The Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, Treasury (OTS); and the National Credit Union Administration (NCUA) recently issued final supervisory guidance regarding real estate appraisals and evaluations.
A copy of the Guidance is available at:
These Interagency Appraisal and Evaluation Guidelines ("Guidelines") replace the prior 1994 guidelines. The Guidelines incorporate the regulators' recent supervisory issuances on appraisal practices, address advancements in information technology used in collateral valuation practices, and clarify standards for the industry's appropriate use of analytical methods and technological tools in developing evaluations.
The Guidelines emphasize that financial institutions are responsible for selecting appraisers and people performing evaluations based on their competence, experience, and knowledge of the market and type of property being valued. The Guidelines also emphasize the importance of institutions maintaining strong internal controls to ensure reliable appraisals and evaluations.
According to the Guidelines, financial institutions should demonstrate the independence of their processes for obtaining property values, and adopt standards for appropriate communications and information-sharing with appraisers and people performing evaluations. In addition, under the Guidelines, institutions are responsible for monitoring and periodically updating valuations of collateral for existing real estate loans and for transactions, such as modifications and workouts, according to the guidelines.
The regulators noted that future revisions may be necessary after regulations are adopted to implement the Dodd-Frank Wall Street Financial Reform and Consumer Protection Act of 2010 Act.
Ralph T. Wutscher
Kahrl Wutscher LLP
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Chicago, Illinois 60602
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