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2000 - Rules and Regulations
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PART 323APPRAISALS
Sec. 323.1
Authority, purpose, and scope.
323.2
Definitions.
323.3
Appraisal not required; transactions requiring a state certified or
licensed appraiser.
323.4
Minimum appraisal standards.
323.5
Appraiser independence.
323.6
Professional association membership; competency.
323.7
Enforcement.
AUTHORITY: 12 U.S.C. 1818, 1819 ["Seventh" and
"Tenth"], and 3331--3352.
SOURCE: The provisions of this Part 323 appear at 55 Fed. Reg.
33888, August 20, 1990, effective September 19, 1990, except as
otherwise noted.
§ 323.1 Authority, purpose, and scope.
(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.
[Codified to 12 C.F.R. § 323.1]
§ 323.2 Definitions.
(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
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(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;
(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.
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[Codified to 12 C.F.R. § 323.2]
[Source: Section 323.2 amended at 57 Fed. Reg. 9049,
March 16, 1992; 59 Fed. Reg. 29501, June 7, 1994]
§ 323.3 Appraisal not required; transactions requiring a state
certified or licensed appraiser.
(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;
(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) Nonresidental transactions of $250,000 or
more. All federally related transactions having a transaction
value of $250,000 or more, other than those involving
appraisals
{{8-30-02 p.2240.02}}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:
(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.
[Codified to 12 C.F.R. § 323.3]
[Source: Section 323.3 amended at 57 Fed. Reg. 9050,
March 16, 1992; 59 Fed. Reg. 29501, June 7, 1994]
§ 323.4 Minimum appraisal standards.
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.
[Codified to 12 C.F.R. § 323.4]
[Source: Section 323.4 amended at 57 Fed. Reg. 9050,
March 16, 1992; 59 Fed. Reg. 29502, June 7, 1994]
§ 323.5 Appraiser independence.
(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
{{8-30-02 p.2240.03}}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 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.
[Codified to 12 C.F.R. § 323.5]
[Source: Section 323.5 amended at 59 Fed. Reg. 29502,
June 7, 1994]
§ 323.6 Professional association membership; competency.
(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 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.
[Codified to 12 C.F.R. § 323.6]
§ 323.7 Enforcement.
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.
[Codified to 12 C.F.R. § 323.7]
Appendix A [Removed]
[Codified to 12 C.F.R. Part 323, Appendix A]
[Appendix A added at 55 Fed. Reg. 53612, December 31, 1990,
effective January 30, 1991; Appendix A removed at 59 Fed. Reg. 29502,
June 7, 1994]
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