65666 Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Rules and Regulations
1 The coronavirus disease 2019 outbreak was
declared a national emergency under Proclamation
No. 9994, 85 FR 15337 (Mar. 18, 2020).
2 85 FR 21312.
3 12 U.S.C. 3331 et seq.; Public Law 101–73, 103
Stat. 183 (1989).
same email address or call the telephone
number in appendix A to 10 CFR part
73. For questions or concerns on
submitting these advance notifications
to the NRC, please contact the Office of
International Programs at 301–287–
9056.
* * * * *
PART 140—FINANCIAL PROTECTION
REQUIREMENTS AND INDEMNITY
AGREEMENTS
■ 82. The authority citation for part 140
continues to read as follows:
Authority: Atomic Energy Act of 1954,
secs. 161, 170, 223, 234 (42 U.S.C. 2201,
2210, 2273, 2282); Energy Reorganization Act
of 1974, secs. 201, 202 (42 U.S.C. 5841,
5842); 44 U.S.C. 3504 note.
§ 140.9a [Amended]
■ 83. In § 140.9a(b), add ‘‘140.8,’’ in
numerical order.
Dated: September 21, 2020.
For the Nuclear Regulatory Commission.
Cindy K. Bladey,
Chief, Regulatory Analysis and Rulemaking
Support Branch, Division of Rulemaking,
Environmental, and Financial Support, Office
of Nuclear Material Safety and Safeguards.
[FR Doc. 2020–21148 Filed 10–15–20; 8:45 am]
BILLING CODE 7590–01–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 34
[Docket No. OCC–2020–0014]
RIN 1557–AE86
FEDERAL RESERVE SYSTEM
12 CFR Part 225
[Docket No. R–1713]
RIN 7100–AF87
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 323
RIN 3064–AF48
Real Estate Appraisals
AGENCY: The Office of the Comptroller
of the Currency, Treasury (OCC); the
Board of Governors of the Federal
Reserve System (Board); and the Federal
Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
SUMMARY: The OCC, Board, and FDIC
(collectively, the agencies) are adopting
as final the interim final rule published
by the agencies on April 17, 2020,
making temporary amendments to the
agencies’ regulations requiring
appraisals for certain real estate-related
transactions. The final rule adopts the
deferral of the requirement to obtain an
appraisal or evaluation for up to 120
days following the closing of certain
residential and commercial real estate
transactions, excluding transactions for
acquisition, development, and
construction of real estate. Regulated
institutions should make best efforts to
obtain a credible estimate of the value
of real property collateral before closing
the loan and otherwise underwrite loans
consistent with the principles in the
agencies’ Standards for Safety and
Soundness and Real Estate Lending
Standards. The agencies’ final rule
allows regulated institutions to
expeditiously extend liquidity to
creditworthy households and businesses
in light of recent strains on the U.S.
economy as a result of the coronavirus
disease 2019 (COVID event). The final
rule adopts the interim final rule with
one revision in response to comments
received by the agencies on the interim
final rule.
DATES: The final rule is effective
October 16, 2020 through December 31,
2020.
FOR FURTHER INFORMATION CONTACT:
OCC: G. Kevin Lawton, Appraiser
(Real Estate Specialist), (202) 649–6670;
Mitchell Plave, Special Counsel, (202)
649–5490; or Joanne Phillips, Counsel,
Chief Counsel’s Office (202) 649–5500;
Office of the Comptroller of the
Currency, 400 7th Street SW,
Washington, DC 20219. For persons
who are deaf or hearing impaired, TTY
users may contact (202) 649–5597.
Board: Anna Lee Hewko, Associate
Director, (202) 530–6260; Teresa A.
Scott, Manager, Policy Development
Section, (202) 973–6114; Carmen Holly,
Lead Financial Institution Policy
Analyst, (202) 973–6122; Devyn
Jeffereis, Senior Financial Institution
Policy Analyst, (202) 365–2467,
Division of Supervision and Regulation;
Laurie Schaffer, Deputy General
Counsel, (202) 452–2272; Derald Seid,
Senior Counsel, (202) 452–2246; Trevor
Feigleson, Counsel, (202) 452–3274;
David Imhoff, Attorney, (202) 452–2249,
Legal Division, Board of Governors of
the Federal Reserve System, 20th and C
Streets NW, Washington, DC 20551. For
the hearing impaired only,
Telecommunications Device for the Deaf
(TDD) users may contact (202) 263–
4869.
