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Rules and Regulations Federal Register Vol. 83, No. 68

Monday, April 9, 2018

This section of the FEDERAL REGISTER property collateral that is consistent are regulated by the agencies (regulated contains regulatory documents having general with safe and sound banking practices. institutions) would not be required to applicability and legal effect, most of which DATES: This final rule is effective on obtain appraisals in connection with are keyed to and codified in the Code of commercial real estate transactions Federal Regulations, which is published under April 9, 2018. 50 titles pursuant to 44 U.S.C. 1510. FOR FURTHER INFORMATION CONTACT: (commercial real estate appraisal OCC: G. Kevin Lawton, Appraiser threshold) from $250,000 to $400,000. The Code of Federal Regulations is sold by (Real Estate Specialist), (202) 649–7152, The proposal followed the completion the Superintendent of Documents. Mitchell E. Plave, Special Counsel, in early 2017 of the regulatory review Legislative and Regulatory Activities process required by the Economic Division, (202) 649–5490, or Joanne Growth and Regulatory Paperwork DEPARTMENT OF THE TREASURY Phillips, Attorney, Bank Activities and Reduction Act (EGRPRA).3 During the Office of the Comptroller of the Structure Division, (202) 649–5500, EGRPRA process, the agencies received Currency Office of the Comptroller of the numerous comments related to the Title Currency, 400 7th Street SW, XI appraisal regulations, including 12 CFR Part 34 Washington, DC 20219. For persons recommendations to increase the who are deaf or hearing impaired, TTY thresholds at or below which [Docket No. OCC–2017–0011] users may contact (202) 649–5597. transactions are exempt from the Title RIN 1557–AE18 Board: Constance Horsley, Deputy XI appraisal requirements. Among other Associate Director, (202) 452–5239, or proposals developed through the FEDERAL RESERVE SYSTEM Carmen Holly, Senior Supervisory EGRPRA process, the agencies Financial Analyst, (202) 973–6122, recommended increasing the 12 CFR Part 225 Division of Supervision and Regulation; commercial real estate appraisal or Gillian Burgess, Senior Counsel, (202) threshold to $400,000.4 [Docket No. R–1568; RIN 7100 AE–81] 736–5564, Matthew Suntag, Counsel, Title XI directs each federal financial FEDERAL DEPOSIT INSURANCE (202) 452–3694, or Kirin Walsh, institutions regulatory agency 5 to CORPORATION Attorney, (202) 452–3058, Legal publish appraisal regulations for Division, Board of Governors of the federally related transactions within its 12 CFR Part 323 Federal Reserve System, 20th and C jurisdiction. The purpose of Title XI is Streets NW, Washington, DC 20551. For RIN 3064 AE–56 to protect federal financial and public the hearing impaired only, policy interests 6 in real estate-related Telecommunications Device for the Deaf Real Estate Appraisals transactions by requiring that real estate (TDD) users may contact (202) 263– appraisals used in connection with AGENCY: Office of the Comptroller of the 4869. federally related transactions (Title XI Currency, Treasury (OCC); Board of FDIC: Beverlea S. Gardner, Senior appraisals) be performed in accordance Governors of the Federal Reserve Examination Specialist, Division of Risk with uniform standards, by individuals System (Board); and Federal Deposit Management and Supervision, (202) whose competency has been Insurance Corporation (FDIC). 898–3640, Mark Mellon, Counsel, Legal demonstrated, and whose professional ACTION: Final rule. Division, (202) 898–3884, or Lauren conduct will be subject to effective Whitaker, Senior Attorney, Legal supervision.7 SUMMARY: The OCC, Board, and FDIC Division, (202) 898–3872, Federal (collectively, the agencies) are adopting Deposit Insurance Corporation, 550 17th 3 Public Law 104–208, Div. A, Title II, section a final rule to amend the agencies’ Street NW, Washington, DC 20429. For 2222, 110 Stat. 3009–414, (1996) (codified at 12 regulations requiring appraisals of real the hearing impaired only, TDD users U.S.C. 3311). estate for certain transactions. The final may contact (202) 925–4618. 4 See FFIEC, Joint Report to Congress: Economic rule increases the threshold level at or SUPPLEMENTARY INFORMATION: Growth and Regulatory Paperwork Reduction Act, below which appraisals are not required (March 2017), (EGRPRA Report), available at I. Background and Summary of the https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_ for commercial real estate transactions Joint-Report_to_Congress.pdf. from $250,000 to $500,000. The final Proposed Rule 5 ‘‘Federal financial institutions regulatory rule defines commercial real estate In July 2017, the agencies invited agency’’ means the Board, the FDIC, the OCC, the transaction as a real estate-related comment on a notice of proposed National Credit Union Association (NCUA), and, formerly, the Office of Thrift Supervision. 12 U.S.C. 1 financial transaction that is not secured rulemaking (proposal or proposed rule) 3350(6). by a single 1-to-4 family residential that would amend the agencies’ 6 These interests include those stemming from the property. It excludes all transactions appraisal regulations promulgated federal government’s roles as regulator and deposit secured by a single 1-to-4 family pursuant to Title XI of the Financial insurer of financial institutions that engage in real residential property, and thus estate lending and investment, guarantor or lender Institutions Reform, Recovery, and on mortgage loans, and as a direct party in real construction loans secured by a single 1- Enforcement Act of 1989 (Title XI).2 estate-related financial transactions. These federal to-4 family residential property are Specifically, the proposal would have financial and public policy interests have been excluded. For commercial real estate increased the monetary threshold at or described in predecessor legislation and transactions exempted from the accompanying Congressional reports. See Real below which financial institutions that Estate Appraisal Reform Act of 1988, H.R. Rep. No. appraisal requirement as a result of the 100–1001, pt. 1, at 19 (1988); 133 Cong. Rec. 33047– revised threshold, regulated institutions 1 82 FR 35478 (July 31, 2017). 33048 (1987). must obtain an evaluation of the real 2 12 U.S.C. 3331 et seq. 7 12 U.S.C. 3331.

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Title XI directs the agencies to because they do not require the services income derived from, real estate as the prescribe appropriate standards for Title of an appraiser.13 primary source of repayment.20 XI appraisals under the agencies’ The agencies have exempted several For real estate-related financial 8 respective jurisdictions, including, at a categories of real estate-related financial transactions that are exempt from the minimum, that appraisals be: (1) transactions from the Title XI appraisal Title XI appraisal requirement because Performed in accordance with the requirements.14 The agencies have they are at or below the applicable Uniform Standards of Professional determined that these categories of thresholds or qualify for the exemption 9 Appraisal Practice (USPAP); (2) transactions do not require appraisals by for certain existing extensions of credit,21 the Title XI appraisal written appraisals, as defined by the state certified or state licensed regulations require regulated statute, by licensed or certified appraisers in order to protect federal 10 institutions to obtain an evaluation of appraisers; and (3) subject to financial and public policy interests or the real property collateral that is appropriate review for compliance with to satisfy principles of safe and sound consistent with safe and sound banking USPAP. All federally related banking. transactions must have Title XI practices.22 An evaluation should appraisals. In 1992, Congress amended Title XI, contain sufficient information and expressly authorizing the agencies to analysis to support the financial Title XI defines a ‘‘federally related establish a threshold level at or below institution’s decision to engage in the transaction’’ as a real estate-related which an appraisal by a state certified transaction.23 financial transaction that is regulated or or state licensed appraiser is not The agencies proposed to increase the engaged in by a federal financial required in connection with federally commercial real estate appraisal institutions regulatory agency and related transactions if the agencies threshold from $250,000 to $400,000. 11 requires the services of an appraiser. determine in writing that the threshold The proposal would have defined A real estate-related financial does not represent a threat to the safety commercial real estate transaction to transaction is defined as any transaction and soundness of financial include all real estate-related financial that involves: (i) The sale, lease, institutions.15 As noted above, transactions, except for those secured by purchase, investment in or exchange of transactions at or below the threshold a 1-to-4 family residential property,24 real property, including interests in level are exempt from the Title XI but including loans that finance the property, or financing thereof; (ii) the appraisal requirements and thus are not construction of 1-to-4 family properties refinancing of real property or interests federally related transactions. and that do not include permanent in real property; and (iii) the use of real 25 Under the current thresholds, financing. Under the proposal, property or interests in real property as established in 1994,16 all real estate- regulated institutions would have been security for a loan or investment, related financial transactions with a required to obtain evaluations including mortgage-backed securities.12 transaction value 17 of $250,000 or less, consistent with safe and sound banking The agencies have authority to as well as certain real estate-secured determine those real estate-related 20 See OCC: 12 CFR 34.43(a)(5); Board: 12 CFR business loans (qualifying business 225.63(a)(5); and FDIC: 12 CFR 323.3(a)(5). financial transactions that do not loans or QBLs) with a transaction value 21 Transactions that involve an existing extension require the services of a state certified of $1 million or less, do not require Title of credit at the lending institution are exempt from or state licensed appraiser and are XI appraisals.18 QBLs are business the Title XI appraisal requirements, but are required therefore exempt from the appraisal 19 to have evaluations, provided that there has been loans that are real estate-related no obvious and material change in market requirements of Title XI. These real financial transactions and that are not conditions or physical aspects of the property that estate-related financial transactions are dependent on the sale of, or rental threatens the adequacy of the institution’s real not federally related transactions under estate collateral protection after the transaction, even with the advancement of new monies; or there the statutory or regulatory definitions, 13 See 59 FR 29482 (June 7, 1994). is no advancement of new monies, other than funds 14 See OCC: 12 CFR 34.43(a); Board: 12 CFR necessary to cover reasonable closing costs. See 8 12 U.S.C. 3339. The agencies’ Title XI appraisal 225.63(a); and FDIC: 12 CFR 323.3(a). OCC: 12 CFR 34.43(a)(7) and (b); Board: 12 CFR regulations apply to transactions entered into by the 15 Housing and Community Development Act of 225.63(a)(7) and (b); and FDIC: 12 CFR 323.3(a)(7) agencies or by institutions regulated by the agencies 1992, Pub. L. 102–550, section 954, 106 Stat. 3894 and (b). that are depository institutions or bank holding (amending 12 U.S.C. 3341). 22 See OCC: 12 CFR 34.43(b); Board: 12 CFR companies or subsidiaries of depository institutions 16 See 59 FR at 29482. The NCUA has 225.63(b); and FDIC: 12 CFR 323.3(b). or bank holding companies. See OCC: 12 CFR 34, promulgated similar rules with similar thresholds. 23 Evaluations are not required to be performed in subpart C; Board: 12 CFR 225.61(b); 12 CFR part See 60 FR 51889 (October 4, 1995) and 66 FR 58656 accordance with USPAP or by state certified or state 208, subpart E; and FDIC: 12 CFR part 323. (November 23, 2001). licensed appraisers. The agencies have provided 9 USPAP is written and interpreted by the 17 For loans and extensions of credit, the supervisory guidance for conducting evaluations in Appraisal Standards Board of the Appraisal transaction value is the amount of the loan or a safe and sound manner in the Interagency Foundation. USPAP contains generally recognized extension of credit. For sales, leases, purchases, Appraisal and Evaluation Guidelines (Guidelines) ethical and performance standards for the appraisal investments in or exchanges of real property, the and the Interagency Advisory on the Use of profession in the United States, including real transaction value is the market value of the real Evaluations in Real Estate-Related Financial estate, personal property, and business appraisals. property. For the pooling of loans or interests in Transactions (Evaluations Advisory, and together See http://www.appraisalfoundation.org/imis/TAF/ real property for resale or purchase, the transaction with the Guidelines, Evaluation Guidance). See, 75 Standards/Appraisal_Standards/Uniform_ value is the amount of each loan or the market FR 77450 (December 10, 2010); OCC Bulletin 2016– Standards_of_Professional_Appraisal_Practice/ value of each real property, respectively. See OCC: 8 (March 4, 2016); Board SR Letter 16–5 (March 4, TAF/USPAP.aspx?hkey=a6420a67-dbfa-41b3-9878- 12 CFR 34.42(m); Board: 12 CFR 225.62(m); and 2016); and Supervisory Expectations for fac35923d2af. FDIC: 12 CFR 323.2(m). Evaluations, FDIC FIL–16–2016 (March 4, 2016). 10 Title XI defines ‘‘written appraisal’’ as ‘‘a 18 See OCC: 12 CFR 34.43(a)(1) and (5); Board: 12 24 A 1-to-4 family residential property is a written statement used in connection with a CFR 225.63(a)(1) and (5); and FDIC: 12 CFR property containing one, two, three, or four federally related transaction that is independently 323.3(a)(1) and (5). individual dwelling units, including manufactured and impartially prepared by a licensed or certified 19 The Title XI appraisal regulations define homes permanently affixed to the underlying land appraiser setting forth an opinion of defined value ‘‘business loan’’ to mean ‘‘a loan or extension of (when deemed to be real property under state law). of an adequately described property as of a specific credit to any corporation, general or limited See OCC: 12 CFR part 34 subpart D, Appendix A; date, supported by presentation and analysis of partnership, business trust, joint venture, pool, Board: 12 CFR 208, Appendix C; and FDIC: 12 CFR relevant market information. 12 U.S.C. 3350(10). syndicate, sole proprietorship, or other business part 365, subpart A, Appendix A. 11 12 U.S.C. 3350(4). entity.’’ OCC: 12 CFR 34.42(d); Board: 12 CFR 25 The second part of the definition was intended 12 12 U.S.C. 3350(5). 225.62(d); and FDIC: 12 CFR 323.2(d). to clarify, not be an exception to, the first part.

