Page 2
The Banker’s Advocate
State Bank Department
stand the nature of the
regulated institution to use
Number of problems and to assign an
an existing appraisal to
appropriate classification.
support a subsequent
Hot
comments on
revisions sent
The institution would be
transaction if the institu-
Topic
to agencies
given “a reasonable
tion documents that the


amount of time” to obtain
existing value estimate
the new appraisal or
remains valid,” according
Continued from Page 1
FDIC

96
evaluation.
to “Appraisal Regulations

Fed The 1994 guidelines
Frequently Asked Ques-
Comments on the pro-

84
NCUA
addressed this issue in
tions” (FIL-20-2005).
posed guidelines were

83
only one paragraph, as
Also retained in the pro-
due by January 20, 2009. OCC
follows:
posed guidelines is an ex-
The five federal bank,

99
OTS
“The institution should
emption under which an
thrift and credit union

70
also develop criteria for
evaluation – not an ap-
regulatory agencies re- Total 432
obtaining reappraisals or
praisal – generally is per-
ceived 432 comments,
reevaluations as part of a
mitted for a transaction
which are being reviewed
program of prudent port-
that involves an existing
by an interagency work-
 As reliance on collat-
folio review and monitor-
extension of credit at the
ing group.
eral becomes more impor-
ing techniques – even
lending institution, includ-
The Notice includes a
tant, an institution’s poli-
when additional financing
ing a renewal or refinanc-
discussion of the pro-
cies and procedures
is not being contemplated.
ing, when either:
posed major revisions to
should ensure that man-
Examples of such types of
 No new funds are ad-
sections of the 1994
agement has timely infor-
situations include large
vanced, other than for
guidelines.
mation to assess collateral.
credit exposures and out-
reasonable closing costs.
A section in the pro-
 In establishing criteria,
of-area loans.”  No obvious and mate-
posed guidelines,
an institution should con-
Separately, the proposed rial changes in market
“Portfolio Monitoring
sider the appropriateness
guidelines mirror the 1994 conditions or the physical
and Updating Collateral
of the valuation tool or
guidance in the section, aspects of the property
Valuations,” covers those
methodology; property
“Validity of Appraisals threaten the institution’s
situations in which there
type; current market con-
and Evaluations.” real estate protection after
is not a “subsequent”
ditions; current use of the
According to the pro- the transaction.
transaction. A
property; and the age of
posed guidelines, the fed- As always, bankers are
“subsequent” transaction
the original appraisal or
eral regulatory agencies encouraged to use their
involves an existing ex-
evaluation.
would continue to allow judgment in those cases
tension of credit at the
 For a transaction oth- an institution to use an covered by exemption but
lending institution.
erwise exempt from regu- existing appraisal or that might warrant a
“A prudent portfolio
latory appraisal require- evaluation to support a higher degree of risk man-
monitoring program
ments, an institution subsequent transaction. agement.
should include criteria
should establish policies Accordingly, an institu- Two caveats:
for determining when to
for obtaining appraisals or tion should establish crite-  The revisions to the
obtain a new appraisal or
evaluations “to meet risk ria for assessing whether 1994 guidelines are only
evaluation in accordance
management objectives.” an existing appraisal or proposed at this point and
with the Agencies’ real
 An examiner has the evaluation remains valid. are subject to change prior
estate lending standards,”
right to require an institu- “Such criteria will vary to publication as a “Final
the proposed guidelines
tion to obtain a new ap- depending upon the con- Notice” in the Federal
state.
praisal or evaluation based dition of the property and Register.
These criteria may be
on safety-and-soundness the marketplace, and the  When a question
based on “changes in
concerns. For example, in nature of the transaction,” about the guidelines does
market conditions or
the case of a problem real the proposed guidelines arise, bankers are urged to
deterioration in the credit
estate credit, the reviewing state. call their regulator, error
since origination,” ac-
examiner can require a However, the burden of on the side of caution and
cording to the guidelines.
new appraisal or evalua- proof falls on the institu- document justification for
In addition, the guide-
tion if additional informa- tion in these cases. a decision in the perma-
lines state:
tion is needed to under- “The agencies allow a nent loan file.
March 31, 2009
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