Title 12--Banks and Banking CHAPTER III--FEDERAL DEPOSIT INSURANCE CORPORATION PART 323--APPRAISALS |
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(a) Authority. This part is issued under 12 U.S.C. 1818, 1819
[``Seventh'' and ``Tenth''] and title XI of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (``FIRREA'') (Pub. L. 101-
73, 103 Stat. 183, 12 U.S.C. 3331 et seq. (1989)).
(b) Purpose and scope. (1) Title XI provides protection for federal
financial and public policy interests in real estate related
transactions by requiring real estate appraisals used in connection with
federally related transactions to be performed in writing, in accordance
with uniform standards, by appraisers whose competency has been
demonstrated and whose professional conduct will be subject to effective
supervision. This part implements the requirements of title XI and
applies to all federally related transactions entered into by the FDIC
or by institutions regulated by the FDIC (regulated institutions).
(2) This part: (i) Identifies which real estate-related financial
transactions require the services of an appraiser;
(ii) Prescribes which categories of federally related transactions
shall be appraised by a State certified appraiser and which by a State
licensed appraiser; and
(iii) Prescribes minimum standards for the performance of real
estate appraisals in connection with federally related transactions
under the jurisdiction of the FDIC.
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(a) Appraisal means a written statement independently and
impartially prepared by a qualified appraiser setting forth an opinion
as to the market value of an adequately described property as of a
specific date(s), supported by the presentation and analysis of relevant
market information.
(b) Appraisal Foundation means the Appraisal Foundation established
on November 30, 1987, as a not-for-profit corporation under the laws of
Illinois.
(c) Appraisal Subcommittee means the Appraisal Subcommittee of the
Federal Financial Institutions Examination Council.
(d) Business loan means a loan or extension of credit to any
corporation, general or limited partnership, business trust, joint
venture, pool, syndicate, sole proprietorship, or other business entity.
(e) Complex 1-to-4 family residential property appraisal means one
in which the property to be appraised, the form of ownership, or market
conditions are atypical.
(f) Federally related transaction means any real estate-related
financial transactions entered into after the effective date hereof
that:
(1) The FDIC or any regulated institution engages in or contracts
for; and
(2) Requires the services of an appraiser.
(g) Market value means the most probable price which a property
should bring in a competitive and open market under all conditions
requisite to a fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a
specified date and the passing of title from seller to buyer under
conditions whereby:
(1) Buyer and seller are typically motivated;
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(2) Both parties are well informed or well advised, and acting in
what they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
(5) The price represents the normal consideration for the property
sold unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
(h) Real estate or real property means an identified parcel or tract
of land, with improvements, and includes easements, rights of way,
undivided or future interests and similar rights in a tract of land, but
does not include mineral rights, timber rights, growing crops, water
rights and similar interests severable from the land when the
transaction does not involve the associated parcel or tract of land.
(i) Real estate-related financial transaction means any transaction
involving:
(1) The sale, lease, purchase, investment in or exchange of real
property, including interests in property, or the financing thereof; or
(2) The refinancing of real property or interests in real property;
or
(3) The use of real property or interests in property as security
for a loan or investment, including mortgage-backed securities.
(j) State certified appraiser means any individual who has satisfied
the requirements for certification in a State or territory whose
criteria for certification as a real estate appraiser currently meet the
minimum criteria for certification issued by the Appraiser
Qualifications Board of the Appraisal Foundation. No individual shall be
a State certified appraiser unless such individual has achieved a
passing grade upon a suitable examination administered by a State or
territory that is consistent with and equivalent to the Uniform State
Certification Examination issued or endorsed by the Appraiser
Qualifications Board. In addition, the Appraisal Subcommittee must not
have issued a finding that the policies, practices, or procedures of a
State or territory are inconsistent with title XI of FIRREA. The FDIC
may, from time to time, impose additional qualification criteria for
certified appraisers performing appraisals in connection with federally
related transactions within its jurisdiction.
