CSBS Issue Briefings - August 2020

Appraisals

CSBS Official Public Position

CSBS believes the current regulation needs to better address the appraiser shortage in rural and underserved urban markets, as well as the difficulties for appraisers to enter those markets.

Summary

Federal appraisal thresholds have been raised over the last two years. For 1-4 family residential transactions, the threshold is now $400,000. For commercial transactions, the bank threshold is $500,000 while the credit union threshold is $1 million. CSBS acknowledges that changes are occurring in the appraisal industry. Automated valuation methods are now used by the GSEs in 40% of their transactions. The Appraiser Qualifications Board of the Appraisal Foundation, which sets minimum qualifications for real property appraisers in the United States, last revised and reduced the educational requirements to become a licensed/credential residential appraiser in 2018. However, these changes may not be enough to address appraiser shortages in underserved markets. State regulators are committed to working with the agencies to address the appraiser shortage and urge federal counterparts to revisit and improve options for impacted financial institutions to facilitate commerce in local communities. The Federal Financi al Institutions Examination Council’s Appraisal Subcommittee (ASC) indicated in September 2019 that it would improve the process for applicants seeking the temporary waiver of appraiser credentials available under Title XI of the Financial Institutions Reform, Recovery and Enforcement Act. The ASC issued FAQs on the temporary waiver authority in December 2019. In 30 years, the waiver has been approved for only the Northern Mariana Islands and North Dakota.

Why it Matters to State Regulators

A shortage of qualified appraisers can leave markets underserved, stifling economic activity. Commercial and residential lending are critical for local economic development. Qualified appraisers make that lending possible. Many state regulators continue to observe a shortage of appraisers in regions across the country.

Talking Points

• In 2017, state and federal banking agencies met with bankers across the country and encouraged the use of the waiver to deal with appraiser shortages. • A Tennessee bank applied for a waiver in 2018 but was denied. • North Dakota’s waiver application was approved for one year in 2019 and extended for an additional year August 2020. • The appraiser waiver process needs to be clarified in a way that it would help address the limited appraiser availability in underserved markets. • The temporary waiver is only a bandage that does not, by itself, correct the underlying problem of scarcity.

FOR STATE REGULATOR USE ONLY