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practices in connection with single 1-to-4 family residential property, would provide burden relief for commercial real estate transactions at or including a loan for construction, will financial institutions, without below the proposed $400,000 threshold. remain subject to the $250,000 sacrificing sound risk management The agencies did not propose increasing threshold.26 The agencies made this principles or safe and sound banking the thresholds for other types of real change in the final rule after practices, and that an increase would estate-related financial transactions, but consideration of the comments, which help justify the cost and return of solicited comment on the suggested that including 1-to-4 family originating smaller and less complex appropriateness of raising the threshold constructions loans that do not include commercial real estate loans. Several for residential real estate transactions permanent financing in the definition, commenters asserted the higher and QBLs. but excluding those that do not, would threshold could be implemented easily The comment period closed on not significantly reduce burden. and would result in burden relief, for September 29, 2017. The agencies These changes are discussed in more example, by reducing loan costs and collectively received over 200 detail below, in the order in which they minimizing delays in loan processing. comments from appraisers, appraiser appear in the rule. As described in more One commenter asserted that the trade organizations, financial detail below, the effective date for the proposed increase would support local institutions, financial institutions trade rule will be the date of its publication and regional economies, and another organizations, and individuals. in the Federal Register. In the Dodd- represented that it would assist small As noted in the proposal, increases in Frank Wall Street Reform and Consumer builders. This same commenter asserted commercial property values over time Protection Act (the Dodd-Frank Act),27 that reducing burden on lenders would have required regulated institutions to Congress amended the threshold facilitate financing to builders generally, obtain Title XI appraisals for a larger provision to require ‘‘concurrence from as they rely heavily on commercial proportion of commercial real estate the Consumer Financial Protection banks for financing. transactions than in 1994 when the Bureau (CFPB) that such threshold level Commenters opposing an increase to current $250,000 threshold was provides reasonable protection for the commercial real estate appraisal established. This increase in the number consumers who purchase 1–4 unit threshold asserted that an increase 28 of appraisals required may have single-family residences.’’ The would elevate risks to financial contributed to increased burden for agencies have received concurrence institutions, the banking system, regulated institutions in terms of time from the CFPB that the commercial real borrowers, small business owners, and cost. The proposal was intended to estate appraisal threshold being adopted commercial property owners, and reduce regulatory burden consistent provides reasonable protection for taxpayers. Several of these commenters with federal financial and public policy consumers who purchase 1–4 unit asserted that the increased risk would interests in real estate-related financial single family residential properties. not be justified by burden relief. Other transactions. Based on supervisory Comments on the Proposed Increase to commenters asserted that the proposed experience and available data, the the Commercial Real Estate Appraisal increase contradicts publicly stated agencies published the proposal to Threshold concerns of the agencies relating to the accomplish these goals without posing a The agencies received a range of state of the commercial real estate threat to the safety and soundness of comments regarding the proposal to market and the quality of evaluation financial institutions. increase the commercial real estate reports. Another commenter asserted II. Revisions to the Title XI Appraisal appraisal threshold. Comments from that the inclusion of construction loans Regulations financial institutions and financial extended to consumers as commercial institutions trade associations generally real estate transactions would magnify Overview of Changes supported an increase, although many risk, as the commenter viewed such After carefully considering the requested a higher increase than loans as particularly risky. One comments and conducting further proposed. Comments from appraisers commenter expressed concern that the analysis, the agencies are adopting a and appraiser-related trade associations proposal would lead to increased use of final rule that increases the commercial generally opposed an increase. automated valuations, which the real estate appraisal threshold with Commenters supporting a threshold commenter asserted are not adequate three modifications from the proposal. increase stated that an increase would substitutes for appraisals, or would First, the agencies have decided to be appropriate, given the increases in eliminate collateral verifications increase the commercial real estate real estate values since the current altogether. appraisal threshold to $500,000 rather threshold was established, the cost and Some commenters opposing the than $400,000 as proposed. Second, the time savings to lenders and borrowers threshold raised issues unrelated to risk. final rule also makes a conforming the higher threshold would provide, and A few asserted that appraisals are change to the section requiring state the burden relief it would provide to relatively inexpensive and, thus, that certified appraisers to be used for financial institutions in rural and other the proposed increase would not federally related transactions that are areas where there are reported shortages materially reduce costs. One commenter commercial real estate transactions of state licensed or state certified expressed the view that an increase in above the increased threshold. appraisers, which may have caused the commercial real estate appraisal Third, the final rule also reflects a transaction delays and increased threshold would be contrary to change to the proposed definition of lending costs. Commenters supporting a consumer protection objectives. Another commercial real estate transaction, threshold increase also asserted that it commenter asserted that the agencies which no longer includes construction are required by Title XI to receive loans secured by a single 1-to-4 family 26 Residential construction loans secured by more concurrence from the CFPB for a residential property, regardless of than one 1-to-4 family residential property will be threshold change. In support of its whether the loan is for initial considered commercial real estate transactions opposition to the proposal, a commenter subject to the higher threshold. cited a 2012 U.S. Government construction only or includes 27 Public Law 111–203, 124 Stat.1376. permanent financing. Thus, under the 28 Dodd-Frank Act, § 1473, 124 Stat. 2190 Accountability Office (GAO) report, final rule, a loan that is secured by a (amending 12 U.S.C. 3341(b)). contending that the report found no

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support for raising the threshold.29 reliability of appraisals and whether obtain Title XI appraisals when Another commenter asserted that the appraisers’ valuations are keeping up necessary for risk management and to proposed threshold increase is contrary with property growth trends. Another preserve the safety and soundness of the to Congressional intent and also commenter expressed concern that institution. asserted that most commenters during appraisers’ access to sales contracts can A. Threshold Increase for Commercial the EGRPRA process were against a lead to an over-abundance of appraised threshold increase. values at or above the amounts in the Real Estate Transactions Several commenters rejected contracts. Definition of Commercial Real Estate assertions that there was an appraiser After carefully considering the Transaction shortage warranting regulatory relief, comments received, the agencies have The commercial real estate appraisal some asserting that any shortage is decided to increase the commercial real threshold increase applies only to caused by appraisers’ unwillingness to estate appraisal threshold. As discussed transactions defined as ‘‘commercial work for appraisal management in the proposal and further detailed real estate transactions.’’ Under the companies (AMCs) at the reduced fees below, increasing the commercial real proposed definition, a commercial real being offered to appraisers by AMCs. estate appraisal threshold will provide estate transaction would have included Two commenters questioned the impact regulatory relief for financial construction loans for 1-to-4 family of the proposed commercial real estate institutions by removing the appraisal residential units, but not those appraisal threshold on appraiser requirement for a material number of providing permanent financing. shortages, one asserting that the number transactions without threatening the Accordingly, the proposed definition of commercial real estate appraisers has safety and soundness of financial would have included a loan extended to remained relatively steady in recent institutions. finance the construction of a consumer’s years and the other asserting that The agencies are increasing the dwelling, but would have excluded appraiser shortages are primarily related threshold based on express statutory construction loans that provide both the to residential property valuations. authority to do so if they determine in Many commenters opposing the writing that the threshold does not initial construction funding and proposal highlighted the benefits that represent a threat to the safety and permanent financing. The agencies received several state licensed or state certified soundness of financial institutions.30 comments related to the proposed appraisers bring to the process of The agencies have made this safety and definition. Most comments were not valuing real estate collateral. One of soundness determination and a detailed supportive of the proposed treatment of these commenters asserted that analysis is provided below. loans to finance the construction of 1- appraisers serve a necessary function in Regarding consumer protection to-4 family residential properties. The real estate lending and expressed concerns, the agencies do not expect one commenter in support of the concerns that bypassing them to create that this increase will affect a significant proposal to include 1-to-4 family a more streamlined valuation process number of consumer transactions. As construction-only loans in the definition could lead to fraud and another real discussed in more detail below, the final of a commercial real estate transaction estate crisis. Several commenters rule is only raising the threshold for asserted that these loans are highlighted that appraisers are the only commercial real estate transactions. underwritten similar to commercial real unbiased party in the valuation process, This definition was revised to exclude estate transactions. in contrast to buyers, agents, lenders, construction loans secured by a single 1- Some commenters supported and sellers, who each have an interest to-4 family residential property, which excluding all loans to finance the in the underlying transactions. One would have included construction loans construction of 1-to-4 family residential commenter asserted that appraisers have to consumers. As a result of this change, properties from the definition. Some a unique vantage point during the the final rule will not affect a material commenters maintained that it would be property inspection process to provide number of consumer transactions. safer from a risk perspective to keep lenders with information, in addition to Regarding the efficacy of Title XI appraisals, the agencies recognize and construction loans for 1-to-4 family a valuation, that may be critical to the are supportive of the role that appraisers properties in the residential loan lending decision and help to avoid bad play in ensuring a safe and sound real category subject to the $250,000 loans and fraud. threshold. These commenters asserted Some commenters who were estate lending process, regardless of that 1-to-4 family construction loans are supportive of the proposal also whether it is in connection with an riskier than conventional residential discussed the role of appraisals and appraisal or an evaluation. Indeed, the lending, and maintained that appraisers. One of these commenters Title XI appraisal regulations, appraiser evaluations lack the market analysis asserted that appraisals are an integral independence requirements, and the needed for a phased construction part of the safety and soundness of the Guidelines emphasize the importance of project. One commenter asserted that real estate industry, but believed that an independent opinion of collateral there may be limited benefit to certain transactions are well served by value in the process of real estate including transactions to finance the alternative valuation methods. Some lending. Through the agencies’ construction of 1-to-4 family residential other commenters expressed skepticism supervisory experience with loans that properties without permanent financing about the value of appraisals prepared were exempted by the current in the definition of commercial real by independent appraisers. In this thresholds and an analysis of loan losses estate transaction, because an appraisal regard, one commenter asserted that over prior credit cycles for such loans, would be required prior to the banks have a better understanding of the agencies have found that evaluations permanent financing phase and prudent property values in their communities can be an effective valuation method for risk management would dictate than appraisers from other areas, while lower-risk transactions. Even when the obtaining the appraisal prior to initial another expressed concern for the transaction amount is at or below the threshold, the Evaluation Guidance funding. Another commenter asserted 29 See GAO, ‘‘Real Estate Appraisals: Appraisal encourages regulated institutions to that the implementation of two Subcommittee Needs to Improve Monitoring thresholds for 1-to-4 family residential Procedures,’’ GAO–12–147 (January 2012). 30 12 U.S.C. 3341(b). construction loans would cause

