Rule raising CRE appraisal threshold to $500K detailed in OCC bulletin

The OCC’s bulletin issued Wednesday gives highlights of a final CRE appraisal rule that took effect April 9. The rule was adopted jointly by the OCC, Fed and FDIC.

A bulletin on a recent final rule raising the commercial real estate (CRE) appraisal threshold from $250,000 to $500,000 was issued Wednesday by the Office of the Comptroller of the Currency (OCC).

The OCC bulletin (No. 2018-10) focuses on a final rule approved jointly by the OCC, Federal Reserve Board (Fed) and Federal Deposit Insurance Corp. (FDIC) relating to appraisals under Title XI of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

In effect since April 9, the final rule defines a CRE transaction as “a real estate-related financial transaction that is not secured by a single 1-to-4 family residential property,” the bulletin states. Besides raising the CRE appraisal threshold, the rule also made conforming changes to the appraisal rules, as follows:

  • It requires evaluations for transactions at or below the $500,000 threshold for CRE transactions, but OCC writes that banks “may use appraisals for these exempt transactions in appropriate circumstances, such as for higher-risk transactions, as discussed in the ‘Interagency Appraisal and Evaluation Guidelines’ attached to OCC Bulletin 2010-42.” It says an evaluation provides an estimate of the market value of real estate but is not subject to the same requirements as a FIRREA Title XI appraisal, such as the requirement to use a certified or licensed appraiser.
  • The rule requires use of a state-certified appraiser for CRE transactions of more than $500,000. These requirements for evaluations and for use of state-certified appraisers are in the current appraisal rules; the conforming changes update the transaction levels for these requirements from $250,000 to $500,000, the bulletin states.

The OCC says the final rule applies to all banks that it supervises, including community banks.

OCC Bulletin 2018-10