NO APPRAISAL NEEDED - FIRREA - BANK POLICY - BANKER
Category: Business and Money > Finance
Asked by: reeden-ga
List Price: $50.00
12 Mar 2005 18:55 PST
Expires: 11 Apr 2005 19:55 PDT
Question ID: 493607
In the real estate industry, FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989) was passed mandating the rules under which financial institutions would conduct themselves in the process of making loans on real estate property and ensuring that an appraisal was conducted. The question is: Most banks have commercial guidelines that outline the rules required to meet FIRREA requirements; however, some banks have in their guidelines language that may read as follows "if making a loan for less than $100,000, no appraisal is required..." OR "an appraisal will be required or conducted on a real estate loans where the loan is for more than $150,000..." having said that, is it FIRREA act rules that say the loan can be issued without an appraisal on real estate loans below a certain dollar amount OR is it that financial institutions decision to say that at that dollar amount the risk is minimal therein making it a bank policy issue not a FIRREA requirement? Said a different way: Is FIRREA setting a maximum of say XXX dollar amount that a real estate loan can be done without an appraisal being required and then banks are lowering or meeting that maximum allowable... OR Are banks setting their own minimums for internal policy since FIRREA doesn't state any kind of minimum and maybe FIRREA just says that a certain percentage of bank real estate loans must have appraisals on them?
Re: NO APPRAISAL NEEDED - FIRREA - BANK POLICY - BANKER
Answered By: wonko-ga on 04 Apr 2005 10:59 PDT
The answer to your question is version number one, where FIRREA has established a maximum dollar amount that banks are lowering or meeting to determine when appraisal is required. FIRREA requires that "transactions of less than $250,000 require an evaluation by a qualified individual." This evaluation is not a full-fledged appraisal. Residential appraisals and some transactions with properties worth less than $1 million require a licensed appraiser at a minimum. Properties securing commercial transactions, properties valued at more than $1 million, and complex properties of any kind must be appraised by a certified appraiser. "Are You in Compliance with FIRREA Appraisal Requirements?" Clayton & McKervey, P.C. (Winter 2005) http://www.claytonmckervey.com/flnw05-2.htm "In one example, there are now "thresholds" of value below which appraisals are not required at all, or which may be conducted by appraisers who have demonstrated the lowest levels of competency. Would it surprise you to know that Federally related lending institutions (i.e., those covered by various forms of Federal oversight) have the option to avoid acquiring appraisals on real estate loans of $250,000, or less? It's true, and such things did not exist prior to "reforms."" "The Fraud of Appraisal Regulation" by Larry S. Levy Financial Sense Online (2004) http://www.financialsense.com/editorials/reality/2004/0702.html Search Terms: FIRREA appraisal Sincerely, Wonko
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