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confusion and increase regulatory The agencies have included the term with the exception that construction burden on financial institutions. ‘‘single’’ in the definition to clarify that loans secured by a single 1-to-4 family A few commenters expressed the view only transactions secured by one 1-to-4 property would not be considered a that all residential construction loans family residential property are excluded commercial real estate transaction for should be included in the definition and from the definition of ‘‘commercial real purposes of this rule. subject to the higher threshold. One estate transaction,’’ whether financing The agencies have determined that, commenter noted that an increasing construction or for other purposes. This on balance, the benefits of adopting this percentage of 1-to-4 family properties change addresses potential confusion definition of commercial real estate are rental properties and that the about whether a loan for the transaction outweigh the drawbacks of proposed definition would have construction of multiple residential the limited inconsistency with other excluded a class of rent-dependent real properties would meet the definition of agency issuances relating to commercial estate that should be classified as ‘‘commercial real estate transaction;’’ a real estate lending. Those issuances are commercial real estate. Another loan that is secured by multiple 1-to-4 for different purposes than the Title XI commenter recommended that family residential properties (for appraisal regulations, and a different set ‘‘construction-to-permanent’’ loans be example, a loan to construct multiple of considerations is relevant for included in the definition of properties in a residential determining what types of transactions commercial real estate transaction to neighborhood) would meet the are appropriately exempt from the Title increase the financing available for new definition of commercial real estate XI appraisal requirement on the basis of home construction, indicating that strict transaction and thus be subject to the transaction size. The definition of underwriting and active engagement higher threshold. commercial real estate transaction in the among the bank, home builder, and This approach addresses concerns final rule ensures that loans made to home buyer alleviate risks for these about consumer protection, because a consumers are largely treated loans. This commenter supported large portion of loans to finance the consistently, remaining subject to the subjecting all construction loans to the purchase or initial construction of a $250,000 threshold. In addition, by same treatment, and asserted that doing single 1-to-4 family residential property categorizing residential construction so would reduce regulatory burden, that are secured by the property are loans more clearly, the definition of provide consistency, and allow for more likely to be extended to consumers who commercial real estate transaction being efficient processes. Another commenter will use the property as their dwelling. adopted can facilitate compliance and indicated that including all 1-to-4 By contrast, transactions secured by enhance the burden reduction benefits family construction loans in the multiple 1-to-4 family properties are of the rule. more likely to be transactions to real definition would avoid creating Threshold Increase additional complications by estate developers or investors in rental distinguishing such loans into two properties. The agencies proposed increasing the The agencies note that they proposed different classes. commercial real estate appraisal to treat construction-only loans to threshold from $250,000 to $400,000. In After carefully considering the consumers as commercial real estate determining the level of increase, the comments, the agencies have adopted a transactions to maintain consistency agencies considered the change in definition of commercial real estate with agency reporting standards and prices for commercial real estate transaction that excludes construction other regulations and guidance that measured by the Federal Reserve loans secured by single 1-to-4 family address construction loans to consumers Commercial Real Estate Price Index residential properties. Specifically, the in other contexts. As in the proposal, (CRE Index). As described in the final rule defines commercial real estate the definition being adopted generally proposal, the CRE Index 33 is a direct transaction as a real estate-related aligns with the categories of commercial measure of the changes in commercial financial transaction that is not secured real estate transactions under the Call real estate prices in the United States.34 by a single 1-to-4 family residential Report 31 and other agency guidance,32 property. This definition eliminates the 2009); Policy Statement on Prudent Commercial distinction between construction loans 31 The following four categories of real-estate Real Estate Loan Workouts, Board SR Letter 09–07 secured by a single 1-to-4 family secured loans in the Consolidated Reports of (October 30, 2009); Policy Statement on Prudent residential property that only finance Condition and Income (Call Report) (FFIEC 031; Commercial Real Estate Loan Workouts, FDIC FIL– construction and those that provide RCFD 1410) are largely captured in the definition 61–2009 (October 30, 2009); Concentrations in of commercial real estate transaction in the rule: (1) Commercial Real Estate Lending, Sound Risk both construction and permanent For construction, land development, and other land Management Practices, 71 FR 74580 (December 12, financing. Under the definition in the loans; (2) secured by farmland; (3) secured by 2006). final rule, neither of these types of loans residential properties with five or more units; or (4) 33 The Board publishes data on the flow of funds will be commercial real estate secured by nonfarm nonresidential properties. As and levels of financial assets and liabilities, by discussed in the proposal, loans that provide sector and financial instrument; full balance sheets, transactions; they will both remain construction funding and are secured by a single 1- including net worth, for households and nonprofit subject to the $250,000 threshold. to-4 family residential property are typically organizations, nonfinancial corporate businesses, This approach addresses the potential reported as ‘‘for construction, land development, and nonfinancial noncorporate businesses; confusion from subjecting two classes of and other land loans.’’ The definition applies to Integrated Macroeconomic Accounts; and corresponding categories of real estate-secured additional supplemental detail. See Board of construction loans secured by a single 1- loans in the FFIEC 041 and FFIEC 051 forms of the Governors of the Federal Reserve System, Financial to-4 family residential property to Call Report. Accounts of the United States, https:// different threshold levels. The revised 32 Other interagency guidance includes all www.federalreserve.gov/releases/z1/current/ definition also reflects comments stating construction loans in one category: Real Estate default.htm. Lending: Interagency Statement on Prudent Risk 34 The CRE Index is quarterly and not seasonally that Title XI appraisals are typically Management for Commercial Real Estate Lending, adjusted. See Board of Governors of the Federal conducted for loans for construction of OCC Bulletin 2015–51 (December 18, 2015); Reserve System, Series analyzer for a single 1-to-4 family residential Statement on Prudent Risk Management for FL075035503.Q, https://www.federalreserve.gov/ property regardless of whether the loan Commercial Real Estate Lending, Board SR Letter apps/fof/SeriesAnalyzer.aspx?s=FL075035503&t= 15–17 (December 18, 2015); Statement on Prudent &bc=:FI075035503,FL075035503&suf=Q; Board of provides only financing for construction Risk Management for CRE Lending, FDIC FIL–62– Governors of the Federal Reserve System, Series or provides ‘‘construction-to- 2015 (December 18, 2015); Guidance on Prudent Structure, https://www.federalreserve.gov/apps/fof/ permanent’’ financing. Loan Workouts, OCC Bulletin 2009–32 (October 30, SeriesStructure.aspx.

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The CRE Index is comprised of data advocated for automatically increasing the commercial real estate appraisal from the CoStar Commercial Repeat Sale or reevaluating the level more threshold to $500,000, rather than the Index,35 which uses repeat sale frequently than every ten years as real proposed $400,000 level. The proposed regression analysis of 1.7 million estate prices rise and valuation $400,000 threshold was based on the commercial property sales records to technology changes. Some commenters value of the CRE Index in March 2010, compare the change in price for the urged the agencies to conduct further when commercial real estate prices were same property between its most recent analysis to determine whether the at their lowest point in the most recent and previous sale transactions.36 The threshold could be increased to a higher downturn. The agencies proposed this data incorporated into this index covers amount, but did not specify an amount. conservative approach, due to the properties across the country and across Some commenters supported increasing volatility of commercial real estate 37 all price ranges, from before 1994 the threshold to $500,000 and suggested prices over time. The agencies based the through the present. that this higher figure would avoid the beginning point of this analysis on According to the CRE Index, a need for additional changes to the $250,000, because supervisory commercial property that sold for threshold in the near-term due to experience with the $250,000 threshold $250,000 as of June 30, 1994, would be expected increases in prices. A few has confirmed that this threshold level expected to sell for approximately commenters supported raising the did not threaten the safety and $760,000 as of December 2016.38 threshold to $750,000 or higher, soundness of financial institutions. However, because the price of claiming the methodology in the commercial real estate can be proposal was unnecessarily Based on the CRE Index, a commercial particularly volatile, the agencies conservative. property that sold for $250,000 as of proposed to base the increased Some commenters supported June 30, 1994, would be expected to sell threshold on the value of the CRE Index lowering the commercial real estate for $423,600 in March 2010, which was when commercial real estate prices were appraisal threshold to unspecified the trough of the CRE price cycle. at their lowest point in the most recent amounts. Some of those commenters Following this trend, that property downturn, which was $423,000 in specifically objected to the methodology would be expected to have a March 2010. The agencies invited used by the agencies in the proposal, conservative value of approximately comment on the proposed level for the asserting that adjusting the previous $509,000 as of December 2017 (as commercial real estate appraisal $250,000 level for changes in prices was shown below). Based on the comments threshold. inappropriate because that level was not received and this further review of the Most of the commenters, who itself the result of an inflation CRE Index, as well as the safety and supported increasing the threshold to at adjustment. soundness analysis discussed below, the least $400,000, supported a higher After careful consideration of the agencies have decided to finalize the amount. Some of these commenters also comments, the agencies have increased threshold at $500,000.

35 Board of Governors of the Federal Reserve of three appraisal-based commercial property series 37 See id. System, Series analyzer for FL075035503.Q, https:// from National Real Estate Investor. Id. 38 Since the proposal was published, the CRE www.federalreserve.gov/apps/fof/Series 36 CoStar, Federal Reserve’s Flow of Funds to Index data points for some of the recent quarters Analyzer.aspx?s=FL075035503&t=&bc= Incorporate CoStar Group’s Price Indices, CoStar were revised. The numbers in this document reflect (June 4, 2012), http://www.costar.com/News/ :FI075035503,FL075035503&suf=Q. Data for years the revised CRE Index. Article/Federal-Reserves-Flow-of-Funds-To- prior to 1996 are comprised of a weighted average Incorporate-CoStar-Groups-Price-Indices/138998.

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Regarding the suggestion to raise the threat to the safety and soundness of delinquencies, or volatility in the commercial real estate appraisal financial institutions. commercial real estate market, which, threshold to $750,000 or higher, the Multiple financial institutions trade some asserted, may be indicative of a agencies also note that $750,000 was associations, financial institutions, market ‘‘bubble.’’ Some commenters close to the high point on the volatile individuals, and home builder and suggested that it is the wrong time to CRE Index, as discussed above. Given realtor associations supported the relax valuation standards, given their the volatility in commercial real estate agencies’ analysis showing that an view that past market bubbles have been prices, raising the threshold to this increase to the appraisal threshold for preceded by loosening of underwriting amount or higher would raise safety and commercial real estate would not have and appraisal standards, and that poor soundness concerns. Finally, a possible a significant impact on the safety and valuation practices contributed to losses threshold increase to $750,000 or higher soundness of financial institutions. A during past financial crises. One of may pose too great a risk to smaller few commenters noted that appraisals these commenters asserted that there is institutions, as such transactions may are only one part of the underwriting increasing risk in commercial real estate represent a higher percentage of capital process, one asserting that loans are lending, particularly among smaller for such firms than has historically been primarily underwritten on borrowers’ community and regional banks, which permitted under the 1994 threshold. ability to repay, with collateral as a the commenter believed are less likely secondary consideration. Another to have robust collateral risk In the proposal, the agencies also commenter asserted that commercial management policies, practices and invited comment on how having three borrowers tend to be larger entities, with procedures. threshold levels ($250,000 for all the capital to withstand detrimental Multiple commenters noted a 2015 transactions, $400,000 for commercial financial events and shifts in the appraiser trade association survey of real estate transactions, and $1 million market. This commenter also indicated appraisal industry professionals, for QBLs) rather than the two threshold that the proposal would not increase including chief appraisers and appraisal levels applicable to Title XI appraisals safety and soundness risk, given that the managers at financial institutions, ($1 million for QBLs and $250,000 for increased threshold would affect a which showed that the majority of those all other transactions) would affect relatively small number of transactions surveyed opposed increasing the current burden on regulated institutions. Three in the commercial real estate lending $250,000 threshold and believed that commenters supported the proposal, market. increases to the threshold could noting that having three thresholds Some commenters noted that increase risk to lenders. would have minimal impact on evaluations would be required where The agencies received a limited operations. One commenter opposed appraisals were not obtained, and some number of comments in response to the having three thresholds, asserting that it asserted that the increased use of request for comment on the data sources will increase complexity, particularly evaluations with these less complex used for the agencies’ safety and for small community banks with less loans would not increase risk if soundness analysis from financial rigorous compliance operations. The prepared with adequate analysis. One of institutions, financial institution trade agencies have determined that the these commenters asserted that associations and appraiser trade burden reduction associated with a evaluations for smaller transactions associations. Multiple commenters higher threshold for commercial real provide more targeted and precise data asserted that the data in the proposal estate transactions outweighs the than appraisals performed by someone supports the increase in the commercial potential burden of implementing three from another area. real estate threshold, and indicated that The agencies received comments from thresholds. they did not know of other sources of appraisers, appraiser-related groups and data that the agencies should consider. Safety and Soundness Considerations individuals opposing the proposed A number of commenters asserted that for Increasing the Threshold for increase, many of whom asserted that the agencies’ analysis was too Commercial Real Estate Transactions appraisals are key to preserving the safety and soundness of financial conservative, that past housing crises do Under Title XI, the agencies may set institutions and the economy. Several of not imply current volatility, and that the a threshold at or below which a Title XI these commenters claimed that data suggest the threshold could be appraisal is not required if they evaluations were not an appropriate increased further than proposed without determine in writing that such a substitute for appraisals, some threatening safety and soundness of threshold level does not pose a threat to suggesting that they are less reliable and financial institutions. One commenter the safety and soundness of financial prepared by individuals that are not opposing the proposal suggested that institutions.39 The analysis of held to the same standards as the data used in the agencies’ safety and supervisory experience and available appraisers. One commenter asserted that soundness analysis was weak and data presented in the proposal indicated the increase would pose safety and questioned why the agencies did not that the proposed threshold level of soundness risks because commercial provide specific numbers to support the $400,000 for commercial real estate loans are riskier than residential loans. assertion that the data related to charge- transactions would not have posed a Another commenter suggested that offs from 2007–2012 is ‘‘no worse than’’ threat to the safety and soundness of entry-level properties that are lower in those from the years 1991–1994, except financial institutions. The agencies price and close to the threshold are for marked increases in construction 40 invited comment on their preliminary more likely to have performance issues loan charge-offs. This commenter also finding and the data used. Taking into compared to more expensive properties. consideration those comments and 40 During the 1991–1994 credit cycle, the net One commenter raised concerns that the charge-off rate for commercial real estate loans updated analysis, discussed below, the rule focused on time and cost savings to reached a high of about 4.5 percent. During the agencies determined that the threshold financial institutions in selecting an 2007–2012 credit cycle, net charge-off rates reached level of $500,000 for commercial real appropriate valuation method, rather a high of about 3.5 percent. These are the numbers estate transactions does not pose a the agencies used to support their conclusion that than risk. the data related to charge-offs from 2007 to 2012 Several commenters voiced concerns was no worse than that from the years 1991 to 1994. 39 12 U.S.C. 3341(b). about recent price increases, increasing Continued

