Real Estate Appraisals

Citation85 FR 65666
Record Number2020-21563
Published date16 October 2020
SectionRules and Regulations
CourtFederal Reserve System,The Comptroller Of The Currency Office
Federal Register, Volume 85 Issue 201 (Friday, October 16, 2020)
[Federal Register Volume 85, Number 201 (Friday, October 16, 2020)]
                [Rules and Regulations]
                [Pages 65666-65672]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-21563]
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                DEPARTMENT OF THE TREASURY
                Office of the Comptroller of the Currency
                12 CFR Part 34
                [Docket No. OCC-2020-0014]
                RIN 1557-AE86
                FEDERAL RESERVE SYSTEM
                12 CFR Part 225
                [Docket No. R-1713]
                RIN 7100-AF87
                FEDERAL DEPOSIT INSURANCE CORPORATION
                12 CFR Part 323
                RIN 3064-AF48
                Real Estate Appraisals
                AGENCY: The Office of the Comptroller of the Currency, Treasury (OCC);
                the Board of Governors of the Federal Reserve System (Board); and the
                Federal Deposit Insurance Corporation (FDIC).
                ACTION: Final rule.
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                SUMMARY: The OCC, Board, and FDIC (collectively, the agencies) are
                adopting as final the interim final rule published by the agencies on
                April 17, 2020, making temporary amendments to the agencies'
                regulations requiring appraisals for certain real estate-related
                transactions. The final rule adopts the deferral of the requirement to
                obtain an appraisal or evaluation for up to 120 days following the
                closing of certain residential and commercial real estate transactions,
                excluding transactions for acquisition, development, and construction
                of real estate. Regulated institutions should make best efforts to
                obtain a credible estimate of the value of real property collateral
                before closing the loan and otherwise underwrite loans consistent with
                the principles in the agencies' Standards for Safety and Soundness and
                Real Estate Lending Standards. The agencies' final rule allows
                regulated institutions to expeditiously extend liquidity to
                creditworthy households and businesses in light of recent strains on
                the U.S. economy as a result of the coronavirus disease 2019 (COVID
                event). The final rule adopts the interim final rule with one revision
                in response to comments received by the agencies on the interim final
                rule.
                DATES: The final rule is effective October 16, 2020 through December
                31, 2020.
                FOR FURTHER INFORMATION CONTACT:
                 OCC: G. Kevin Lawton, Appraiser (Real Estate Specialist), (202)
                649-6670; Mitchell Plave, Special Counsel, (202) 649-5490; or Joanne
                Phillips, Counsel, Chief Counsel's Office (202) 649-5500; Office of the
                Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219.
                For persons who are deaf or hearing impaired, TTY users may contact
                (202) 649-5597.
                 Board: Anna Lee Hewko, Associate Director, (202) 530-6260; Teresa
                A. Scott, Manager, Policy Development Section, (202) 973-6114; Carmen
                Holly, Lead Financial Institution Policy Analyst, (202) 973-6122; Devyn
                Jeffereis, Senior Financial Institution Policy Analyst, (202) 365-2467,
                Division of Supervision and Regulation; Laurie Schaffer, Deputy General
                Counsel, (202) 452-2272; Derald Seid, Senior Counsel, (202) 452-2246;
                Trevor Feigleson, Counsel, (202) 452-3274; David Imhoff, Attorney,
                (202) 452-2249, Legal Division, Board of Governors of the Federal
                Reserve System, 20th and C Streets NW, Washington, DC 20551. For the
                hearing impaired only, Telecommunications Device for the Deaf (TDD)
                users may contact (202) 263-4869.
                 FDIC: Beverlea S. Gardner, Senior Examination Specialist, Division
                of Risk Management and Supervision, (202) 898-3640, [email protected];
                Mark Mellon, Counsel, Legal Division, (202) 898-3884; or, Lauren
                Whitaker, Senior Attorney, Legal Division, (202) 898-3872, Federal
                Deposit Insurance Corporation, 550 17th Street NW, Washington, DC
                20429. For the hearing impaired only, TDD users may contact (202) 925-
                4618.
