farm Managers and Rural Appraisers
North Carolina Professional Appraisers Coalition
Columbia Society of Real Estate Appraisers
The Farm Credit Council
Instituto de Valuadores de Puerto Rico
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The typical property I appraise has near a $500,000 loan so I don’t think in my circle there would be any adverse effect if the number was raised. However, as I have stated previously, appraisers can in part be successful based on the state, city, location (rural/urban) that they work in. When expensive big city appraisers complain about current AMC fees ($250 to $300) and the rural appraiser could care less ($600 to $900), this may effect them more. Be carful out there.
Without additional context, I could see how my point could have been missed. In past posts I have tried to make a point that the issues facing this industry are vast and vary significantly from a state, city, and community prospective. If a rural appraiser can charge $700 for an appraisal and quote turn times of 4 to 5 weeks, I find it difficult to bring them on board to fight what may be my issue (urban/suburban $250 to $300 with 3-5 day turn times). When some appraisers live in a state where there are 1,000 appraisers while others have 1,000 appraisers in a single county, its difficult to agree to the problems of the industry. If big cities are dominated by big banks and the use of AMC’s, again the appraiser who has plenty of non AMC clients may not be concerned about AMC regulation. Will a bump in the appraisal threshold adversely effect MY work in the immediate future, probably not, however as it will negatively effect the industry as a whole, I will fight the increase. We need to support the industry together even in cases where the issue may not directly impact you.
“View Modesto,CA Home Prices Map.
Summary for Modesto. Average price per square foot for Modesto CA was $147, an increase of 10.5% compared to the same period last year. The median sales price for homes in Modesto CA for Sep 15,2015 to Dec 15,2015 was $225,000 based on 746 home sales.”
Speak for yourself Bill Johnson, we have very few sales over $500,000 each year. I believe this is much more typical across middle America than your $500K loan amount.
Markver, we work in the same state (CA) but the issues you face may not be the same issues I face. If the median home price in the county I serve is near $500,000 but my primarily zip codes are approaching $800,000, then its just business as usual to be above a $500,000 loan amount. If you and I both work for the same AMC that pays $300 and if my local market is two to three times more expensive to live in (home prices), I may complain just a little louder when it comes to enforcement of customary and reasonable fees. If you eliminate the AMC approach and focus on state set VA appraisal fees, then the financial impact is less, but again winners and losers will be determined by the cost of living in your area. If the loan limit gets bumped up to a level where it gives you less opportunity for lending work, then your going to complain louder than I am. We need to unite and fight the issues facing our profession together even if they may not immediately impact your area of practice.
I believe Bill Johnson could not resist the temptation to brag. I live on one of the Hawaiian islands where property is very costly. I would much prefer that there be no loan threshold amount. It’s unfair to all appraisers to have rules like this shoved down our throats.
Speak only for yourself Bill Johnson, or not at all.
Dave, after my comments get posted above, read my additional points for further explanation. As it relates to having a $500,000 average loan amount in my area, it was not meant as a brag, but is only a fact. When you have 3,000 sf properties on 5,000 sf lots inside a dime a dozen PUD that sale for $1,000,000 plus, its not a difficult process.
The impact on appraisers is not remotely a concern to the ABA and those that support increasing the de minimus limit. When FIRREA was first drafted, the limit proposed was $25,000. ABA and others whined it was not enough. So we got $250k instead.
As for BV appraisal limits they are already BEYOND insane! The HIGHEST risk category is allowed to have a threshold four times greater than the collateralized category! OK, in BV they often cross collateralize but shouldn’t the property/Enterprise that the loan is taken out for, cover the loan?
As long as ANY insured loan is backed by American taxpayers there should be an appraisal. If the amounts are so small, and cost of appraisal is so burdensome relative to the borrowed amount, then make them UNINSURED loans! Let the lenders & their direct investors making these loans absorb 100% of the risk.
But you wont hear that from any of the play along to get along ‘peer’ group advocates; or their lobbyists.
Please refer to the FNMA mantra, when arguing these points. It is unfair to consider low borrowing scale persons, as not needing a valid check and balance system like rich people. It is the poorest persons in our society which are at the most risk. Ask your average 25 year old how much he or she is prequalified for. I double dare you.
Please don’t forget to revisit this issue, now that this came forth in the paperwork reduction act. If demins are raised in Colorado, there goes the whole enchilada, so to speak.