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Interagency Appraisal and Evaluation Guidelines

On December 2, 2010, the five federal banking agencies—the Federal Reserve Board (FRB), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), Office of Thrift Supervision (OTS) and National Credit Union Administration (NCUA) (collectively, the “Agencies”)—issued revisions to the Interagency Appraisal and Evaluation Guidelines (“Guidelines”).

The Guidelines, applicable to all regulated banking institutions, identify the components of a safe and sound program for performing appraisals and evaluations for real estate-related financial transactions. Further, they promote consistency in the application and enforcement of the Agencies’ appraisal regulations and safe and sound banking practices. The Guidelines, including their appendices, update and replace existing supervisory guidance documents to reflect recent developments concerning appraisals and evaluations, as well as changes in appraisal standards and advancements in regulated institutions’ collateral valuation methods.

The Agencies recognize that revisions to the Guidelines may not cover all the changes brought about by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)    . The Agencies state that it may be necessary to engage in future regulations to fully implement the provisions of Dodd-Frank.

The Guidelines contain four appendices that clarify current regulatory requirements and supervisory Guidance, and are organized as follows:

  • Appendix A provides further clarification on real estate-related financial transactions that are exempt from the Agencies’ appraisal regulations.
  • Appendix B addresses an institution’s use of analytical methods or technological tools in the development of an evaluation.
  • Appendix C clarifies the minimum appraisal standards required by the Agencies’ appraisal regulations for analyzing and reporting appropriate deductions and discounts in appraisals.
  • Appendix D (previously Appendix C in the Proposal) provides a glossary of terms.

The Guidelines became effective upon publication, on December 10, 2010.

Appraisal and Evaluation Program

Every institution is responsible for establishing an effective real estate appraisal and evaluation program. The institution’s board of directors, or a specially designated committee, must adopt policies and procedures and review them periodically. Appraisal and evaluation programs should:

  • Assure independence of persons ordering, performing, and reviewing appraisals or evaluations.
  • Establish selection criteria and procedures to evaluate ongoing performance of appraisers and persons performing evaluations.
  • Ensure that appraisals comply with regulations and supervisory guidance.
  • Ensure that appraisals and evaluations contain sufficient supporting information. Maintain criteria for the content and use of evaluations consistent with safe banking practices.
  • Provide for timely receipt and review of appraisal or evaluation report to facilitate credit decision.
  • Develop criteria for whether existing appraisal or evaluation may be used to support subsequent transaction.
  • Implement internal controls that promote compliance with these program standards.
  • Establish criteria for monitoring collateral values.
  • Establish criteria for valuations in transactions not otherwise covered by applicable appraisal regulations.

See the Final Guidance issued on December 10, 2010.

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