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Home appraisal’s ugly history and uncertain future

This is Part I of a deep dive into the home appraisal industry. Today we explore the origins of the appraisal industry and its current lack of diversity.

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MortgageAppraisals & Valuations

Credit unions can now also delay appraisals until 4 months after a mortgage closes

NCUA passes own version of federal banking rule

Federal banking regulators last week moved to allow banks to delay getting an appraisal on a property for as many as 120 days after a mortgage closes, and now, credit unions can do the same thing.

In order to “allow credit unions to expeditiously extend liquidity to creditworthy households and businesses in light of recent strains on the U.S. economy as a result of the National Emergency declared in connection with coronavirus disease,” the National Credit Union Administration will allow credit unions to postpone obtaining an appraisal until four months after a mortgage closes.

The move comes shortly after the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency changed their rules to allow for banks to push appraisals out as much as four months.

The NCUA followed suit last week, approving a “substantially identical” policy to the one passed by the federal banking regulators. The NCUA Board unanimously approved the interim final rule last week that allows a credit union to “temporarily defer certain appraisals and evaluations for up to 120 days when other alternatives are not available and when the appraisal or evaluation would delay the closing of the residential or commercial real estate loan transaction.”

The NCUA’s policy was published in the Federal Register on Tuesday, making its policy official as well.

As with the bank rule, the credit union rule only applies to loans held in credit unions’ portfolios.

Loans sold to or guaranteed by the Federal Housing Administration, Department of Housing and Urban Development, Department of Veterans AffairsFannie Mae or Freddie Mac will still require an appraisal before closing, per each agency’s or company’s rules.

And just as the banking regulators did, the NCUA cited a need to ensure liquidity in the mortgage market as a reason for making this change.

“Due to the impact of COVID-19, businesses and individuals have a heightened need for additional liquidity,” the NCUA said in its rule.

“Being able to quickly access equity in real estate could help address this need. However, government restrictions on non-essential movement and health and safety advisories in response to the National Emergency declared in connection with COVID-19, including those relating to social distancing, have led to complications with respect to performing and completing real property appraisals and written estimates of market value needed to comply with federal appraisal regulations,” the NCUA continued. “As a result, some borrowers may experience delays in obtaining funds needed to meet immediate and near-term financial needs.”

Therefore, the regulator is moving to allow credit unions to postpone getting an appraisal for 120 days.

But just as with the bank rule, credit unions are not permitted to waive an appraisal entirely. They are only allowed to delay it. Credit unions are also directed to ensure sound underwriting practices on the loans in question.

“Under this interim final rule, deferrals of appraisals and written estimates of market value will allow for expeditious access to credit. The deferrals, which will be temporary, are offered in response to a National Emergency,” the NCUA said. “Credit unions that defer receipt of an appraisal or written estimate of market value are still expected to conduct their lending activity consistent with safe and sound underwriting principles, such as the ability of a borrower to repay a loan and other relevant laws and regulations.”

The rule changes will expire on Dec. 31, 2020.

For much more on the NCUA’s policy, click here.

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