                SUPPLEMENTARY INFORMATION:
                Table of Contents
                I. Introduction
                II. Background
                III. Overview of the Interim Final Rule and Comments
                 A. Overview of the Interim Final Rule
                 B. Public Comments
                IV. Summary of the Final Rule
                V. Administrative Law Matters
                 A. Administrative Procedure Act
                 B. Congressional Review Act
                 C. Paperwork Reduction Act
                 D. Regulatory Flexibility Act
                 E. Riegle Community Development and Regulatory Improvement Act
                of 1994
                 F. Use of Plain Language
                 G. OCC Unfunded Mandates Reform Act of 1995 Determination
                I. Introduction
                 Impact of the COVID event on appraisals and evaluations. Due to the
                impact of the COVID event \1\ and the need for businesses and
                individuals to quickly access additional liquidity, the agencies
                published an interim final rule in the Federal Register on April 17,
                2020 (interim final rule),\2\ that deferred the requirement to obtain
                an appraisal or evaluation for up to 120 days following the closing of
                a transaction for certain residential and commercial real estate
                transactions, excluding transactions for acquisition, development, and
                construction of real estate. The interim final rule allows businesses
                and individuals to quickly access liquidity from real estate equity
                during the COVID event.
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                 \1\ The coronavirus disease 2019 outbreak was declared a
                national emergency under Proclamation No. 9994, 85 FR 15337 (Mar.
                18, 2020).
                 \2\ 85 FR 21312.
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                 The agencies are adopting the interim final rule as final, with one
                revision in response to comments. The amendments to the agencies'
                appraisal regulations allow for the deferral of appraisals and
                evaluations for qualifying transactions through December 31, 2020, as
                detailed further below.
                II. Background
                 Title XI of the Financial Institutions Reform, Recovery, and
                Enforcement Act of 1989 (Title XI) \3\ directs each Federal
                [[Page 65667]]
                financial institutions regulatory agency to publish appraisal
                regulations for federally related transactions within its
                jurisdiction.\4\ The purpose of Title XI is to protect federal
                financial and public policy interests \5\ in real estate-related
                transactions by requiring that real estate appraisals used in
                connection with federally related transactions (Title XI appraisals)
                are performed in writing, in accordance with uniform standards, by
                individuals whose competency has been demonstrated and whose
                professional conduct will be subject to effective supervision.\6\
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                 \3\ 12 U.S.C. 3331 et seq.; Public Law 101-73, 103 Stat. 183
                (1989).
                 \4\ The term ``Federal financial institutions regulatory
                agencies'' means the Board, the FDIC, the OCC, the National Credit
                Union Administration, and, formerly, the Office of Thrift
                Supervision. 12 U.S.C. 3350(6).
                 \5\ These federal financial and public policy interests include
                those stemming from the federal government's roles as regulator and
                deposit insurer of financial institutions that engage in real estate
                lending and investment, guarantor or lender on mortgage loans, and
                as a direct party in real estate-related financial transactions.
                These interests have been described in predecessor legislation and
                accompanying Congressional reports. See Real Estate Appraisal Reform
                Act of 1988, H.R. Rep. No. 100-1001, pt. 1, at 19 (1988); 133 Cong.
                Rec. 33047-33048 (1987).
                 \6\ 12 U.S.C. 3331.
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                 Title XI directs the agencies to prescribe appropriate standards
                for Title XI appraisals under the agencies' respective
                jurisdictions.\7\ At a minimum, Title XI provides that a Title XI
                appraisal must be: (1) Performed in accordance with the Uniform
                Standards of Professional Appraisal Practice (USPAP); (2) a written
                appraisal, as defined by Title XI; and (3) subject to appropriate
                review for compliance with USPAP.\8\ While appraisals ordinarily are
                completed before a lender and borrower close a real estate transaction,
                there is no specific requirement in USPAP that appraisals be completed
                at a specific time relative to the closing of a transaction.
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                 \7\ 12 U.S.C. 3339.
                 \8\ Id.
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                 All federally related transactions must have Title XI appraisals.