FDIC: Beverlea S. Gardner, Senior
Examination Specialist, Division of Risk
Management and Supervision, (202)
898–3640, BGardner@FDIC.gov; Mark
Mellon, Counsel, Legal Division, (202)
898–3884; or, Lauren Whitaker, Senior
Attorney, Legal Division, (202) 898–
3872, Federal Deposit Insurance
Corporation, 550 17th Street NW,
Washington, DC 20429. For the hearing
impaired only, TDD users may contact
(202) 925–4618.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
III. Overview of the Interim Final Rule and
Comments
A. Overview of the Interim Final Rule
B. Public Comments
IV. Summary of the Final Rule
V. Administrative Law Matters
A. Administrative Procedure Act
B. Congressional Review Act
C. Paperwork Reduction Act
D. Regulatory Flexibility Act
E. Riegle Community Development and
Regulatory Improvement Act of 1994
F. Use of Plain Language
G. OCC Unfunded Mandates Reform Act of
1995 Determination
I. Introduction
Impact of the COVID event on
appraisals and evaluations. Due to the
impact of the COVID event 1 and the
need for businesses and individuals to
quickly access additional liquidity, the
agencies published an interim final rule
in the Federal Register on April 17,
2020 (interim final rule),2 that deferred
the requirement to obtain an appraisal
or evaluation for up to 120 days
following the closing of a transaction for
certain residential and commercial real
estate transactions, excluding
transactions for acquisition,
development, and construction of real
estate. The interim final rule allows
businesses and individuals to quickly
access liquidity from real estate equity
during the COVID event.
The agencies are adopting the interim
final rule as final, with one revision in
response to comments. The
amendments to the agencies’ appraisal
regulations allow for the deferral of
appraisals and evaluations for
qualifying transactions through
December 31, 2020, as detailed further
below.
II. Background
Title XI of the Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989 (Title XI) 3 directs each Federal
VerDate Sep<11>2014 16:47 Oct 15, 2020 Jkt 253001 PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 E:\FR\FM\16OCR1.SGM 16OCR1
jbell on DSKJLSW7X2PROD with RULES
1 The coronavirus disease 2019 outbreak was
declared a national emergency under Proclamation
No. 9994, 85 FR 15337 (Mar. 18, 2020).
2 85 FR 21312.
3 12 U.S.C. 3331 et seq.; Public Law 101–73, 103
Stat. 183 (1989).
same email address or call the telephone
number in appendix A to 10 CFR part
73. For questions or concerns on
submitting these advance notifications
to the NRC, please contact the Office of
International Programs at 301–287–
9056.
* * * * *
PART 140—FINANCIAL PROTECTION
REQUIREMENTS AND INDEMNITY
AGREEMENTS
■ 82. The authority citation for part 140
continues to read as follows:
Authority: Atomic Energy Act of 1954,
secs. 161, 170, 223, 234 (42 U.S.C. 2201,
2210, 2273, 2282); Energy Reorganization Act
of 1974, secs. 201, 202 (42 U.S.C. 5841,
5842); 44 U.S.C. 3504 note.
§ 140.9a [Amended]
■ 83. In § 140.9a(b), add ‘‘140.8,’’ in
numerical order.
Dated: September 21, 2020.
For the Nuclear Regulatory Commission.
Cindy K. Bladey,
Chief, Regulatory Analysis and Rulemaking
Support Branch, Division of Rulemaking,
Environmental, and Financial Support, Office
of Nuclear Material Safety and Safeguards.
