NCUA approves rule to increase appraisal threshold for commercial real estate transactions

Posted: Jul 22, 2019 | Author:

The National Credit Union Administration Board on Thursday approved a final rule that increases the appraisal threshold for commercial real estate-related transactions from $250,000 to $1 million. Chairman Rodney Hood and board member J. Mark McWatters voted for the rule, while board member Todd Harper voted against it.

Harper said the magnitude of the appraisal increase was too large, noting that banking agencies increased their threshold from $250,000 to $500,000.

“We’re not just running before we walk, we’re leapfrogging over the other banking regulators,” he said.

Hood disagreed, saying, “If this regulation raised safety and soundness issues, I would not move forward, and it would not be on our agenda,” Hood said.

McWatters agreed. “I don’t see a safety and soundness issue at all,” he said.

In presenting the rule, agency officials said that the 2008 financial crisis was fueled by a lack of prudent underwriting, not appraisals. The rule, as adopted, also would exempt from appraisal requirements certain loans made in rural areas.

Credit union trade groups endorsed the threshold increase, along with Cornerstone Credit Union League.

“CUNA advocated strongly to raise the threshold for required appraisals for commercial loans to $1 million from $250,000, which will provide relief for credit unions,” said CUNA Chief Advocacy Officer Ryan Donovan. “Making it easier for credit unions to determine whether an appraisal is required will also benefit credit unions and their members.”