Appraisal requirements were eased for real estate-related financial transactions in areas declared to be a major disaster – including those affected by severe storms and flooding related to Hurricanes Harvey, Irma, and Maria – by four federal financial institution regulators Tuesday, affecting three states and two U.S. territories.
The exceptions apply to transactions in areas of Florida, Georgia, Puerto Rico, Texas, and the U.S. Virgin Islands and expire three years after the date the president declared each area a major disaster. The exceptions are being made under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and its implementing regulations, the agencies stated.
The joint announcement was made by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC). The agencies said they were taking the action to facilitate the recovery process.
The temporary exceptions mean that the agencies will not require financial institutions to obtain appraisals for affected transactions under three condition: if the properties involved are located in areas declared major disasters; if there are binding commitments to fund the transactions within 36 months of the date the areas were declared major disasters, and if the value of the real properties support the institutions’ decisions to enter into the transactions.
In a release, the four agencies stated that financial institutions using the appraisal exception must maintain information estimating the collateral’s value that sufficiently supports their credit decision to enter into the transaction. The agencies will monitor institutions’ real estate lending practices to ensure the transactions are being originated in a safe and sound banking manner, they said.