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Financial Services Law Insights and Observations

Federal Banking Agencies Issue Proposed Rulemaking to Amend Appraisal Requirement Threshold for Commercial Real Estate Transactions

Agency Rule-Making & Guidance Federal Reserve FDIC OCC Commercial Lending Appraisal

Agency Rule-Making & Guidance

On July 19, the Federal Reserve Board, the FDIC, and the OCC issued a joint notice of proposed rulemaking to raise the threshold for commercial real estate transactions requiring an appraisal from $250,000 to $400,000 in an effort to reduce costs and streamline transactions. The proposal was issued, in part, in response to concerns raised by financial industry representatives during the Economic Growth and Regulatory Paperwork Reduction Act review process that adjustments have not been made to the current thresholds despite increases in property values and a scarcity of appraisers in rural areas. FDIC Chairman Martin J. Gruenberg issued a statement announcing that the proposal will significantly reduce the number of transactions requiring an appraisal. Evaluations, rather than appraisals, would now be required for commercial real estate transactions at or below the proposed threshold.

Comments on the proposed rule will be accepted for 60 days from date of publication in the Federal Register.