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asserted that the agencies’ analysis of with transactions at or below Due to the manner in which IDIs the CoStar data should have considered $250,000.42 In the last three decades, the report information on nonfarm that newly exempted loans under the banking industry suffered two crises in nonresidential (NFNR) loans in the Call higher threshold would more likely be which poorly underwritten and Report, this data set does not enable the extended to small businesses, which by administered commercial real estate agencies to calculate the percentage of nature are more vulnerable to market loans were a key feature in elevated loans that would fall under any volatility and the potential for business levels of loan losses and bank failures. threshold amount between $250,000 failure. Supervisory experience and an and $1 million.44 The percentage of the Based on their supervisory examination of material loss reviews total dollar volume of loans that fall experiences, the agencies disagree that covering those decades suggest that beneath the $250,000 threshold is now increasing the commercial real estate larger acquisition, development, and less than one third of what it was when appraisal threshold would increase risks construction transactions pose greater the threshold was established in 1994.45 to financial institutions, including credit risk, due to the lack of This is true even for institutions under smaller institutions. As outlined earlier, appropriate underwriting and $1 billion in assets, who are more likely the agencies closely examined a variety administration of issues unique to larger to hold smaller loans. Based in part on of data and metrics indicating that the properties, such as longer construction this analysis, the agencies conclude that relative risks associated with the new periods, extended ‘‘lease up’’ periods the exposure of financial institutions threshold in terms of the scope of (the time required to lease a building will remain at acceptable levels with a covered transactions were similar to after construction), and the more $500,000 commercial real estate those presented by the 1994 threshold. complex nature of the construction of appraisal threshold. The agencies specifically examined the such properties.43 The CoStar Comps database provides information from smaller insured In addition to considering the depository institutions (IDIs) from Call sales value data on specific commercial agencies’ supervisory experience since real estate transactions and allows for an Reports to assess the concentration risk 1994, the agencies reviewed how the for institutions and concluded that these analysis of the estimated coverage at any coverage of transactions exempted by potential threshold level. As described risks were similar to those presented for the threshold would change, both in in the proposal, the agencies used this larger IDIs. The agencies also note that terms of number of transactions and dataset to analyze the impact of smaller IDIs are often better positioned aggregate value, in order to consider the increasing the commercial real estate than larger institutions to understand potential impact on safety and and quantify local real estate market appraisal threshold to $400,000, and soundness of increasing the commercial values since they serve a smaller, more have recently updated this analysis to real estate appraisal threshold to defined market area. evaluate the impact of a $500,000 $500,000. In the proposal, the agencies Regarding comments concerning threshold. An analysis of the CoStar used three different metrics to estimate evaluations as a valuation method, in Comps database for the most recent year the overall coverage of the existing the agencies’ views, evaluations are an available suggests that increasing the threshold and the proposed threshold: effective valuation method for smaller amount to $500,000 would significantly (1) The number of commercial real commercial real estate transactions and increase the number of commercial real other transactions under the thresholds. estate transactions at or under the threshold as a share of the number of all estate transactions exempted from the As provided in the Title XI appraisal Title XI appraisal requirements, but the regulations, evaluations for each commercial real estate transactions; (2) the dollar volume of commercial real portion of the total dollar volume of transaction must be consistent with safe commercial real estate transactions that and sound banking practices. The estate transactions at or under the threshold as a share of the total dollar would be exempted by the threshold Evaluation Guidance provides guidance would be comparatively minimal. on appropriate evaluation practices. In volume of all commercial real estate adopting the increased threshold for transactions; and (3) the dollar volume At the existing $250,000 threshold commercial real estate transactions, the of commercial real estate transactions at and the proposed $400,000 threshold, agencies note that regulated institutions or under the threshold relative to IDIs’ the percentage of commercial properties have the flexibility to choose to obtain capital and the allowance for loan and with loans in the CoStar Comps a Title XI appraisal when markets are lease losses, which act as buffers to database that would be exempted from volatile or when an appraisal is absorb losses, as explained below. The the Title XI appraisal regulations would warranted for other reasons.41 agencies examined data reported on the have been 16.1 percent and 26.3 The agencies have no evidence that Call Report and data from the CoStar increasing the appraisal threshold to Comps database to estimate the volume 44 As described in the proposal, IDIs annually of commercial real estate transactions report information on NFNR loans in the Call $500,000 for commercial real estate Report by three separate size categories: (1) Loans transactions will materially increase the covered by the existing threshold and with original amounts of $100,000 or less; (2) loans risk of loss to financial institutions. increased thresholds. with original amounts of more than $100,000, but Analysis of supervisory experience The Call Report data shows that the $250,000 or less; and (3) loans with original scope of the exemption in 1994, in amounts of more than $250,000, but $1 million or concerning losses on commercial real less. They also annually report the dollar amount estate transactions suggests that faulty terms of the number of transactions of all NFNR loans, including those over $1 million. valuations of the underlying real estate impacted, decreased significantly over Using this data, the agencies calculated the dollar collateral since 1994 have not been a time, and implies that raising the amount of NFNR loans at or under the current commercial real estate appraisal $250,000 threshold as a percentage of the dollar material cause of losses in connection amount of all NFNR loans. threshold to $500,000 will not involve 45 In the proposal, the agencies explained that 18 Federal Reserve Bank of San Francisco: Aggregate a greater number of transactions than percent of the dollar volume of all NFNR loans Net Charge-Off Rate Database as derived from the when the thresholds were established in reported by IDIs had original loan amounts of Federal Financial Institutions Examination Council 1994. $250,000 or less when the current appraisal Consolidated Reports of Condition and Income, threshold was established in 1994, but as of the FFIEC031 4Q 2016: http://www.frbsf.org/banking/ fourth quarter of 2016, approximately 4 percent of data/aggregate-data/. 42 See 82 FR at 35484. the dollar volume of such loans had original loan 41 75 FR 77450, 77460. 43 See id. amounts of $250,000 or less. 82 FR at 35485.

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percent, respectively.46 The $500,000 transaction value of $1 million or less.48 commenters also expressed concern threshold that the agencies are adopting Accordingly, the agencies proposed to over the lack of standards for will increase the percentage of require that regulated institutions evaluations and the lack of oversight transactions affected by another 5.5 entering into commercial real estate and regulation for persons performing percent, resulting in 31.9 percent of transactions at or below the proposed evaluations. One commenter urged the loans in the CoStar database being commercial real estate appraisal agencies to increase the qualification exempt from the appraisal requirement, threshold obtain evaluations that are requirements for those completing or 15.7 percent more transactions than consistent with safe and sound banking evaluations if the commercial real estate under the $250,000 threshold. The practices unless the institution chooses appraisal threshold were increased. proposed $400,000 threshold would to obtain an appraisal for such As discussed in the proposal, have increased the percentage of transactions.49 institutions must obtain evaluations that exempted transactions by dollar volume The agencies are adopting this aspect are consistent with safe and sound from 0.5 percent, under the current of the proposal in the final rule without banking practices. The agencies have threshold, to 1.2 percent. Increasing the change.50 An evaluation estimates the provided guidance to regulated threshold to $500,000 would increase market value of real estate, but is not institutions on evaluations.53 The the dollar volume by an additional 0.5 subject to the same requirements as a Guidelines state that evaluations should percent, so that a total of 1.8 percent of Title XI appraisal. For example, a Title be performed by persons who are the dollar volume of loans in the CoStar XI appraisal must be performed by a competent and have the relevant database will be exempt from the state certified or state licensed appraiser experience and knowledge of the appraisal requirement, or 1.3 percent and must conform to USPAP standards, market, location, and type of real more of the dollar volume than under whereas evaluations are not required to property being valued. An evaluation is the $250,000 threshold. Thus, this be performed by individuals with not required to be completed by a state analysis indicates that the increased specific credentials or to conform to licensed or state certified appraiser, but threshold will affect a low aggregate USPAP standards. As noted above, the may be completed by an employee of dollar volume, but a material number of agencies have issued guidance on the the regulated institution or by a third transactions. preparation of evaluations.51 party, as addressed in the Evaluations 54 The agencies have used this analysis The agencies requested comment on Advisory. However, the agencies’ final and the Call Report analysis to the proposed requirement that regulated rule does not prohibit regulated determine that increasing the institutions obtain evaluations for institutions from using state licensed or commercial real estate appraisal commercial real estate transactions at or state certified appraisers to prepare threshold to $500,000 does not pose a below the proposed commercial real evaluations. A Title XI appraisal would threat to safety and soundness. In estate appraisal threshold. The agencies satisfy the requirement for an reaching this determination, the also asked related questions concerning ‘‘appropriate evaluation of real property agencies also considered the fact that whether additional guidance is needed collateral that is consistent with safe evaluations would be required for such by institutions to support the increased and sound banking practices;’’ thus, transactions. The Guidelines provide use of evaluations as well as questions regulated institutions that choose to regulated institutions with guidance on concerning burden and costs related to obtain Title XI appraisals for real estate- establishing parameters for ordering the use of evaluations. related financial transactions that require evaluations are not in violation Title XI appraisals for transactions that Evaluations Required at or Below the of the Title XI appraisal regulations. present significant risk, even if those Threshold transactions are eligible for evaluations Evaluation Guidance 47 Several commenters generally under the regulation. Regulated supported the proposal that regulated The agencies also requested comment institutions are encouraged to continue institutions obtain evaluations for on the type of additional guidance, if using a risk-focused approach when commercial real estate transactions at or any, regulated institutions need to considering whether to order an below the threshold. Other commenters support the increased use of appraisal for real estate-related financial expressed concern regarding the evaluations. In response, the agencies transactions. competency and credentialing of received comments indicating concern B. Use of Evaluations persons performing evaluations, as well regarding the clarity of, and the burden as concerns regarding difficulty in produced by, the existing guidance on Overview locating persons qualified to perform evaluations. A few commenters The Title XI appraisal regulations evaluations.52 Some of these requested that the agencies provide require regulated institutions to obtain additional guidance, such as guidance evaluations for three categories of real 48 See OCC: 12 CFR 34.43(a)(1) and (5); Board: 12 relating to the adequacy of evaluation estate-related financial transactions that CFR 225.63(a)(1) and (5); and FDIC: 12 CFR products available on the market or 323.3(a)(1) and (5). examples of acceptable industry the agencies have determined do not 49 An evaluation is not required when real estate- require a Title XI appraisal, including related financial transactions meet the threshold practices for evaluations. Some other commercial and residential real-estate criteria and also qualify for another exemption from related financial transactions of the appraisal requirements where no evaluation is in the proposal: ‘‘Unlike appraisals, evaluations required by the regulation. may be performed by a lender’s own employees and $250,000 or less and QBLs with a 50 The agencies are adopting the commercial real are not required to comply with USPAP.’’ The estate appraisal threshold at $500,000, which is agencies agree with the commenter that regulations 46 Certain percentages shown here differ from the higher than proposed. Financial institutions will be do not prohibit employees of regulated institutions values presented in the proposal because of ongoing required to obtain evaluations for commercial real from preparing appraisals if they are so qualified refinements to the database and filters used to estate transactions with transaction values of and independent of the real estate-related financial extract the information. The methodology was $500,000 or less. transaction. further refined to improve its ability to reflect the 51 See Evaluation Guidance. 53 See Evaluation Guidance. relevant population of commercial real estate 52 A commenter highlighted two sentences in the 54 OCC Bulletin 2016–8 (March 4, 2016); Board transactions. Also, values presented here may not proposal that appeared to conflict with the SR Letter 16–05 (March 4, 2016); and Supervisory sum due to rounding. requirements of the appraisal regulations. First, the Expectations for Evaluations, FDIC FIL–16–2016 47 See Guidelines, Section XI. commenter disagreed with the following statement (March 4, 2016).

