Credit union regulator adopts temporary reg relief, appraisal relief amid COVID-19; appraisal threshold raised to $400k

Two interim final rules to give regulatory relief, as well as temporary real estate appraisal relief, to credit unions through Dec. 31 of this year amid the ongoing coronavirus (COVID-19) pandemic were adopted unanimously by the National Credit Union Administration (NCUA) Board Thursday.

The board’s actions, which also included a 2-1 vote approving a final rule raising the real estate appraisal threshold for credit unions, were taken during a public meeting accessed online only (with links to documents and an audiostream of the board’s discussion) to ensure the public distancing being exercised during the current crisis.

Thursday’s interim final rules are as follows:

  • Loan participations, eligible obligations, occupancy/disposition of acquired premises: Under interim final rule, the board raised the maximum aggregate amount of loan participations that a federally insured credit union (FICU) may purchase from a single originating lender without seeking a waiver from the appropriate NCUA regional director to the greater of $5 million or 200% of the FICU’s net worth (up from the greater of $500 million or 100% of the FICU’s net worth). Limits on the types of eligible obligations that a federal credit union (FCU) may purchase and hold are temporarily suspended; an FCU will not be required to refinance a purchased obligation so that it is a loan the FCU is empowered to make. Also, an FCU with a CAMEL 3 rating will be able to purchase the eligible obligations of any FICU or liquidating credit union without regard to whether they are obligations of the purchasing FCU’s members. (Currently, this authority is limited to FCUs with CAMEL composite ratings of 1 and 2.) Given physical distancing policies under the current health crisis, the board is tolling the required timeframes for the occupancy or disposition of properties not being used for FCU business or that have been abandoned. All of these temporary modifications will be in place until Dec. 31, 2020, unless extended, the agency said.
  • Real estate appraisal deferrals: Consistent with action taken by banking regulators, the NCUA Baord adopted an interim final rule that defers the requirements to obtain an appraisal or evaluation for up to 120 days following the closing of a transaction for certain residential and commercial real estate transactions. “Credit unions should continue to make best efforts to obtain a reliable valuation of real property collateral at the time of loan closing, consistent with safe and sound practices,” the agency said in the rule summary. The rule, effective from its date of publication in the Federal Register and through Dec. 31, is out for comment for 45 days following its publication in the Federal Register.

In addition, the board on Thursday was briefed by staff on recent changes to the agency’s liquidity facility to help ensure liquidity access during the crisis.

The board also adopted, with Member Todd Harper dissenting, an increase (proposed last year) in the real estate appraisal threshold from $250,000 to $400,000, effective upon the final rule’s publication in the Federal Register. Banking regulators adopted a similar provision last year.

Under the final rule, NCUA said, if property involved in a residential real estate transaction is below the threshold, federally insured credit unions will be required to obtain written estimates of the market value of the real estate, consistent with safe and sound practices.

The agency also noted that the final rule explicitly incorporates the existing statutory requirement that appraisals be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). Additionally, NCUA said, the final rule aligns the agency’s appraisal rule with the requirements of the Federal Reserve,  the Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency (OCC).

NCUA Board April 16, 2020, open meeting agenda, action items