(k) State licensed appraiser means any individual who has satisfied
the requirements for licensing in a State or territory where the
licensing procedures comply with title XI of FIRREA and where the
Appraisal Subcommittee has not issued a finding that the policies,
practices, or procedures of the State or territory are inconsistent with
title XI. The FDIC may, from time to time, impose additional
qualification criteria for licensed appraisers performing appraisals in
connection with federally related transactions within its jurisdiction.
(l) Tract development means a project of five units or more that is
constructed or is to be constructed as a single development.
(m) Transaction value means: (1) For loans or other extensions of
credit, the amount of the loan or extension of credit;
(2) For sales, leases, purchases, and investments in or exchanges of
real property, the market value of the real property interest involved;
and
(3) For the pooling of loans or interests in real property for
resale or purchase, the amount of the loan or market value of the real
property calculated with respect to each such loan or interest in real
property.
[55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9049, Mar. 16, 1992; 59
FR 29501, June 7, 1994]
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Sec. 323.3 Appraisals
required; transactions requiring a State certified or licensed appraiser. |
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(a) Appraisals required. An appraisal performed by a State certified
or licensed appraiser is required for all real estate-related financial
transactions except those in which:
(1) The transaction value is $250,000 or less;
(2) A lien on real estate has been taken as collateral in an
abundance of caution;
(3) The transaction is not secured by real estate;
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(4) A lien on real estate has been taken for purposes other than the
real estate's value;
(5) The transaction is a business loan that:
(i) Has a transaction value of $1 million or less; and
(ii) Is not dependent on the sale of, or rental income derived from,
real estate as the primary source of repayment;
(6) A lease of real estate is entered into, unless the lease is the
economic equivalent of a purchase or sale of the leased real estate;
(7) The transaction involves an existing extension of credit at the
lending institution, provided that:
(i) There has been no obvious and material change in market
conditions or physical aspects of the property that threatens the
adequacy of the institution's real estate collateral protection after
the transaction, even with the advancement of new monies; or
(ii) There is no advancement of new monies, other than funds
necessary to cover reasonable closing costs;
(8) The transaction involves the purchase, sale, investment in,
exchange of, or extension of credit secured by, a loan or interest in a
loan, pooled loans, or interests in real property, including mortgaged-
backed securities, and each loan or interest in a loan, pooled loan, or
real property interest met FDIC regulatory requirements for appraisals
at the time of origination;
(9) The transaction is wholly or partially insured or guaranteed by
a United States government agency or United States government sponsored
agency;
(10) The transaction either:
(i) Qualifies for sale to a United States government agency or
United States government sponsored agency; or
(ii) Involves a residential real estate transaction in which the
appraisal conforms to the Federal National Mortgage Association or
Federal Home Loan Mortgage Corporation appraisal standards applicable to
that category of real estate;
(11) The regulated institution is acting in a fiduciary capacity and
is not required to obtain an appraisal under other law; or
(12) The FDIC determines that the services of an appraiser are not
necessary in order to protect Federal financial and public policy
interests in real estate-related financial transactions or to protect
the safety and soundness of the institution.
(b) Evaluations required. For a transaction that does not require
the services of a State certified or licensed appraiser under paragraph
(a)(1), (a)(5) or (a)(7) of this section, the institution shall obtain
an appropriate evaluation of real property collateral that is consistent
with safe and sound banking practices.
(c) Appraisals to address safety and soundness concerns. The FDIC
reserves the right to require an appraisal under this part whenever the
agency believes it is necessary to address safety and soundness
concerns.
(d) Transactions requiring a State certified appraiser--(1) All
transactions of $1,000,000 or more. All federally related transactions
having a transaction value of $1,000,000 or more shall require an
appraisal prepared by a State certified appraiser.
(2) Nonresidential transactions of $250,000 or more. All federally
related transactions having a transaction value of $250,000 or more,
other than those involving appraisals of 1-to-4 family residential
properties, shall require an appraisal prepared by a State certified
appraiser.
(3) Complex residential transactions of $250,000 or more. All
complex 1-to-4 family residential property appraisals rendered in
connection with federally related transactions shall require a State
certified appraiser if the transaction value is $250,000 or more. A
regulated institution may presume that appraisals of 1-to-4 family
residential properties are not complex, unless the institution has
readily available information that a given appraisal will be complex.