                Title XI defines a federally related transaction as a real estate-
                related financial transaction \9\ that the agencies or a financial
                institution regulated by the agencies engages in or contracts for, that
                requires the services of an appraiser.\10\ The agencies have authority
                to determine those real estate-related financial transactions that do
                not require the services of an appraiser and thus are not required to
                have Title XI appraisals.\11\ The agencies have exercised this
                authority by exempting certain categories of real estate-related
                financial transactions from the agencies' appraisal requirements.\12\
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                 \9\ 12 U.S.C. 3350(5). A real estate-related financial
                transaction is defined as any transaction that involves: (i) The
                sale, lease, purchase, investment in or exchange of real property,
                including interests in property, or financing thereof; (ii) the
                refinancing of real property or interests in real property; and
                (iii) the use of real property or interests in property as security
                for a loan or investment, including mortgage-backed securities.
                 \10\ 12 U.S.C. 3350(4).
                 \11\ Real estate-related financial transactions that the
                agencies have exempted from the appraisal requirement are not
                federally related transactions under the agencies' appraisal
                regulations.
                 \12\ See OCC: 12 CFR 34.43(a); Board: 12 CFR 225.63(a); FDIC: 12
                CFR 323.3(a). The agencies have determined that these categories of
                transactions do not require appraisals by state certified or state
                licensed appraisers in order to protect federal financial and public
                policy interests or to satisfy principles of safe and sound banking.
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                 The agencies have used their safety and soundness authority to
                require evaluations for a subset of transactions for which an appraisal
                is not required.\13\ Under the appraisal regulations, for these
                transactions, financial institutions that are subject to the agencies'
                appraisal regulations (regulated institutions) must obtain an
                appropriate evaluation of real property collateral that is consistent
                with safe and sound banking practices.\14\
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                 \13\ See OCC: 12 CFR 34.43(b); Board: 12 CFR 225.63(b); and
                FDIC: 12 CFR 323.3(b). Evaluations are required for exempt
                residential and commercial loans below the dollar value thresholds
                for requiring an appraisal; exempt business loans; exempt subsequent
                transactions; and transactions subject to the rural residential
                exemption.
                 \14\ The agencies have provided guidance on appraisals and
                evaluations through the Interagency Guidelines on Appraisals and
                Evaluations. See 75 FR 77450 (Dec. 10, 2010), available at https://occ.gov/news-issuances/federal-register/2010/75fr77450.pdf.
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                 Authority to defer appraisals and evaluations. In general, the
                agencies require that Title XI appraisals for federally related
                transactions occur prior to the closing of a federally related
                transaction.\15\ The Interagency Guidelines on Appraisals and
                Evaluations provide similar guidance about evaluations.\16\ Under the
                interim final rule, deferrals of appraisals and evaluations allow for
                expeditious access to credit. The agencies authorized the deferrals,
                which are temporary, in response to the COVID event. Regulated
                institutions that defer receipt of an appraisal or evaluation are still
                expected to conduct their lending activity consistent with the
                underwriting principles in the agencies' Standards for Safety and
                Soundness \17\ and Real Estate Lending Standards \18\ that focus on the
                ability of a borrower to repay a loan and other relevant laws and
                regulations. These deferrals are not an exercise of the agencies'
                waiver authority, because appraisals and evaluations are being
                deferred, not waived. The deferrals also are not a waiver of USPAP
                requirements, given that (1) USPAP does not address the completion of
                an appraisal assignment with the timing of a lending decision; and (2)
                the deferred appraisal must be conducted in compliance with USPAP.
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                 \15\ See OCC: 12 CFR 34.42(a), 34.44(b)&(e); Board: 12 CFR
                225.62(a), 225.64(b)&(e); and FDIC: 12 CFR 323.2(a), 323.4(b)&(e)
                (requiring an appraisal to (1) contain sufficient information and
                analysis to support the institution's decision to engage in the
                transaction, and (2) be based on the definition of market value in
                the regulation, which takes into account a specified closing date
                for the transaction).