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commenters requested that the agencies for portfolio loans but would not could impose significant additional revisit and relax the current guidance address issues related to secondary costs on lenders and borrowers without pertaining to evaluations and ensure market requirements, which are outside materially increasing the safety and examiners accept evaluations when the agencies’ purview. soundness of the transactions. The permissible. One commenter expressed On the other hand, some commenters agencies’ data and analysis reflect that the view that a simplification would asserted that the agencies had overstated the increase in the commercial real make the current existing guidance for how much the proposal would reduce estate appraisal threshold and evaluations less time consuming and burden for regulated institutions, and corresponding increased use of complex for lower value transactions. questioned the agencies’ methods for evaluations could result in a cost Another commenter suggested there estimating the reduction in burden. savings of several hundred dollars for should be no need for a review of Some commenters expressed concern each commercial real estate transaction, internal evaluations where the direct regarding the length of time required to as discussed below. lender did not complete the evaluation. review an evaluation. A few Based on supervisory experience the The Evaluation Guidance provides commenters suggested that the agencies’ agencies conclude that regulated information to help ensure that cost analysis reflected a lack of institutions generally need less time to evaluations provide a credible estimate precision and absence of detailed review evaluations than Title XI of the market value of the property research to determine the cost appraisals, because the content of the pledged as collateral for the loan. The differential of appraisals and report can be less comprehensive than current Evaluation Guidance provides evaluations between the current and an appraisal report. Transactions flexibility to regulated institutions for proposed threshold. This same permitting the use of an evaluation developing evaluations that are commenter asserted that evaluations typically have a lower dollar value, appropriate for the type and risk of the lack the detail of appraisals, and, as a often are less complex, or are real estate financial transaction and result, lenders are often required to subsequent to previous transactions for does not prescribe specific valuation perform additional research in which Title XI appraisals were obtained. approaches or products to use tools in determining whether evaluations are Therefore, a consolidated analysis is the development of evaluations. Also, in credible, which reduces cost and time more likely to be used in an evaluation. addition to various valuation savings produced by the proposal. One The agencies estimate that, on average, approaches, the Guidelines discuss the commenter implied that the limited the time to review an evaluation for an possible use of several analytical guidance for performing evaluations affected transaction under the final rule methods and technological tools in the creates confusion, which results in will be approximately 30 minutes less development of evaluations, such as added costs. One commenter asserted than the time to review an appraisal.56 automated valuation models and tax that it is not true that evaluations In evaluating this rule, the agencies assessment values. The agencies will contain less detailed information or take considered the impact of obtaining continue to assess the adequacy of less time to review than appraisals.55 evaluations instead of Title XI agency guidance on evaluations. Another commenter asserted that, appraisals on regulated institutions and because evaluations provide less detail borrowers. As noted in the proposal, Cost and Burden of Evaluations than appraisals, lenders may be required based on information from industry The agencies invited comment to do more research to determine participants, the cost of third-party regarding whether the use of evaluations whether the value conclusion is evaluations of commercial real estate reduces burden and cost as compared to credible. generally ranges from $500 to over the use of Title XI appraisals. The The agencies carefully considered $1,500, whereas the cost of appraisals of agencies also invited comment on these comments in evaluating the rule’s such properties generally ranges from whether evaluations are currently impact on the time to obtain and review $1,000 to over $3,000. Commercial real prepared by in-house staff or outsourced Title XI appraisals and evaluations. The estate transactions with transaction to appraisers or other qualified agencies conclude that there may be less values above $250,000, but at or below professionals. delay in finding appropriate personnel $500,000, are likely to involve smaller The agencies received several to perform an evaluation than to and less complex properties, and comments indicating that the proposed perform a Title XI appraisal, particularly appraisals and evaluations on such increase in the commercial real estate in rural areas, because evaluations are properties would likely be at the lower appraisal threshold and the increased not required to be prepared by a end of the cost range. This third-party use of evaluations would provide cost certified or licensed appraiser. pricing information suggests a savings of and time savings for consumers and Requiring regulated institutions to several hundred dollars per transaction institutions, because evaluations tend to procure the services of a state licensed affected by the proposal. Comments cost less that appraisals and take less or state certified appraiser to prepare from financial institutions generally time to prepare. One commenter evaluations for commercial real estate affirmed similar information presented asserted that third-party evaluations are transactions at or below the threshold in the proposal. approximately 25 percent of the cost of In considering the aggregate effect of an appraisal. Another commenter 55 Two commenters disagreed with the agencies’ this rule, the agencies considered the indicated noted that some financial use of the term ‘‘loan officer’’ relative to the number of transactions affected by the estimated time for reviewing an appraisal or institutions prefer to conduct them in- evaluation, and asserted that the usage of the term increased threshold. As previously house to maintain consistency of the could be perceived to imply that originators are discussed, the agencies estimate that the product and because of staff knowledge permitted to be involved in the appraisal review number of commercial real estate of the marketplace. One commenter process, which is contrary to the agencies’ appraiser transactions that would be exempted by independence requirements. The agencies were asserted that appraiser-developed using the term ‘‘loan officer’’ in its broadest context, evaluations are unnecessarily and did not intend to imply that the officer 56 The agencies recognize some evaluations take expensive, necessitating evaluations to originating the credit may conduct appraisal or longer to review than some appraisals; yet, on be conducted in-house. Another evaluation reviews relating to that credit. The use average, evaluations are likely to take less time to of the term ‘‘loan officer’’ was not intended to review than appraisals. This view is based on commenter indicated that increasing the change standards established on appraiser supervisory experience as well as discussions with threshold would provide cost savings independence or any implementing guidance. regulated institutions.

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the threshold is expected to increase by $500,000 threshold, the final rule makes the approach used in adopting the 1994 approximately 16 percent under the a corresponding change to this section. amendments to the Title XI appraisal rule. Thus, while the precise number of The amendment to this provision is a regulations. The agencies are not aware affected transactions and the precise technical change that does not alter any of any evidence that using an immediate cost reduction per transaction cannot be substantive requirement. effective date in connection with the determined, the rule is expected to lead III. Effective Date 1994 amendments caused a competitive to significant cost savings for regulated disadvantage or hardship to regulated institutions that engage in commercial The agencies proposed to make the institutions. The agencies also note that real estate lending. final rule, if adopted, effective upon regulated institutions have the publication in the Federal Register. The discretion to use Title XI appraisals in Competitive Disadvantage of agencies reasoned that a delayed lieu of evaluations for any exempt Evaluations effective date was not required by transaction. The agencies received comments from applicable law because the proposal financial institutions, individuals, and a exempted additional transactions from IV. Other Efforts To Relieve Burden trade association representing valuation the Title XI appraisal requirements and Residential and Qualifying Business professionals, indicating concern that did not impose any new requirements Loan Thresholds the proposal would put smaller banks on regulated institutions.58 The agencies The agencies explained in the that do not have in-house expertise to requested comment on whether the proposal that they were not proposing prepare evaluations at a competitive proposed effective date was appropriate. any threshold increases for transactions disadvantage to larger banks. The agencies received three secured by a single 1-to-4 family Commenters asserted that these banks comments on the proposed effective residential property (residential hire outside parties to prepare date. One commenter supported the transactions) or QBLs in connection evaluations and pass the cost along to proposed effective date and did not with this rulemaking. The agencies borrowers, making their loans more think it would pose challenges to requested comment on whether there expensive than comparable loans at financial institutions. The other two are other factors that should be larger financial institutions. commenters disagreed with an In evaluating the final rule, the immediate effective date, asserting that considered in evaluating the current agencies considered these concerns. In financial institutions required time to appraisal threshold for residential response, the agencies note that the cost adjust policies and procedures to transactions. The agencies also invited for completing an evaluation would be implement the proposed changes. One comment and supporting data on the less than the cost for completing a Title commenter recommended a six-month appropriateness of raising the current $1 XI appraisal for the same property, to one-year implementation period, million threshold for QBLs and posed a which thereby reduces burden. The goal while the other suggested an effective number of specific questions related to of the agencies with this increase is to date 180 days after the final rule is regulated institutions’ experiences with provide flexibility to regulated published. QBLs. Numerous commenters, particularly institutions in approaching property The agencies have retained the financial institutions and their trade valuation. Some institutions may not proposed effective date, which is the associations, encouraged the agencies to currently be in a position to take date of publication in the Federal 59 consider increasing the threshold for advantage of this flexibility. However, Register. In doing so, the agencies residential transactions, though few raising the threshold will help those balanced the need for some financial introduced new factors for the agencies’ regulated institutions that choose to institutions to update policies and consideration. Many of these train in-house staff to perform procedures to incorporate evaluations commenters asserted that an increase evaluations and would reduce costs for for transactions exempted by the revised threshold with the benefit of an would produce cost and time savings those institutions that choose to immediate effective date, which will that would benefit regulated institutions outsource evaluations. enable institutions to benefit from lower and consumers without threatening the C. State Certified Appraiser Required costs and regulatory relief upon or safety and soundness of financial As described in the proposal, the shortly after the effective date of the institutions. In support of its position current Title XI appraisal regulations final rule. The agencies note that an that an increase would not threaten require that ‘‘[a]ll federally related effective date immediately upon safety and soundness, one of these transactions having a transaction value publication in the Federal Register is commenters asserted that there is less of $250,000 or more, other than those risk in the homogenous loan pool of 1- 58 involving appraisals of 1-to-4 family See 82 FR at 35482. to-4 family residential loans than there 59 As discussed in Section V.A of the is in commercial real estate. One residential properties, shall require an SUPPLEMENTARY INFORMATION, the 30-day delayed appraisal prepared by a State certified effective date required under the Administrative commenter asserted that the consumer appraiser.’’ 57 In order to make this Procedure Act (APA) is waived pursuant to 5 U.S.C. benefits of appraisals have been paragraph consistent with the other 553(d)(1), which provides a waiver when a overstated, that appraisals are primarily substantive rule grants or recognizes an exception for the benefit of financial institutions, proposed changes to the appraisal or relieves a restriction. Additionally, the Riegle regulations, the agencies proposed to Community Development and Regulatory and that consumers could always order change its wording to introduce the Improvement Act of 1994, Public Law 103–325, 108 their own appraisals. $400,000 threshold and use the term Stat. 2163 (Riegle Act) provides that rules imposing Several commenters supporting an additional reporting, disclosures, or other new increase in the threshold for residential ‘‘commercial real estate transaction.’’ requirements on IDIs generally must take effect on The agencies did not receive any the first day of a calendar quarter that begins on or transactions noted that an increase in comments on this proposed change. after the date on which the regulations are the threshold would be justified by Given the change from the proposed published in final form. 12 U.S.C. 4802(b). As increases in residential property values discussed further in the Section V.D of the since the current threshold was rule from a $400,000 threshold to a SUPPLEMENTARY INFORMATION, the final rule does not impose any new requirements on IDIs, and, as such, established. Some commenters 57 OCC: 12 CFR 34.43(d); Board: 12 CFR the effective date requirement of the Riegle Act is represented that relief would be 225.63(d)(2); and FDIC: 12 CFR 323.3(d)(2). inapplicable. particularly beneficial for lending in