[FR Doc. 2020–21148 Filed 10–15–20; 8:45 am]
BILLING CODE 7590–01–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 34
[Docket No. OCC–2020–0014]
RIN 1557–AE86
FEDERAL RESERVE SYSTEM
12 CFR Part 225
[Docket No. R–1713]
RIN 7100–AF87
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 323
RIN 3064–AF48
Real Estate Appraisals
AGENCY: The Office of the Comptroller
of the Currency, Treasury (OCC); the
Board of Governors of the Federal
Reserve System (Board); and the Federal
Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
SUMMARY: The OCC, Board, and FDIC
(collectively, the agencies) are adopting
as final the interim final rule published
by the agencies on April 17, 2020,
making temporary amendments to the
agencies’ regulations requiring
appraisals for certain real estate-related
transactions. The final rule adopts the
deferral of the requirement to obtain an
appraisal or evaluation for up to 120
days following the closing of certain
residential and commercial real estate
transactions, excluding transactions for
acquisition, development, and
construction of real estate. Regulated
institutions should make best efforts to
obtain a credible estimate of the value
of real property collateral before closing
the loan and otherwise underwrite loans
consistent with the principles in the
agencies’ Standards for Safety and
Soundness and Real Estate Lending
Standards. The agencies’ final rule
allows regulated institutions to
expeditiously extend liquidity to
creditworthy households and businesses
in light of recent strains on the U.S.
economy as a result of the coronavirus
disease 2019 (COVID event). The final
rule adopts the interim final rule with
one revision in response to comments
received by the agencies on the interim
final rule.
DATES: The final rule is effective
October 16, 2020 through December 31,
2020.
FOR FURTHER INFORMATION CONTACT:
OCC: G. Kevin Lawton, Appraiser
(Real Estate Specialist), (202) 649–6670;
Mitchell Plave, Special Counsel, (202)
649–5490; or Joanne Phillips, Counsel,
Chief Counsel’s Office (202) 649–5500;
Office of the Comptroller of the
Currency, 400 7th Street SW,
Washington, DC 20219. For persons
who are deaf or hearing impaired, TTY
users may contact (202) 649–5597.
Board: Anna Lee Hewko, Associate
Director, (202) 530–6260; Teresa A.
Scott, Manager, Policy Development
Section, (202) 973–6114; Carmen Holly,
Lead Financial Institution Policy
Analyst, (202) 973–6122; Devyn
Jeffereis, Senior Financial Institution
Policy Analyst, (202) 365–2467,
Division of Supervision and Regulation;
Laurie Schaffer, Deputy General
Counsel, (202) 452–2272; Derald Seid,
Senior Counsel, (202) 452–2246; Trevor
Feigleson, Counsel, (202) 452–3274;
David Imhoff, Attorney, (202) 452–2249,
Legal Division, Board of Governors of
the Federal Reserve System, 20th and C
Streets NW, Washington, DC 20551. For
the hearing impaired only,
Telecommunications Device for the Deaf
(TDD) users may contact (202) 263–
4869.
FDIC: Beverlea S. Gardner, Senior
Examination Specialist, Division of Risk
Management and Supervision, (202)
898–3640, BGardner@FDIC.gov; Mark
Mellon, Counsel, Legal Division, (202)
898–3884; or, Lauren Whitaker, Senior
Attorney, Legal Division, (202) 898–
3872, Federal Deposit Insurance
Corporation, 550 17th Street NW,
Washington, DC 20429. For the hearing
impaired only, TDD users may contact
(202) 925–4618.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
III. Overview of the Interim Final Rule and
Comments
A. Overview of the Interim Final Rule
B. Public Comments
IV. Summary of the Final Rule
V. Administrative Law Matters
A. Administrative Procedure Act
B. Congressional Review Act
C. Paperwork Reduction Act
D. Regulatory Flexibility Act
E. Riegle Community Development and
Regulatory Improvement Act of 1994
F. Use of Plain Language
G. OCC Unfunded Mandates Reform Act of
1995 Determination
I. Introduction
Impact of the COVID event on
appraisals and evaluations. Due to the
impact of the COVID event 1 and the
need for businesses and individuals to
quickly access additional liquidity, the
agencies published an interim final rule
in the Federal Register on April 17,
2020 (interim final rule),2 that deferred
the requirement to obtain an appraisal
or evaluation for up to 120 days
following the closing of a transaction for
certain residential and commercial real
estate transactions, excluding
transactions for acquisition,
development, and construction of real
estate. The interim final rule allows
businesses and individuals to quickly
access liquidity from real estate equity
during the COVID event.
