Bank Examination & Appraisal
Legislation has been introduced in the House of Representatives which repeals and replaces the Dodd-Frank Act, eliminates taxpayer bailouts of financial institutions and provides regulatory relief for community financial institutions, among other things.
Within the realm of appraisal, The AI has concerns with Section 1136 of the Financial CHOICE Act, which we believe would limit unnecessarily the flexibility of bank examiners in protecting safety and soundness. Specifically, new Section 1013(a)(3) is inconsistent with Real Estate Lending regulations, the Interagency Appraisal and Evaluation Guidelines, and the Policy Statement on Prudent Commercial Real Estate Loan Workouts, in that it would prohibit any reappraisal of a performing loan even if examiners identified safety and soundness concerns. We do not believe that Federal bank examiners’ hands should be tied on issues of safety and soundness.;
In our view, Section 1013(a)(3) may not be necessary because current regulations and guidance do not require reappraisal of performing loans. Under the regulations, outside of the safety and soundness trigger, a new appraisal is not required for a loan workout or refinance unless there are new monies involved and there has been a material change in market conditions or the physical aspects of the property. Otherwise, an “evaluation” is acceptable. In this regard, Section 1013(a)(3) may confuse a matter that already is settled through existing regulations.
Appraisal Institute Letter to House Financial Services Committee on Financial CHOICE Act