[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR614.4265]



[Page 120-121]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 614_LOAN POLICIES AND OPERATIONS--Table of Contents

 

              Subpart F_Collateral Evaluation Requirements

 

Sec. 614.4265  Real property evaluations.



    (a) Real estate shall be valued on the basis of market value.

    (b) Market value shall be determined by a reasonable valuation 

method that:

    (1) Considers the income capitalization approach, the sales 

comparison approach, and/or the cost approach, as appropriate, to 

determine market value;

    (2) Explains and documents the elimination of any approach not used.



[[Page 121]]



    (3) Reconciles the market values of the applicable approaches; and

    (c) Where real estate appraisals or real estate collateral 

valuations for business loans in excess of $250,000 that would not 

otherwise be exempted under Sec. 614.4260(c) are required, such 

evaluations shall be completed in accordance with the USPAP and shall 

include a legal description of the subject property.

    (d) At a minimum, the institution shall develop and document the 

evaluation of the income and debt servicing capacity for the property 

and operation where the transaction value exceeds $250,000 and the real 

estate taken as collateral:

    (1) Is an integral part of and supports the principal source of loan 

repayment; or

    (2) Is not an integral part of and does not support the principal 

source of loan repayment, but has demonstrable rental market appeal, is 

statutorily required, and fully or partially constitutes an integral 

part of an agricultural or aquatic operation.

    (e) The income-earning and debt-servicing capacity established under 

paragraph (d) of this section on such properties shall be documented as 

part of the credit analysis for any related loan action, whether or not 

the income capitalization approach value is used as the basis for the 

market value conclusion stated in the evaluation report.

    (f) Collateral closely aligned with, an integral part of, and 

normally sold with real estate (fixtures) may be included in the value 

of the real estate. All other collateral associated with the real 

estate, but designated as personal property, shall be evaluated as 

personal property in accordance with Sec. Sec. 614.4250 and 614.4266.

    (g) The evaluation shall properly identify all nonagricultural 

influences, including, but not limited to, urban development, mineral 

deposits, and commercial building development value, and the reasoning 

supporting the evaluator's highest and best-use conclusion.

    (h) Where an evaluation of real property is completed by a fee 

appraiser, as defined in Sec. 614.4240(g), the institution's standards 

shall include provisions for periodic collateral inspections performed 

by the institution's account officer or appropriate designee.