The agencies are adopting the interim
final rule as final, with one revision in
response to comments. The
amendments to the agencies’ appraisal
regulations allow for the deferral of
appraisals and evaluations for
qualifying transactions through
December 31, 2020, as detailed further
below.
II. Background
Title XI of the Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989 (Title XI) 3 directs each Federal
VerDate Sep<11>2014 16:47 Oct 15, 2020 Jkt 253001 PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 E:\FR\FM\16OCR1.SGM 16OCR1
jbell on DSKJLSW7X2PROD with RULES
65667Federal Register / Vol. 85, No. 201 / Friday, October 16, 2020 / Rules and Regulations
4 The term ‘‘Federal financial institutions
regulatory agencies’’ means the Board, the FDIC, the
OCC, the National Credit Union Administration,
and, formerly, the Office of Thrift Supervision. 12
U.S.C. 3350(6).
5 These federal financial and public policy
interests include those stemming from the federal
government’s roles as regulator and deposit insurer
of financial institutions that engage in real estate
lending and investment, guarantor or lender on
mortgage loans, and as a direct party in real estate-
related financial transactions. These interests have
been described in predecessor legislation and
accompanying Congressional reports. See Real
Estate Appraisal Reform Act of 1988, H.R. Rep. No.
100–1001, pt. 1, at 19 (1988); 133 Cong. Rec. 33047–
33048 (1987).
6 12 U.S.C. 3331.
7 12 U.S.C. 3339.
8 Id.
9 12 U.S.C. 3350(5). A real estate-related financial
transaction is defined as any transaction that
involves: (i) The sale, lease, purchase, investment
in or exchange of real property, including interests
in property, or financing thereof; (ii) the refinancing
of real property or interests in real property; and
(iii) the use of real property or interests in property
as security for a loan or investment, including
mortgage-backed securities.
10 12 U.S.C. 3350(4).
11 Real estate-related financial transactions that
the agencies have exempted from the appraisal
requirement are not federally related transactions
under the agencies’ appraisal regulations.
12 See OCC: 12 CFR 34.43(a); Board: 12 CFR
225.63(a); FDIC: 12 CFR 323.3(a). The agencies have
determined that these categories of transactions do
not require appraisals by state certified or state
licensed appraisers in order to protect federal
financial and public policy interests or to satisfy
principles of safe and sound banking.
13 See OCC: 12 CFR 34.43(b); Board: 12 CFR
225.63(b); and FDIC: 12 CFR 323.3(b). Evaluations
are required for exempt residential and commercial
loans below the dollar value thresholds for
requiring an appraisal; exempt business loans;
exempt subsequent transactions; and transactions
subject to the rural residential exemption.
14 The agencies have provided guidance on
appraisals and evaluations through the Interagency
Guidelines on Appraisals and Evaluations. See 75
FR 77450 (Dec. 10, 2010), available at https://
occ.gov/news-issuances/federal-register/2010/
75fr77450.pdf.
15 See OCC: 12 CFR 34.42(a), 34.44(b)&(e); Board:
12 CFR 225.62(a), 225.64(b)&(e); and FDIC: 12 CFR
323.2(a), 323.4(b)&(e) (requiring an appraisal to (1)
contain sufficient information and analysis to
support the institution’s decision to engage in the
transaction, and (2) be based on the definition of
market value in the regulation, which takes into
account a specified closing date for the transaction).
16 See 75 FR 77450 (Dec. 10, 2010), available at
https://occ.gov/news-issuances/federal-register/
2010/75fr77450.pdf.
17 OCC: 12 CFR part 30, appendix A; Board: 12
CFR part 208, appendix D–1; and FDIC: 12 CFR part
364, appendix A.
18 OCC: 12 CFR part 34, subpart D, appendix A;
Board: 12 CFR part 208, subpart E, appendix C; and
FDIC: 12 CFR part 365, subpart A, appendix A.