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rural communities that often have for residential transactions could consider if they decide to propose shortages in state licensed and state discourage entrance into the appraisal changes to the residential or QBL certified appraisers. One of these profession and cause further appraiser thresholds in the future. commenters cited feedback from several shortages. Regarding the requests for state bank supervisory agencies Regarding an increase to the appraisal clarification of the QBL threshold, the indicating that access to appraisers, threshold for QBLs, the majority of Title XI appraisal regulations have particularly for residential transactions, comments received opposed an established a $1 million threshold that is limited in rural areas within their increase. These commenters, who were is applicable to any business loans that states and that federal appraisal appraisers or their trade associations, are not dependent on the sale of, or regulations are causing significant cautioned against a loosening of rental income derived from, real estate burden. A few commenters noted that standards that could raise safety and as the primary source of repayment.60 the government sponsored enterprises soundness concerns. Commenters For example, a loan secured by a farm, (GSEs) waive appraisal requirements for supporting an increase in the QBL which could include a situation where certain residential mortgage loans that threshold asserted that the value of real one or more affiliated limited liability they purchase and they expected the estate offered as collateral on a QBL is companies own the farmland securing GSEs to expand eligibility for such a secondary consideration, because the the loan, could be treated as a QBL waivers. In this regard, they asserted primary source of repayment is not the subject to the $1 million threshold, if that increasing the threshold in the income from or sale of that collateral. repayment is primarily from the appraisal regulations would provide Some commenters also supported an proceeds from the farm business (e.g., burden relief. One of these commenters increase in the threshold due to limited sale of crops and related payments). asserted that as the GSEs expand their availability of appraisers in their states. However, a real estate-related financial appraisal waiver programs, regulated Commenters advocated a range of transaction secured by farmland whose institutions that hold residential increases from $1.5 million to $3 repayment is primarily from rental mortgage loans in portfolio will be at a million. income from renting or leasing the competitive disadvantage if the current Few commenters specifically farmland to a non-affiliated entity threshold in the appraisal regulations is addressed the agencies’ questions would be subject to the final rule’s not increased. Another commenter regarding unique risks that may be $500,000 threshold. posed by QBLs, data regarding QBLs, asserted that, even if inconsistent GSE Other Proposals and Clarifications requirements would negate some of the and regulated institutions’ experiences burden reduction, the agencies should in applying the current QBL threshold. The agencies received several raise the residential threshold now if, by Regarding risks posed by QBLs, one comments suggesting additional ways financial institutions trade association doing so, safety and soundness would the agencies could reduce burden under commented that its members consider not be jeopardized. A separate the Title XI appraisal regulations. One QBLs to be higher-risk loans. An commenter suggested that the agencies commenter urged the agencies to review appraiser trade association that was should provide a de minimis exemption the appraisal requirements of other opposed to an increase asserted that from appraisal requirements for federal agencies and pursue ways to small business loans are riskier than residential mortgage loans that are make appraisal requirements across others and that lenders with retained in portfolio by regulated agencies more consistent. The agencies concentrations in such loans are at institutions. This same commenter have publically articulated their interest greater risk. The commenter also noted urged the agencies to consider more in seeking ways to coordinate appraisal that such loans are usually held in standards across various government regional data in deciding whether to portfolio, thus increasing risk. make future changes to the threshold for agencies that are involved in residential Regarding the agencies’ requests for data 61 residential transactions. mortgage lending. The agencies have on QBLs, a commenter expressed begun conducting outreach to Many commenters, particularly surprise that the agencies lack data on government agencies to implement this appraisers and appraiser trade QBL concentrations, and asserted this goal and will continue to consider associations, supported with the lack of data further supports not opportunities to do so. agencies’ decision not to propose an increasing the threshold. In response to Another commenter asserted that the increase in the threshold for residential the agencies’ question regarding agencies should focus on allowing the transactions. Several commenters regulated institutions’ experiences in use by appraisers of products that pointed to the safety and soundness and applying the QBL threshold, a streamline the valuation process, consumer protection benefits of commenter asserted that many loan instead of exempting additional obtaining appraisals in connection with officers are poorly trained in classifying transactions from the appraisal residential transactions. Several loans as either real estate or business. requirements. Several commenters, commenters also asserted that the The commenter recommended that the including a financial institution and a appraisal regulations already exempt a agencies provide examples of these financial institutions trade association, significant percentage of residential types of loans. In addition, two suggested that certain transactions could mortgage loans. One commenter commenters asked the agencies to be added to the list of exemptions from suggested that the agencies should not clarify the QBL threshold relative to the appraisal requirements to further rely on policies of other federal entities, transactions secured by farmland. reduce regulatory burden without such as the GSEs, in making decisions The agencies appreciate the issues sacrificing safety and soundness. These about the appraisal regulations. Another raised by the commenters relating to the suggestions included exemptions for commenter expressed concern that the thresholds for residential transactions transactions secured by real estate potential negative consequences of and QBLs. As discussed in the proposal, outside the United States; loans below raising the threshold could be the agencies decided not to propose any a threshold that a bank originates and exacerbated by the loosening of change to these thresholds in appraisal standards by the GSEs for connection with this rulemaking. 60 See OCC: 12 CFR 34.43(a)(5); Board: 12 CFR some transactions. Another commenter Nevertheless, the comments reflect a 225.63(a)(5); and FDIC: 12 CFR 323.3(a)(5). asserted that increasing the threshold variety of issues that the agencies would 61 See EGRPRA Report at 36; 82 FR at 35482.

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retains ‘‘in-house;’’ transactions currently available to the OCC are not estate prices have increased since 1994, involving mortgage-backed securities sufficient to estimate how many OCC- when the current $250,000 threshold and pools of mortgages; and loans made supervised small entities make was established, a smaller percentage of to certain community development commercial real estate loans in amounts commercial real estate transactions are organizations. An association of state that fall between the current and final currently exempted from the Title XI bank supervisors requested that the thresholds. Therefore, we cannot appraisal requirements than when the agencies release further guidance on the estimate how many small entities may threshold was established. This Title XI process for temporary waivers be affected by the increase threshold. threshold adjustment is intended to of appraiser certification and licensing However, because the final rule does not reduce the regulatory burden associated requirements and also requested that the contain any new recordkeeping, with extending credit secured by education requirements for appraiser reporting, or compliance requirements, commercial real estate in a manner that qualifications be relaxed. A financial the final rule will not impose costs on is consistent with the safety and institution suggested establishing an any OCC-supervised institution. soundness of financial institutions. additional threshold of $50,000, below Accordingly, the OCC certifies that the which certain transactions would not final rule will not have a significant B. Statement of Objectives and Legal require appraisals or evaluations. economic impact on a substantial Basis These comments concerning number of small entities. additional potential exemptions from Board: The Board is providing a As discussed above, the agencies’ the appraisal regulations and additional regulatory flexibility analysis with objective in finalizing this threshold burden relieving measures are outside respect to this final rule. The RFA increase is to reduce the regulatory the scope of this rulemaking. However, requires that an agency prepare and burden associated with extending credit the agencies appreciate the suggestions make available a final regulatory in a safe and sound manner by reducing for ways to expand burden relief beyond flexibility analysis in connection with a the number of commercial real estate what was proposed. final rulemaking that the agency expects transactions that are subject to the Title will have a significant economic impact XI appraisal requirements. V. Regulatory Analysis on a substantial number of small Title XI explicitly authorizes the A. Waiver of Delayed Effective Date entities. The commercial real estate agencies to establish a threshold level at appraisal threshold increase applies to This final rule is effective on April 9, or below which a Title XI appraisal is certain IDIs and nonbank entities that not required if the agencies determine in 2018. The 30-day delayed effective date make loans secured by commercial real writing that the threshold does not required under the APA is waived estate.62 The SBA establishes size represent a threat to the safety and pursuant to 5 U.S.C. 553(d)(1), which standards that define which entities are soundness of financial institutions and provides for waiver when a substantive small businesses for purposes of the rule grants or recognizes an exemption RFA.63 The size standard to be receive concurrence from the CFPB that or relieves a restriction. The amendment considered a small business is: $550 such threshold level provides adopted in this final rule exempts million or less in assets for banks and reasonable protection for consumers additional transactions from the Title XI other depository institutions; and $38.5 who purchase 1-to-4 unit single-family 65 appraisal requirements, which has the million or less in annual revenues for homes. Based on available data and effect of relieving restrictions. the majority of non-bank entities that supervisory experience, the agencies Consequently, the amendment in this are likely to be subject to the final tailored the size and scope of the final rule meets the requirements for rule.64 Based on the Board’s analysis, threshold increase to ensure that it waiver set forth in the APA. and for the reasons discussed below, the would not pose a threat to the safety and soundness of financial institutions or B. Regulatory Flexibility Act final rule may have a significant positive economic impact on a erode protections for consumers who OCC: The Regulatory Flexibility Act substantial number of small entities. purchase 1-to-4 unit single-family (RFA), 5 U.S.C. 601 et seq., generally The Board requested comment on all homes. requires that, in connection with a aspects of the initial regulatory The Board’s final rule applies to state rulemaking, an agency prepare and flexibility analysis it provided in chartered banks that are members of the make available for public comment a connection with the proposal. The Federal Reserve System (state member regulatory flexibility analysis that comments received are addressed banks), as well as bank holding describes the impact of the rule on small below. entities. However, the regulatory companies and nonbank subsidiaries of flexibility analysis otherwise required A. Reasons for the Threshold Increase bank holding companies that engage in under the RFA is not required if an In response to comments received in lending. There are approximately 601 agency certifies that the rule will not the EGRPRA process and in connection state member banks and 35 nonbank have a significant economic impact on with the proposal, the agencies are lenders regulated by the Board that meet a substantial number of small entities increasing the commercial real estate the SBA definition of small entities and (defined in regulations promulgated by appraisal threshold from $250,000 to would be subject to the proposed rule. the Small Business Administration $500,000. Because commercial real Data currently available to the Board do (SBA) to include commercial banks and not allow for a precise estimate of the savings institutions, and trust 62 For its RFA analysis, the Board considered all number of small entities that will be companies, with assets of $550 million Board-regulated creditors to which the proposed affected by the final rule because the rule would apply. number of small entities that will or less and $38.5 million or less, 63 U.S. SBA, Table of Small Business Size respectively) and publishes its Standards Matched to North American Industry engage in commercial real estate certification and a brief explanatory Classification System Codes, available at https:// transactions at or below the commercial www.sba.gov/sites/default/files/files/Size_ real estate appraisal threshold is statement in the Federal Register _ Standards Table.pdf. unknown. together with the rule. 64 Asset size and annual revenues are calculated The OCC currently supervises according to SBA regulations. See 13 CFR 121 et approximately 956 small entities. Data seq. 65 12 U.S.C. 3341(b).

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C. Projected Reporting, Recordkeeping of larger entities. Thus, while the The FDIC supervises 3,675 depository and Other Compliance Requirements precise number of transactions that will institutions,68 of which 2,950 are The final rule would reduce reporting, be affected and the precise cost defined as small banking entities by the 69 recordkeeping, and other compliance reduction per transaction cannot be terms of the RFA. According to the requirements for small entities. For determined, the final rule is expected to Call Report 2,950 small entities reported transactions at or below the threshold, have a significant positive economic holding some volume of real estate- regulated institutions will be given the impact on small entities that engage in related financial transactions that meet commercial real estate lending. the final rule’s definition of a option to obtain an evaluation of the 70 property instead of an appraisal. commercial real estate transaction. D. Identification of Duplicative, Therefore, 2,950 small entities could be Evaluations may be performed by a Overlapping, or Conflicting Federal lender’s own employees and are not affected by the final rule. Regulations The final rule will raise the appraisal required to comply with USPAP. As threshold for commercial real estate discussed in detail in Section II.B of the The Board has not identified any transactions from $250,000 to $500,000. SUPPLEMENTARY INFORMATION, the cost of federal statutes or regulations that Any commercial real estate transaction obtaining appraisals and evaluations would duplicate, overlap, or conflict with the final rule. with a value in excess of the $500,000 can vary widely depending on the size threshold is required to have an and complexity of the property, the E. Discussion of Significant Alternatives appraisal by a state licensed or state party performing the valuation, and The agencies considered additional certified appraiser. Any commercial real market conditions where the property is estate transaction at or below the burden-reducing measures, such as located. Additionally, the costs of $500,000 threshold requires an increasing the commercial threshold to obtaining appraisals and evaluations evaluation. may be passed on to borrowers. Because an amount higher than $500,000 and To estimate the dollar volume of of this variation in cost and practice, it increasing the residential and business commercial real estate transactions the is not possible to precisely determine loan thresholds, but did not implement change could potentially affect, the the cost savings that regulated such measures for the safety and FDIC used information on the dollar institutions will experience due to the soundness and consumer protection volume and number of loans in the Call decreased cost of obtaining an reasons discussed in the proposal. For Report for small institutions from two evaluation rather than an appraisal. transactions exempted from the Title XI categories of loans included in the However, based on information appraisal requirements under the definition of a commercial real estate available to the Board, it is likely that commercial real estate appraisal transaction. The Call Report data reflect small entities and borrowers engaging in threshold, the final rule requires that 3.92 percent of the dollar volume of commercial real estate transactions regulated institutions to get an NFNR loans secured by real estate has could experience significant cost evaluation if they do not choose to an original amount between $1 and reductions. obtain a Title XI appraisal. The agencies $250,000, while 10.19 percent have an In addition to costing less to obtain believe this requirement is necessary to original amount between $250,000 and than appraisals, evaluations also require protect the safety and soundness of $1 million. The Call Report data also less time to review than appraisals financial institutions, which is a legal reflect that 7.30 percent of the dollar because they contain less detailed prerequisite to the establishment of any volume of agricultural loans secured by information. As discussed further in appraisal threshold. The Board is not farmland has an original amount Section II.B of the SUPPLEMENTARY aware of any other significant between $1 and $250,000, while 6.05 INFORMATION, an evaluation takes alternatives that would reduce burden percent have an original amount approximately 30 minutes less to review on small entities without sacrificing the between $250,000 and $500,000.71 than an appraisal. Thus, the agencies safety and soundness of financial Assuming that the original amount of believe that the final rule will alleviate institutions or consumer protections. NFNR loans secured by real estate and approximately 30 minutes of employee FDIC: The RFA generally requires the original amount of agricultural loans time per affected transaction for which that, in connection with a rulemaking, secured by farmland are normally the lender obtains an evaluation instead an agency prepare and make available distributed, the FDIC estimates that 6.28 of an appraisal. As discussed above, for public comment an initial regulatory and 13.35 percent of loan volume is at some commenters provided anecdotal flexibility analysis describing the or below the $500,000 threshold for evidence to show that the agencies’ impact of the proposed rule on small these categories, respectively. estimate of time savings was incorrect. entities.66 A regulatory flexibility Therefore, raising the appraisal The agencies recognize that certain analysis is not required, however, if the threshold from $250,000 to $500,000 for evaluations may take longer to review agency certifies that the rule will not commercial real estate transactions than others; however, this variation was have a significant economic impact on taken into account in the agencies’ a substantial number of small entities. 68 FDIC-supervised institutions are set forth in 12 estimate of the average time savings that The SBA has defined ‘‘small entities’’ to U.S.C. 1813(q)(2). are expected to occur. 69 FDIC Call Report, September 30, 2017. include banking organizations with total 70 The definition of ‘‘commercial real estate As previously discussed, the Board assets less than or equal to $550 transaction’’ would largely capture the following estimates that the percentage of million.67 For the reasons described four categories of loans secured by real estate in the commercial real estate transactions that below and pursuant to section 605(b) of Call Report (FFIEC 031; RCFD 1410), namely loans would be exempted by the threshold is that are: (1) For construction, land development, the RFA, the FDIC certifies that the final and other land loans; (2) secured by farmland; (3) expected to increase by approximately rule will not have a significant secured by residential properties with five or more 16 percent under the final rule. The economic impact on a substantial units; or (4) secured by NFNR properties. However, Board expects this percentage to be number of small entities. loans secured by a single 1-to-4 family residential higher for small entities, because a property would be excluded from the definition. The definition applies to corresponding categories higher percentage of their loan 66 5 U.S.C. 601 et seq. of real estate-secured loans in the FFIEC 041 and portfolios are likely to be made up of 67 13 CFR 121.201 (as amended, effective FFIEC 051 forms of the Call Report. small, below-threshold loans than those December 2, 2014). 71 FDIC Call Report, September 30, 2017.

