Mortgage Daily

Published On: October 17, 2017

In an effort to help the recovery of areas impacted by the recent hurricanes, federal banking regulators have temporarily waived the requirement for an appraisal.

Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 requires federally regulated financial institutions to use state certified or licensed appraisers to perform appraisals on loans.

But Section 2 of the Depository Institutions Disaster Relief Act of 1992 authorizes regulators to make exceptions to statutory and regulatory appraisal requirements of Title XI for areas that the president declares a major disaster.

Such declarations have been made by President Donald J. Trump
for areas devastated by severe storms and flooding caused by Hurricanes Harvey, Irma and Maria.

The impacted areas are located in the states of Florida, Georgia and Texas
and the territories of Puerto Rico and the Virgin Islands.

On Tuesday,
a joint press release was issued by the Federal Deposit Insurance Corp., Federal Reserve Board, National Credit Union Administration and Office of the Comptroller of the Currency.

According to the statement,
the agencies won’t require banks and credit unions to obtain appraisals for affected transactions.

In order to skip an appraisal, the property has to be located in a disaster-declared area, and the value must support the decision to complete the transaction. In addition, their must be a binding commitment to fund the transaction within 36 months of the declaration date.

When the appraisal exception is used, information estimating the collateral’s value must sufficiently support the credit decision.

The expiration of the exception is August 2020 for Hurricane Harvey and September 2020 for Hurricane Irma and Hurricane Maria.

The action was taken to “facilitate recovery from the major disaster and is consistent with safety and soundness.”

An FDIC spokeswoman confirmed in a written statement that the exception applies to both single-family loans and commercial mortgages.

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