Financial institutions should have a program for
establishing the market value of real property to
comply with these real estate lending standards,
which require financial institutions to determine
the value used in loan-to-value calculations based
in part on a value set forth in an appraisal or an
evaluation.
19 See 12 U.S.C. 1831p-1.
financial institutions regulatory agency
to publish appraisal regulations for
federally related transactions within its
jurisdiction.4 The purpose of Title XI is
to protect federal financial and public
policy interests 5 in real estate-related
transactions by requiring that real estate
appraisals used in connection with
federally related transactions (Title XI
appraisals) are performed in writing, in
accordance with uniform standards, by
individuals whose competency has been
demonstrated and whose professional
conduct will be subject to effective
supervision.6
Title XI directs the agencies to
prescribe appropriate standards for Title
XI appraisals under the agencies’
respective jurisdictions.7 At a
minimum, Title XI provides that a Title
XI appraisal must be: (1) Performed in
accordance with the Uniform Standards
of Professional Appraisal Practice
(USPAP); (2) a written appraisal, as
defined by Title XI; and (3) subject to
appropriate review for compliance with
USPAP.8 While appraisals ordinarily are
completed before a lender and borrower
close a real estate transaction, there is
no specific requirement in USPAP that
appraisals be completed at a specific
time relative to the closing of a
transaction.
All federally related transactions must
have Title XI appraisals. Title XI defines
a federally related transaction as a real
estate-related financial transaction 9 that
the agencies or a financial institution
regulated by the agencies engages in or
contracts for, that requires the services
of an appraiser.10 The agencies have
authority to determine those real estate-
related financial transactions that do not
require the services of an appraiser and
thus are not required to have Title XI
appraisals.11 The agencies have
exercised this authority by exempting
certain categories of real estate-related
financial transactions from the agencies’
appraisal requirements.12
The agencies have used their safety
and soundness authority to require
evaluations for a subset of transactions
for which an appraisal is not required.13
Under the appraisal regulations, for
these transactions, financial institutions
that are subject to the agencies’
appraisal regulations (regulated
institutions) must obtain an appropriate
evaluation of real property collateral
that is consistent with safe and sound
banking practices.14
Authority to defer appraisals and
evaluations. In general, the agencies
require that Title XI appraisals for
federally related transactions occur
prior to the closing of a federally related
transaction.15 The Interagency
Guidelines on Appraisals and
Evaluations provide similar guidance
about evaluations.16 Under the interim
final rule, deferrals of appraisals and
evaluations allow for expeditious access
to credit. The agencies authorized the
deferrals, which are temporary, in
response to the COVID event. Regulated
institutions that defer receipt of an
appraisal or evaluation are still expected
to conduct their lending activity
consistent with the underwriting
principles in the agencies’ Standards for
Safety and Soundness 17 and Real Estate
Lending Standards 18 that focus on the
ability of a borrower to repay a loan and
other relevant laws and regulations.
These deferrals are not an exercise of
the agencies’ waiver authority, because
appraisals and evaluations are being
deferred, not waived. The deferrals also
are not a waiver of USPAP
requirements, given that (1) USPAP
does not address the completion of an
appraisal assignment with the timing of
a lending decision; and (2) the deferred
appraisal must be conducted in
compliance with USPAP.
The deferral of evaluations reflects the
same considerations relating to the
impact of the COVID event as the
deferral of appraisals. The agencies
require evaluations for certain exempt
transactions as a matter of safety and
soundness. Evaluations do not need to
comply with USPAP but must be
sufficiently robust to support a
valuation conclusion. An evaluation can
be less complex than an appraisal and
usually takes less time to complete than
an appraisal, and commonly involves a
physical property inspection. For these
reasons, the agencies also are using their
safety and soundness authority 19 to
allow for deferral of evaluations.
By the end of the 120-day appraisal
and evaluation deferral period provided
by the final rule, regulated institutions
must obtain appraisals or evaluations
that are consistent with safe and sound
banking practices, as required by the
agencies’ appraisal regulations.