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could affect an estimated 2.36 to 6.05 and require an appraisal on commercial 1995.76 In accordance with the percent of the dollar volume of all real estate transaction greater than requirements of the PRA, the agencies commercial real estate transactions $250,000 but not more than $500,000 may not conduct or sponsor, and the originated each year for small FDIC- any reduction in costs would be smaller. respondent is not required to respond supervised institutions. This estimate Any associated recordkeeping costs to, an information collection unless it assumes that the distribution of loans are unlikely to change for small FDIC- displays a currently-valid Office of for the other loan categories within the supervised entities as the amount of Management and Budget (OMB) control definition of commercial real estate labor required to satisfy documentation number. The OMB control number for transactions is similar to those loans requirements for an evaluation or an the OCC is 1557–0190, the Board is secured by NFNR properties or appraisal is estimated to be the same at 7100–0250, and the FDIC is 3064–0103, farmland. about five minutes for either an which will be extended, without The final rule is likely to reduce appraisal or evaluation. revision. The agencies have concluded valuation review costs for covered The final rule also is likely to reduce that the final rule does not contain any institutions. The FDIC estimates that it the loan origination costs associated changes to the current information takes a loan officer an average of 40 with real estate appraisals for collections; however, the agencies are minutes to review an appraisal to ensure commercial real estate borrowers. The revising the methodology for calculating that it meets that standards set forth in FDIC assumes that these costs are the burden estimates. There were no Title XI, but 10 minutes to perform a always paid by the borrower for this comments received regarding the PRA. similar review of an evaluation, which analysis. Anecdotal information from The OCC and the FDIC submitted the does not need to meet the Title XI industry participants indicates that a information collection requirements to standards for appraisals. The final rule commercial real estate appraisal costs OMB in connection with the proposal increases the number of commercial real between $1,000 to over $3,000, or about under section 3507(d) of the PRA 77 and estate transactions that would require an $2,000 on average, and a commercial section 1320.11 of the OMB’s evaluation by raising the appraisal real estate evaluation costs between implementing regulations.78 OMB filed threshold from $250,000 to $500,000. $500 to over $1,500, or about $1,000 on a comment pursuant to 5 CFR Assuming that 15 percent of the average. Based on the prior 1320.11(c) instructing the agencies to outstanding balance of commercial real assumptions, the FDIC estimates that examine public comment in response to estate transactions for small entities gets the final rule will affect approximately the proposal and describe in the renewed or replaced by new 2,003 to 5,138 transactions per year,74 or supporting statement of its next originations each year, the FDIC 0.68 to 1.74 loans on average for small collection (the final rule) any public estimates that small entities originate FDIC-supervised institutions. Therefore, comments received regarding the $31.8 billion in new commercial real the final rule could reduce loan collection as well as why (or why it did estate transactions each year. Assuming origination costs for borrowers doing not) incorporate the commenter’s that 2.36 to 6.05 percent of annual business with small entities by $2.0 to recommendation and include the draft originations represent loans with an $5.1 million on average per year.75 final rule in its next submission. The origination amount greater than By lowering valuation costs on OCC and the FDIC have resubmitted the $250,000 but not more than $500,000, commercial real estate transactions collection to OMB in connection with the FDIC estimates that the proposed greater than $250,000 but less than or the final rule. The Board reviewed the rule will affect approximately 2,003 to equal to $500,000 for small FDIC- final rule under the authority delegated 5,138 loans per year,72 or 0.68 to 1.74 supervised institutions, the final rule to the Board by OMB. could marginally increase lending loans on average for small FDIC- Information Collection supervised institutions. Therefore, activity. As discussed previously, based on an estimated hourly rate, the commenters in the EGRPRA review Title of Information Collection: final rule would reduce loan review noted that appraisals can be costly and Recordkeeping Requirements costs for small entities by $67,391 to time consuming. By enabling small Associated with Real Estate Appraisals $172,868, on average, each year.73 If FDIC-supervised institutions to utilize and Evaluations. lenders opt to not utilize an evaluation evaluations for more commercial real Frequency of Response: Event estate transactions, the final rule will generated. 72 Multiplying $31.8 billion by 2.36 percent then reduce transaction costs. The reduction Affected Public: Businesses or other dividing the product by an average loan amount of in loan origination fees could for-profit. $375,000 equals 2,003 loans and multiplying $31.8 marginally increase commercial real Respondents: billion by 6.05 percent then dividing the product OCC: National banks, federal savings estate lending activity for loans with an by an average loan amount of $375,000 equals 5,138 associations. loans. origination value greater than $250,000 Board: State member banks (SMBs) 73 The FDIC estimates that the average hourly and not more than $500,000. compensation for a loan officer is $67.29 an hour. and nonbank subsidiaries of bank The hourly compensation estimate is based on C. Paperwork Reduction Act holding companies (BHCs). published compensation rates for Credit Counselors FDIC: Insured state nonmember banks Certain provisions of the final rule and Loan Officers ($43.40). The estimate includes and state savings associations, insured the September 2017 75th percentile hourly wage contain ‘‘collection of information’’ rate reported by the Bureau of Labor Statistics, state branches of foreign banks. requirements within the meaning of the General Description of Report: For National Industry-Specific Occupational Paperwork Reduction Act (PRA) of Employment and Wage Estimates for the Depository federally related transactions, Title XI Credit Intermediation sector. The reported hourly requires regulated institutions 79 to wage rate is grossed up by 155.0 percent to account 74 Multiplying $31.8 billion by 2.36 percent then for non-monetary compensation as reported by the dividing the product by an average loan amount of 76 3rd Quarter 2017 Employer Costs for Employee $375,000 equals 2,003 loans and multiplying $31.8 44 U.S.C. 3501–3521. Compensation Data. Based on this estimate, loan billion by 6.05 percent then dividing the product 77 44 U.S.C. 3507(d). review costs would decline between $67,391 (2,003 by an average loan amount of $375,000 equals 5,138 78 5 CFR 1320. loans multiplied by 30 minutes and multiplied by loans. 79 National banks, federal savings associations, $67.29 per hour) and $172,868 (5,138 loans 75 Multiplying 2,003 loans by $1,000 savings SMBs and nonbank subsidiaries of BHCs, insured multiplied by 30 minutes and multiplied by $67.29 equals $2.0 million and multiplying 5,138 loans by state nonmember banks and state savings per hour). $1,000 savings equals $5.1 million. Continued

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obtain appraisals prepared in Annual Frequency: 143. • Hand Delivery: Comments may be accordance with USPAP promulgated Total Estimated Annual Burden: hand delivered to the guard station at by the Appraisal Standards Board of the 43,794 hours. the rear of the 550 17th Street Building Appraisal Foundation. Generally, these These collections are available to the (located on F Street) on business days standards include the methods and public at www.reginfo.gov. between 7 a.m. and 5 p.m. techniques used to estimate the market The agencies have an ongoing interest Public Inspection: All comments value of a property as well as the in public comments on its burden received will be posted without change requirements for reporting such analysis estimates. Comments on the collection to http://www.fdic.gov/regulations/laws/ and a market value conclusion in the of information should be sent to: federal/ including any personal appraisal. Regulated institutions are OCC: Because paper mail in the information provided. expected to maintain records that Washington, DC area and at the OCC is Additionally, commenters may send a demonstrate that appraisals used in subject to delay, commenters are copy of their comments to the OMB their real estate-related lending encouraged to submit comments by desk officer for the PRA Agencies by activities comply with these regulatory email, if possible. Comments may be mail to the Office of Information and requirements. For commercial real sent to: Legislative and Regulatory Regulatory Affairs, U.S. Office of estate transactions exempted from the Activities Division, Office of the Management and Budget, New Title XI appraisal requirements by the Comptroller of the Currency, Attention: Executive Office Building, Room 10235, final rule, regulated institutions will 1557–0190, 400 7th Street SW, Suite 725 17th Street NW, Washington, DC still be required to obtain an evaluation 3E–218, Mail Stop 9W–11, Washington, 20503; by fax to (202) 395–6974; or by to justify the transaction amount. The DC 20219. In addition, comments may email to [email protected]. be sent by fax to (571) 465–4326 or by agencies estimate that the recordkeeping D. Riegle Act burden associated with evaluations is electronic mail to regs.comments@ the same as the recordkeeping burden occ.treas.gov. You may personally The Riegle Act requires that each of associated with appraisals for such inspect and photocopy comments at the the agencies, in determining the transactions. OCC, 400 7th Street SW, Washington, effective date and administrative Current Action: The threshold change DC 20219. For security reasons, the OCC compliance requirements for new in the final rule will result in lenders requires that visitors make an regulations that impose additional being able to use evaluations instead of appointment to inspect comments. You reporting, disclosure, or other appraisals for certain transactions. It is may do so by calling (202) 649–6700. requirements on IDIs, consider, estimated that the time required to Upon arrival, visitors will be required to consistent with principles of safety and document the review of an appraisal or present valid government-issued photo soundness and the public interest, any an evaluation is the same. While the identification and submit to security administrative burdens that such rulemaking described in this final rule screening in order to inspect and regulations would place on depository will not change the amount of time that photocopy comments. institutions, including small depository institutions spend complying with the All comments received, including institutions, and customers of Title XI appraisal regulation, the attachments and other supporting depository institutions, as well as the agencies are using a more accurate materials, are part of the public record benefits of such regulations.80 In methodology for calculating the burden and subject to public disclosure. Do not addition, in order to provide an of the information collections based on include any information in your adequate transition period, new the experience of the agencies. Thus, the comment or supporting materials that regulations that impose additional PRA burden estimates shown here are you consider confidential or reporting, disclosures, or other new different from those previously inappropriate for public disclosure. requirements on IDIs generally must reported. The agencies are (1) using the Board: Nuha Elmaghrabi, Federal take effect on the first day of a calendar average number of loans per institution Reserve Clearance Officer, Office of the quarter that begins on or after the date as the frequency and (2) using 5 minutes Chief Data Officer, Mail Stop K1–148, on which the regulations are published as the estimated time per response for Board of Governors of the Federal in final form.81 the appraisals or evaluations. Reserve System, Washington, DC 20551, The final rule reduces burden and with copies of such comments sent to does not impose any reporting, PRA Burden Estimates the Office of Management and Budget, disclosure, or other new requirements Estimated average time per response: Paperwork Reduction Project (7100– on IDIs. For transactions exempted from 5 minutes. 0250), Washington, DC 20503. the Title XI appraisal requirements by the proposed rule (i.e., commercial real OCC FDIC: You may submit comments, which should refer to ‘‘Real Estate estate transactions between $250,000 Number of Respondents: 1,200. Appraisals, 3064–0103’’ by any of the and $500,000), lenders are required to Annual Frequency: 1,488. following methods: get an evaluation if they chose not to get Total Estimated Annual Burden: • Agency website: http:// an appraisal. However, the agencies do 148,800 hours. www.fdic.gov/regulations/laws/federal/. not view the option to obtain an Board Follow the instructions for submitting evaluation instead of an appraisal as a new or additional requirement for Number of Respondents: 828 SMBs; comments on the FDIC website. • Federal eRulemaking Portal: http:// purposes of the Riegle Act. First, the 1,215 nonbank subsidiaries of BHCs. Annual Frequency: 419; 25. www.regulations.gov. Follow the process of obtaining an evaluation is not instructions for submitting comments. new since IDIs already get evaluations Total Estimated Annual Burden: • 28,911 hours; 2,531 hours. Email: [email protected]. for transactions at or below the current Include ‘‘Real Estate Appraisals, 3064– $250,000 threshold. Second, for FDIC 0103’’ in the subject line of the message. commercial real estate transactions • Number of Respondents: 3,675. Mail: Jennifer Jones, Attn: between $250,000 and $500,000, IDIs Comments, Federal Deposit Insurance associations, and insured state branches of foreign Corporation, 550 17th Street NW, MB– 80 12 U.S.C. 4802(a). banks. 3105, Washington, DC 20429. 81 12 U.S.C. 4802(b).

