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Rules and Regulations Federal Register Vol 15019 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. VerDate Sep<11>2014 16:01 Apr 06, 2018 Jkt 244001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\09APR1.SGM 09APR1 sradovich on DSK3GMQ082PROD with RULES 15020 Federal Register / Vol. 83, No. 68 / Monday, April 9, 2018 / Rules and Regulations 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
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