III. Overview of the Interim Final Rule
and Comments
A. Overview of the Interim Final Rule
The interim final rule allows a
temporary deferral of the requirements
for appraisals and evaluations under the
agencies’ appraisal regulations. The
deferrals apply to both residential and
commercial real estate-related financial
transactions, excluding transactions for
acquisition, development, and
construction of real estate. The agencies
are excluding these transactions because
these loans present heightened risks not
associated with the financing of existing
real estate.
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jbell on DSKJLSW7X2PROD with RULES
4 The term ‘‘Federal financial institutions
regulatory agencies’’ means the Board, the FDIC, the
OCC, the National Credit Union Administration,
and, formerly, the Office of Thrift Supervision. 12
U.S.C. 3350(6).
5 These federal financial and public policy
interests include those stemming from the federal
government’s roles as regulator and deposit insurer
of financial institutions that engage in real estate
lending and investment, guarantor or lender on
mortgage loans, and as a direct party in real estate-
related financial transactions. These interests have
been described in predecessor legislation and
accompanying Congressional reports. See Real
Estate Appraisal Reform Act of 1988, H.R. Rep. No.
100–1001, pt. 1, at 19 (1988); 133 Cong. Rec. 33047–
33048 (1987).
6 12 U.S.C. 3331.
7 12 U.S.C. 3339.
8 Id.
9 12 U.S.C. 3350(5). A real estate-related financial
transaction is defined as any transaction that
involves: (i) The sale, lease, purchase, investment
in or exchange of real property, including interests
in property, or financing thereof; (ii) the refinancing
of real property or interests in real property; and
(iii) the use of real property or interests in property
as security for a loan or investment, including
mortgage-backed securities.
10 12 U.S.C. 3350(4).
11 Real estate-related financial transactions that
the agencies have exempted from the appraisal
requirement are not federally related transactions
under the agencies’ appraisal regulations.
12 See OCC: 12 CFR 34.43(a); Board: 12 CFR
225.63(a); FDIC: 12 CFR 323.3(a). The agencies have
determined that these categories of transactions do
not require appraisals by state certified or state
licensed appraisers in order to protect federal
financial and public policy interests or to satisfy
principles of safe and sound banking.
13 See OCC: 12 CFR 34.43(b); Board: 12 CFR
225.63(b); and FDIC: 12 CFR 323.3(b). Evaluations
are required for exempt residential and commercial
loans below the dollar value thresholds for
requiring an appraisal; exempt business loans;
exempt subsequent transactions; and transactions
subject to the rural residential exemption.
14 The agencies have provided guidance on
appraisals and evaluations through the Interagency
Guidelines on Appraisals and Evaluations. See 75
FR 77450 (Dec. 10, 2010), available at https://
occ.gov/news-issuances/federal-register/2010/
75fr77450.pdf.
15 See OCC: 12 CFR 34.42(a), 34.44(b)&(e); Board:
12 CFR 225.62(a), 225.64(b)&(e); and FDIC: 12 CFR
323.2(a), 323.4(b)&(e) (requiring an appraisal to (1)
contain sufficient information and analysis to
support the institution’s decision to engage in the
transaction, and (2) be based on the definition of
market value in the regulation, which takes into
account a specified closing date for the transaction).
16 See 75 FR 77450 (Dec. 10, 2010), available at
https://occ.gov/news-issuances/federal-register/
2010/75fr77450.pdf.
17 OCC: 12 CFR part 30, appendix A; Board: 12
CFR part 208, appendix D–1; and FDIC: 12 CFR part
364, appendix A.
18 OCC: 12 CFR part 34, subpart D, appendix A;
Board: 12 CFR part 208, subpart E, appendix C; and
FDIC: 12 CFR part 365, subpart A, appendix A.
Financial institutions should have a program for
establishing the market value of real property to
comply with these real estate lending standards,
which require financial institutions to determine
the value used in loan-to-value calculations based
in part on a value set forth in an appraisal or an
evaluation.
