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August 21, 2019

AI Opposes Banks' Residential Appraisal Threshold Increase

Federal banking regulators on Aug. 20 approved a final rule to increase the residential appraisal threshold from $250,000 to $400,000, effective after publication in the Federal Register, which should happen within days. 
 
“The Appraisal Institute continues to oppose this effort by bank regulators that threatens consumer protection and safety and soundness,” said Appraisal Institute President Stephen S. Wagner, MAI, SRA, AI-GRS. “While not surprised, we are very disappointed that the regulatory agencies have focused on regulatory relief at the expense of protecting homebuyers. The consequences could be substantial.”
 
The Appraisal Institute fought to retain the existing threshold level during its review of the Economic Growth and Regulatory Paperwork Reduction Act several years ago, warning — and continuing to warn —federal banking agencies and congressional allies that the threshold increase could harm financial institutions and consumers. 
 
The Appraisal Institute’s efforts to relay that message included:
  • Leading an appraisal coalition that submitted a comment letter to the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corp. warning them that raising the residential  threshold would increase exposure to unregulated evaluation products. The letter also explained that many of the market conditions spurring consideration of the increase have improved. 
  • Meeting with members of Congress, banking regulatory agencies and the Consumer Financial Protection Bureau to express concern about the threshold increase. 
  • Working to secure opposition to the proposed increase from consumer groups and other stakeholder organizations.  
Additionally, Appraisal Institute representatives met with Senate Banking Committee Ranking Member Sherrod Brown, D-Ohio, and his staff. Following those discussions, Brown submitted questions to the FDIC and the OCC, asking for justification for the residential appraisal threshold increase. The agencies avoided answering the questions until just days before the rule’s adoption. 
 
Regulatory sources have told Appraisal Institute representatives that around 90% of public comments were against the increase. However, the banking regulatory agencies are required only to consider public comments, not to base decisions on them. 

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