The National Credit Union Administration Board (Board) recently adopted as final an interim final rule that defers the requirement for appraisals and written estimates of market value by up to 120 days following the closing of transactions for certain residential and commercial real estate transactions. The final rule is effective October 14, 2020 and expires December 31, 2020, unless extended by the Board.
Under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the Board has the authority to set appraisal regulations for all federally related transactions under its purview. It can exempt certain of these transactions from appraisal requirements, and, for certain of these exempted transactions, require written estimates of market value instead.
The interim final rule, issued April 21, 2020, and the final rule are attempts to extend liquidity to creditworthy households and businesses that have experienced financial strain as a result of the COVID-19 pandemic, by deferring the appraisal and written estimates until after closing. Credit unions are still required to conduct lending activities consistent with safe and sound underwriting principles, and all appraisals, including deferred ones, must comply with the Uniform Standards of Professional Appraisal Practice. Additionally, these deferrals do not constitute waivers of the appraisal and written estimate requirements.
Notably, 1) the final and interim final rules do not apply to transactions for acquisition, development, and construction of real estate; and 2) the rules do not revise any existing appraisal exceptions or any other requirements concerning how written estimates must be performed.