The regulated institution shall be responsible for making the final
determination of whether the appraisal is complex. If during the course
of the appraisal a licensed appraiser identifies factors that would
result in the property, form of ownership, or market conditions being
considered atypical, then either:
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(i) The regulated institution may ask the licensed appraiser to
complete the appraisal and have a certified appraiser approve and co-
sign the appraisal; or
(ii) The institution may engage a certified appraiser to complete
the appraisal.
(e) Transactions requiring either a State certified or licensed
appraiser. All appraisals for federally related transactions not
requiring the services of a State certified appraiser shall be prepared
by either a State certified appraiser or a State licensed appraiser.
(f) Effective date. Regulated institutions are required to use state
certified or licensed appraisers as set forth in this section no later
than December 31, 1992, unless otherwise required by law.
[55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9050, Mar. 16, 1992; 59
FR 29501, June 7, 1994]
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Sec. 323.4 Minimum appraisal standards. |
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For federally related transactions, all appraisals shall, at a
minimum:
(a) Conform to generally accepted appraisal standards as evidenced
by the Uniform Standards of Professional Appraisal Practice (USPAP)
promulgated by the Appraisal Standards Board of the Appraisal
Foundation, 1029 Vermont Ave., NW., Washington, DC 20005, unless
principles of safe and sound banking require compliance with stricter
standards;
(b) Be written and contain sufficient information and analysis to
support the institution's decision to engage in the transaction;
(c) Analyze and report appropriate deductions and discounts for
proposed construction or renovation, partially leased buildings, non-
market lease terms, and tract developments with unsold units;
(d) Be based upon the definition of market value as set forth in
this part; and
(e) Be performed by State licensed or certified appraisers in
accordance with requirements set forth in this part.
[59 FR 29502, June 7, 1994] |
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Sec. 323.5 Appraiser independence. |
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(a) Staff appraisers. If an appraisal is prepared by a staff
appraiser, that appraiser must be independent of the lending,
investment, and collection functions and not involved, except as an
appraiser, in the federally related transaction, and have no direct or
indirect interest, financial or otherwise, in the property. If the only
qualified persons available to perform an appraisal are involved in the
lending, investment, or collection functions of the regulated
institution, the regulated institution shall take appropriate steps to
ensure that the appraisers exercise independent judgment and that the
appraisal is adequate. Such steps include, but are not limited to,
prohibiting an individual from performing appraisals in connection with
federally related transactions in which the appraiser is otherwise
involved and prohibiting directors and officers from participating in
any vote or approval involving assets on which they performed an
appraisal.
(b) Fee appraisers. (1) If an appraisal is prepared by a fee
appraiser, the appraiser shall be engaged directly by the regulated
institution or its agent, and have no direct or indirect interest,
financial or otherwise, in the property or the transaction.
(2) A regulated institution also may accept an appraisal that was
prepared by an appraiser engaged directly by another financial services
institution, if:
(i) The appraiser has no direct or indirect interest, financial or
otherwise, in the property or the transaction; and
(ii) The regulated institution determines that the appraisal
conforms to the requirements of this part and is otherwise acceptable.
[55 FR 33888, Aug. 20, 1990, as amended by 59 FR 29502, June 7, 1994] |
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Sec. 323.6 Professional association
membership; competency. |
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(a) Membership in appraisal organizations. A State certified
appraiser or a State licensed appraiser may not be excluded from
consideration for an assignment for a federally related transaction
solely by virtue of membership or lack of membership in any particular
appraisal organization.
(b) Competency. All staff and fee appraisers performing appraisals
in connection with federally related transactions must be State
certified or licensed, as appropriate. However, a
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State certified or licensed appraiser may not be considered competent
solely by virtue of being certified or licensed. Any determination of
competency shall be based upon the individual's experience and
educational background as they relate to the particular appraisal
assignment for which he or she is being considered.
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Sec. 323.7 Enforcement. |
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Institutions and institution-affiliated parties, including staff
appraisers and fee appraisers, may be subject to removal and/or
prohibition orders, cease and desist orders, and the imposition of civil
money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C.
1811 et seq., as amended, or other applicable law.
PART 324 [RESERVED]
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