Federal Agencies Allow Member Banks to Postpone Appraisals for 120 Days

Three federal agencies this week announced a rule change allowing its member banks to postpone an appraisal on a residential or commercial property for 120 days after the loan is closed.

The rule (https://www.fdic.gov/news/news/press/2020/pr20051b.pdf), issued by The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency, will remain in effect until the end of 2020.

“COVID-19 has significantly affected financial institutions and their customers, and the agencies seek to assist financial institutions in their provision of needed services to their customers and to the general public,” the agencies said.

The rule applies only to banks under these agencies’ oversight.

The rule notes while exterior and interior inspections are commonly conducted in preparing appraisals and evaluations and can facilitate high quality valuations, such inspections are not required by the agencies’ appraisal regulations implementing Title XI of the Financial Institutions Reform, Recovery and Enforcement Act. Rather, as allowed by the Uniform Standards of Professional Appraisal Practice, an appraiser can determine the characteristics of a property through, among other things, any combination of property inspection, asset records, photographs, property sketches and recorded media.

Fannie Mae and Freddie Mac recently issued guidance providing temporary flexibility in appraisal standards for loans that they purchase, including allowing exterior-only and desktop appraisals for certain loans. Specifically, the GSEs’ guidance states for certain qualifying principal or primary residence loans, desktop appraisals and exterior-only appraisals will now be acceptable. For Freddie Mac, qualifying primary residence loans are those with up to 97 percent loan-to-value. For Fannie Mae, qualifying primary residence loans are those with an LTV within the range listed on its current eligibility matrix.