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can continue to get appraisals instead of tribal governments, or by the private financial and public policy interests in evaluations. Because the final rule sector, in any one year. real estate-related financial transactions imposes no new requirements on IDIs, or to protect the safety and soundness List of Subjects the agencies are not required by the of the institution; or Riegle Act to consider the 12 CFR Part 34 (13) The transaction is a commercial administrative burdens and benefits of Appraisal, Appraiser, Banks, Banking, real estate transaction that has a the rule or delay its effective date. Consumer protection, Credit, Mortgages, transaction value of $500,000 or less. (b) Evaluations required. For a Because delaying the effective date of National banks, Reporting and transaction that does not require the the rule is not required, the agencies are recordkeeping requirements, Savings services of a State certified or licensed making the threshold increase effective associations, Truth in lending. on the first day after publication of the appraiser under paragraph (a)(1), (a)(5), final rule in the Federal Register. 12 CFR Part 225 (a)(7), or (a)(13) of this section, the Additionally, although not required by Administrative practice and institution shall obtain an appropriate the Riegle Act, the agencies did consider procedure, Banks, banking, Federal evaluation of real property collateral the administrative costs and benefits of Reserve System, Capital planning, that is consistent with safe and sound the rule while developing the proposal Holding companies, Reporting and banking practices. and finalizing the rule. In designing the recordkeeping requirements, Securities, * * * * * scope of the threshold increase, the Stress testing. (d) * * * agencies chose to largely align the (2) Commercial real estate definition of commercial real estate 12 CFR Part 323 transactions of more than $500,000. All transaction with industry practice, Banks, banking, Mortgages, Reporting federally related transactions that are regulatory guidance, and the categories and recordkeeping requirements, commercial real estate transactions used in the Call Report in order to Savings associations. having a transaction value of more than reduce the administrative burden of $500,000 shall require an appraisal Office of the Comptroller of the prepared by a State certified appraiser. determining which transactions were Currency 12 CFR Part 34 exempted by the rule. The agencies also * * * * * considered the cost savings that IDIs For the reasons set forth in the joint Federal Reserve Board would experience by obtaining preamble, the OCC amends part 34 of evaluations instead of appraisals and set chapter I of title 12 of the Code of Federal Regulations as follows: the threshold at a level designed to 12 CFR Part 225 provide significant burden relief PART 34—REAL ESTATE LENDING without sacrificing safety and For the reasons set forth in the joint AND APPRAISALS soundness. In the proposal, the agencies preamble, the Board amends part 225 of chapter II of title 12 of the Code of invited comments on compliance with ■ 1. The authority citation for part 34 Federal Regulations as follows: the Riegle Act, but no such comments continues to read as follows: were received. Authority: 12 U.S.C. 1, 25b, 29, 93a, 371, PART 225—BANK HOLDING E. Solicitation of Comments on Use of 1462a, 1463, 1464, 1465, 1701j-3, 1828(o), COMPANIES AND CHANGE IN BANK Plain Language 3331 et seq., 5101 et seq., and 5412(b)(2)(B), CONTROL (REGULATION Y) and 15 U.S.C. 1639h. Section 722 of the Gramm-Leach- ■ 4. The authority citation for part 225 ■ 2. Section 34.42 is amended by Bliley Act 82 requires the agencies to use continues to read as follows: plain language in all proposed and final redesignating paragraphs (e) through (m) as paragraphs (f) through (n), Authority: 12 U.S.C. 1817(j)(13), 1818, rules published after January 1, 2000. 1828(o), 1831i, 1831p–1, 1843(c)(8), 1844(b), The agencies invited comment on how respectively, and by adding a new paragraph (e) to read as follows: 1972(l), 3106, 3108, 3310, 3331–3351, 3906, to make the rule easier to understand, 3907, and 3909; 15 U.S.C. 1681s, 1681w, but no such comments were received. § 34.42 Definitions. 6801 and 6805. F. OCC Unfunded Mandates Reform Act * * * * * ■ 5. Section 225.62 is amended by of 1995 Determination (e) Commercial real estate transaction redesignating paragraphs (e) through (m) means a real estate-related financial as paragraphs (f) through (n), The OCC has analyzed the final rule transaction that is not secured by a respectively, and by adding a new under the factors in the Unfunded single 1-to-4 family residential property. paragraph (e) to read as follows: Mandates Reform Act of 1995 (2 U.S.C. 1532). Under this analysis, the OCC * * * * * § 225.62 Definitions. considered whether the final rule ■ 3. Section 34.43 is amended by: ■ * * * * * includes a federal mandate that may a. Removing the word ‘‘or’’ at the end (e) Commercial real estate transaction result in the expenditure by state, local, of paragraph (a)(11); means a real estate-related financial ■ b. Revising paragraph (a)(12); and tribal governments, in the aggregate, transaction that is not secured by a ■ c. Adding paragraph (a)(13); and or by the private sector, of $100 million single 1-to-4 family residential property. ■ d. Revising paragraphs (b) and (d)(2). or more in any one year (adjusted The revisions and addition read as * * * * * annually for inflation). follows: ■ 6. Section 225.63 is amended by: The final rule does not impose new ■ a. Removing the word ‘‘or’’ at the end requirements or include new mandates. § 34.43 Appraisals required; transactions of paragraph (a)(12); Therefore, we conclude that the final requiring a State certified or licensed ■ b. Revising paragraph (a)(13); rule will not result in an expenditure of appraiser. ■ c. Adding paragraph (a)(14); $100 million or more by state, local, and (a) * * * ■ d. Revising paragraph (b); and (12) The OCC determines that the ■ e. Revising paragraph (d)(2). 82 Public Law 106–102, section 722, 113 Stat. services of an appraiser are not The revisions and addition read as 1338 1471 (1999). necessary in order to protect Federal follows:

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§ 225.63 Appraisals required; transactions transaction that is not secured by a DEPARTMENT OF TRANSPORTATION requiring a State certified or licensed single 1-to-4 family residential property. appraiser. Federal Aviation Administration (a) * * * ■ 10. Section 323.3 is amended by: (13) The Board determines that the ■ a. Removing the word ‘‘or’’ at the end 14 CFR Part 39 services of an appraiser are not of paragraph (a)(11); necessary in order to protect Federal [Docket No. FAA–2018–0284; Product ■ b. Revising paragraph (a)(12); Identifier 2018–CE–014–AD; Amendment financial and public policy interests in 39–19246; AD 2018–07–15] real estate-related financial transactions ■ c. Adding paragraph (a)(13); or to protect the safety and soundness ■ d. Revising paragraph (b); and RIN 2120–AA64 of the institution; or ■ e. Revising paragraph (d)(2). (14) The transaction is a commercial Airworthiness Directives; XtremeAir real estate transaction that has a The revisions and addition read as GmbH Airplanes follows: transaction value of $500,000 or less. AGENCY: Federal Aviation (b) Evaluations required. For a Administration (FAA), DOT. transaction that does not require the § 323.3 Appraisals required; transactions requiring a State certified or licensed ACTION: Final rule; request for services of a State certified or licensed appraiser. appraiser under paragraph (a)(1), (a)(5), comments. (a)(7), or (a)(14) of this section, the (a) * * * SUMMARY: We are adopting a new institution shall obtain an appropriate (12) The FDIC determines that the airworthiness directive (AD) for evaluation of real property collateral services of an appraiser are not XtremeAir GmbH Model XA42 airplanes that is consistent with safe and sound necessary in order to protect Federal equipped with an engine mount part banking practices. financial and public policy interests in number XA42–7120–151. This AD * * * * * real estate-related financial transactions results from mandatory continuing (d) * * * or to protect the safety and soundness airworthiness information (MCAI) (2) Commercial real estate of the institution; or issued by the aviation authority of transactions of more than $500,000. All (13) The transaction is a commercial another country to identify and address federally related transactions that are an unsafe condition on an aviation commercial real estate transactions real estate transaction that has a transaction value of $500,000 or less. product. The MCAI describes the unsafe having a transaction value of more than condition as cracking of the diagonal $500,000 shall require an appraisal (b) Evaluations required. For a strut of the engine mount frame. We are prepared by a State certified appraiser. transaction that does not require the issuing this AD to require actions to * * * * * services of a State certified or licensed address the unsafe condition on these appraiser under paragraph (a)(1), (a)(5), products. Federal Deposit Insurance Corporation (a)(7), or (a)(13) of this section, the 12 CFR Part 323 institution shall obtain an appropriate DATES: This AD is effective April 30, evaluation of real property collateral 2018. For the reasons set forth in the joint The Director of the Federal Register preamble, the FDIC amends part 323 of that is consistent with safe and sound banking practices. approved the incorporation by reference chapter III of title 12 of the Code of of a certain publication listed in the AD * * * * * Federal Regulations as follows: as of April 30, 2018. (d) * * * PART 323—APPRAISALS We must receive comments on this (2) Commercial real estate AD by May 24, 2018. ■ 7. Revise the authority citation for part transactions of more than $500,000. All ADDRESSES: You may send comments by 323 to read as follows: federally related transactions that are any of the following methods: • Authority: 12 U.S.C. 1818, commercial real estate transactions Federal eRulemaking Portal: Go to 1819(a)(Seventh’’ and ‘‘Tenth), 1831p–1 and having a transaction value of more than http://www.regulations.gov. Follow the 3331 et seq. $500,000 shall require an appraisal instructions for submitting comments. • ■ 8. Section 323.1 is amended by prepared by a State certified appraiser. Fax: (202) 493–2251. • Mail: U.S. Department of revising paragraph (a) to read as follows: * * * * * Transportation, Docket Operations, M– § 323.1 Authority, purpose, and scope. Dated: March 16, 2018. 30, West Building Ground Floor, Room (a) Authority. This subpart is issued Joseph M. Otting, W12–140, 1200 New Jersey Avenue SE, under 12 U.S.C. 1818, 1819(a)(Seventh Comptroller of the Currency. Washington, DC 20590. and Tenth), 1831p–1 and title XI of the • Hand Delivery: U.S. Department of Financial Institutions Reform, Recovery, By order of the Board of Governors of the Transportation, Docket Operations, M– and Enforcement Act of 1989 (FIRREA) Federal Reserve System, March 23, 2018. 30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE, (Pub. L. 101–73, 103 Stat. 183, 12 U.S.C. Ann E. Misback, 3331 et seq. (1989)). Washington, DC 20590, between 9 a.m. Secretary of the Board. ■ 9. Section 323.2 is amended by and 5 p.m., Monday through Friday, redesignating paragraphs (e) through (m) Dated at Washington, DC on March 20, except Federal holidays. as paragraphs (f) through (n), 2018. For service information identified in respectively, and by adding a new By order of the Board of Directors. this AD, contact XtremeAir GmbH, paragraph (e) to read as follows: Federal Deposit Insurance Corporation. Harzstrasse 2, Am Flughafen Cochstedt, D–39444 Hecklingen, Germany; phone: § 323.2 Definitions. Valerie J. Best, +49 39267 60999 0; fax: +49 39267 * * * * * Assistant Executive Secretary. 60999 20; email: [email protected]; (e) Commercial real estate transaction [FR Doc. 2018–06960 Filed 4–6–18; 8:45 am] internet: https://www.xtremeair.com. means a real estate-related financial BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P You may view this referenced service

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