19 See 12 U.S.C. 1831p-1.
financial institutions regulatory agency
to publish appraisal regulations for
federally related transactions within its
jurisdiction.4 The purpose of Title XI is
to protect federal financial and public
policy interests 5 in real estate-related
transactions by requiring that real estate
appraisals used in connection with
federally related transactions (Title XI
appraisals) are performed in writing, in
accordance with uniform standards, by
individuals whose competency has been
demonstrated and whose professional
conduct will be subject to effective
supervision.6
Title XI directs the agencies to
prescribe appropriate standards for Title
XI appraisals under the agencies’
respective jurisdictions.7 At a
minimum, Title XI provides that a Title
XI appraisal must be: (1) Performed in
accordance with the Uniform Standards
of Professional Appraisal Practice
(USPAP); (2) a written appraisal, as
defined by Title XI; and (3) subject to
appropriate review for compliance with
USPAP.8 While appraisals ordinarily are
completed before a lender and borrower
close a real estate transaction, there is
no specific requirement in USPAP that
appraisals be completed at a specific
time relative to the closing of a
transaction.
All federally related transactions must
have Title XI appraisals. Title XI defines
a federally related transaction as a real
estate-related financial transaction 9 that
the agencies or a financial institution
regulated by the agencies engages in or
contracts for, that requires the services
of an appraiser.10 The agencies have
authority to determine those real estate-
related financial transactions that do not
require the services of an appraiser and
thus are not required to have Title XI
appraisals.11 The agencies have
exercised this authority by exempting
certain categories of real estate-related
financial transactions from the agencies’
appraisal requirements.12
The agencies have used their safety
and soundness authority to require
evaluations for a subset of transactions
for which an appraisal is not required.13
Under the appraisal regulations, for
these transactions, financial institutions
that are subject to the agencies’
appraisal regulations (regulated
institutions) must obtain an appropriate
evaluation of real property collateral
that is consistent with safe and sound
banking practices.14
Authority to defer appraisals and
evaluations. In general, the agencies
require that Title XI appraisals for
federally related transactions occur
prior to the closing of a federally related
transaction.15 The Interagency
Guidelines on Appraisals and
Evaluations provide similar guidance
about evaluations.16 Under the interim
final rule, deferrals of appraisals and
evaluations allow for expeditious access
to credit. The agencies authorized the
deferrals, which are temporary, in
response to the COVID event. Regulated
institutions that defer receipt of an
appraisal or evaluation are still expected
to conduct their lending activity
consistent with the underwriting
principles in the agencies’ Standards for
Safety and Soundness 17 and Real Estate
Lending Standards 18 that focus on the
ability of a borrower to repay a loan and
other relevant laws and regulations.
These deferrals are not an exercise of
the agencies’ waiver authority, because
appraisals and evaluations are being
deferred, not waived. The deferrals also
are not a waiver of USPAP
requirements, given that (1) USPAP
does not address the completion of an
appraisal assignment with the timing of
a lending decision; and (2) the deferred
appraisal must be conducted in
compliance with USPAP.
The deferral of evaluations reflects the
same considerations relating to the
impact of the COVID event as the
deferral of appraisals. The agencies
require evaluations for certain exempt
transactions as a matter of safety and
soundness. Evaluations do not need to
comply with USPAP but must be
sufficiently robust to support a
valuation conclusion. An evaluation can
be less complex than an appraisal and
usually takes less time to complete than
an appraisal, and commonly involves a
physical property inspection. For these
reasons, the agencies also are using their
safety and soundness authority 19 to
allow for deferral of evaluations.
By the end of the 120-day appraisal
and evaluation deferral period provided
by the final rule, regulated institutions
must obtain appraisals or evaluations
that are consistent with safe and sound
banking practices, as required by the
agencies’ appraisal regulations.
III. Overview of the Interim Final Rule
and Comments
A. Overview of the Interim Final Rule
The interim final rule allows a
temporary deferral of the requirements
for appraisals and evaluations under the
agencies’ appraisal regulations. The
deferrals apply to both residential and
commercial real estate-related financial
transactions, excluding transactions for
acquisition, development, and
construction of real estate. The agencies
are excluding these transactions because
these loans present heightened risks not
associated with the financing of existing
real estate.
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