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FDIC Board Approves Appraisal Threshold Increase for CRE Transactions

Posted on 3/21/2018

The FDIC board of directors yesterday approved a final rule to raise the appraisal thresholds for commercial real estate transactions from $250,000 to $500,000 -- an increase from the original proposal, which called for the appraisal threshold to be raised to $400,000. The threshold for loans secured by one-to-four family residential properties will remain at $250,000; however, residential construction loans secured by multiple one-to-four residential properties would be considered CRE transactions. The final rule must now be approved by the Federal Reserve and the OCC; once approved by the agencies, it will be effective 30 days after publication in the Federal Register.

Progress is slow and incremental, but we do want to recognize FDIC for actually listening to commentators, including NDBA and bankers, who asserted the proposed relief at $400,000 was insufficient. FDIC's positive movement also demonstrates the value of a late fall, Bismarck meeting among NDBA, North Dakota bankers, the department of financial institutions and other mortgage lenders and senior officials from FDIC, and other bank regulators. There, mortgage lenders spoke frankly about the need for relief from overly burdensome appraisal requirements and how the rules hurt potential borrowers. It is not enjoyable to write comment letters but it is good to know that sometimes, at least, our input does improve the result.

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