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?

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

awesome wonko-ga