                 \16\ See 75 FR 77450 (Dec. 10, 2010), available at https://occ.gov/news-issuances/federal-register/2010/75fr77450.pdf.
                 \17\ OCC: 12 CFR part 30, appendix A; Board: 12 CFR part 208,
                appendix D-1; and FDIC: 12 CFR part 364, appendix A.
                 \18\ OCC: 12 CFR part 34, subpart D, appendix A; Board: 12 CFR
                part 208, subpart E, appendix C; and FDIC: 12 CFR part 365, subpart
                A, appendix A. Financial institutions should have a program for
                establishing the market value of real property to comply with these
                real estate lending standards, which require financial institutions
                to determine the value used in loan-to-value calculations based in
                part on a value set forth in an appraisal or an evaluation.
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                 The deferral of evaluations reflects the same considerations
                relating to the impact of the COVID event as the deferral of
                appraisals. The agencies require evaluations for certain exempt
                transactions as a matter of safety and soundness. Evaluations do not
                need to comply with USPAP but must be sufficiently robust to support a
                valuation conclusion. An evaluation can be less complex than an
                appraisal and usually takes less time to complete than an appraisal,
                and commonly involves a physical property inspection. For these
                reasons, the agencies also are using their safety and soundness
                authority \19\ to allow for deferral of evaluations.
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                 \19\ See 12 U.S.C. 1831p-1.
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                 By the end of the 120-day appraisal and evaluation deferral period
                provided by the final rule, regulated institutions must obtain
                appraisals or evaluations that are consistent with safe and sound
                banking practices, as required by the agencies' appraisal regulations.
                III. Overview of the Interim Final Rule and Comments
                A. Overview of the Interim Final Rule
                 The interim final rule allows a temporary deferral of the
                requirements for appraisals and evaluations under the agencies'
                appraisal regulations. The deferrals apply to both residential and
                commercial real estate-related financial transactions, excluding
                transactions for acquisition, development, and construction of real
                estate. The agencies are excluding these transactions because these
                loans present heightened risks not associated with the financing of
                existing real estate.
                [[Page 65668]]
                 Under the interim final rule, regulated institutions may close a
                real estate loan without a contemporaneous appraisal or evaluation,
                subject to a requirement that the institution obtain the appraisal or
                evaluation, as would have been required under the appraisal regulations
                without the deferral, within a period of 120 days after the closing of
                the transaction. While appraisals and evaluations can be deferred, the
                agencies expect regulated institutions to use best efforts and
                available information to develop a well-informed estimate of the
                collateral value of the subject property. For purposes of the risk-
                weighting of residential mortgage exposures, an institution's prudent
                underwriting estimation of the collateral value of the subject property
                will be considered to meet the agencies' appraisal and evaluation
                requirements during the deferral period.\20\ In addition, the agencies
                continue to expect regulated institutions to adhere to internal
                underwriting standards for assessing borrowers' creditworthiness and
                repayment capacity, and to develop procedures for estimating the
                collateral's value for the purposes of extending or refinancing credit.
                Transactions for acquisition, development, and construction of real
                estate are excluded because repayment of those transactions is
                generally dependent on the completion or sale of the property being
                held as collateral as opposed to repayment generated by existing
                collateral or the borrower. The agencies also expect regulated
                institutions to develop an appropriate risk mitigation strategy if the
                appraisal or evaluation ultimately reveals a market value significantly
                lower than the expected market value. A regulated institution's risk
                mitigation strategy should consider all risks that affect the
                institution's safety and soundness, balanced with mitigation of
                financial harm to COVID event affected borrowers. The temporary
                provision permitting regulated institutions to defer an appraisal or
                evaluation for eligible transactions will expire on December 31, 2020
                (a transaction closed on or before December 31, 2020, is eligible for a
                deferral), unless extended by the agencies. The agencies believe that
                the limited timeframe for the deferral strikes the right balance
                between safety and soundness and the need for immediate relief due to
                the COVID event.
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                 \20\ See OCC: 12 CFR 3.32(g); Board: 12 CFR 217.32(g); and FDIC:
                12 CFR 324.32(g).
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                B. Public Comments
                 The agencies collectively received eleven comments from trade
                associations representing banks, appraisers, and from individuals in
                response to the interim final rule. The majority of commenters
                supported the agencies' action and stated that appraisal and evaluation
                deferrals would be helpful to businesses and consumers during the COVID
                event. Commenters also requested clarification of certain aspects of
                the interim final rule. Two commenters requested that the agencies add
                a definition of acquisition, development, and construction transactions
                for purposes of this rule and that the agencies clarify risk management
                practices after the deferral period. Two commenters asked the agencies
                to reconsider the interim final rule, mainly over concern that delayed
                appraisals and evaluations might not support the related credit
                extensions and the loans would give rise to excessive leverage. One
                commenter asked the agencies to describe how appraisers should date
                deferred appraisals. One commenter asked the agencies to make the
                deferral permanent as a way to address the ongoing problem of appraiser
                shortages in rural areas.
                 Commenters in support of the interim final rule stated that it
                would provide households and businesses with needed relief during the
                COVID event. Several commenters stated the interim final rule would
                provide consumers with quick access to liquidity from real estate
                equity. Another commenter stated that flexibilities shown by the
                agencies in response to the COVID event, including the temporary
                amendment implemented by the interim final rule, would help community
                banks serve their clients and would not compromise safety and soundness
                or credit quality. Another commenter indicated the interim final rule
                would alleviate a bottleneck or freeze of appraisal and evaluation
                services in certain geographical areas. Another commenter stated that
                the interim final rule would allow banks to complete real estate
                transactions within the normal timeframes. A commenter stated that
                banks would use the deferral prudently, for creditworthy borrowers.
                Commenters also expressed support for the agencies making the interim
                final rule effective immediately.
                 Commenters who opposed the interim final rule expressed concern
                that the deferred appraisals and evaluations might not support the loan
                amount and that after the 120-day deferral period, loans would give
                rise to excessive leverage. Another expressed concern about sudden
                defaults and potential miscalculation of collateral values. Commenters
                also were concerned about professionalism in valuations, stating that
                insured professionals should be involved from the outset of real estate
                lending. Commenters also stated that a well-informed estimate of
                collateral value, as required by the interim final rule, may be
                difficult to develop for complex commercial real estate transactions.
                Definition of Acquisition, Development, and Construction
                 Two commenters requested the agencies provide clarity about the
                scope of ``acquisition, development, and construction'' transactions
                that are excluded from the interim final rule. One commenter stated
                there is confusion in the industry about the meaning of the term.
                Another commenter asked the agencies to confirm that the definition
                found in the instructions to the Federal Financial Institutions
                Examination Council (FFIEC) Schedule RC-C, Part I, ``Loan and Leases,''
                \21\ of the Consolidated Reports of Condition and Income (Call Report),
                for the three versions of the Call Report (FFIEC 031, FFIEC 041, and
                FFIEC 051), is the definition that should apply to real estate
                appraisals for purposes of ``acquisition, development, and
                construction'' in the interim final rule.
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                 \21\ See https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_202006_i.pdf. See also https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC051_202006_i.pdf.
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                 After consideration of these comments, the agencies are clarifying
                that transactions for the ``acquisition, development, and
                construction'' of real estate excluded from the 120-day deferral period
                mean, for purposes of this rule, those loans described in the
                Instructions for Schedule RC-C, ``Loans and Lease Financing
                Receivables,'' Part I, ``Loans and Leases,'' item 1.a, ``Construction,
                land development, and other land loans,'' of the Call Report. The
                instructions for Schedule RC-C describe such loans as loans secured by
                real estate made to finance (a) land development (i.e., the process of
                improving land--laying sewers, water pipes, etc.) preparatory to
                erecting new structures, (b) the on-site construction of industrial,
                commercial, residential, or farm buildings (including not only
                construction of new structures, but also additions or alterations to
                existing structures and the demolition of existing structures to make
                way for new structures), (c) loans secured by vacant land, except land
                known to be used or useable for agricultural purposes, such as crop and
                livestock production, (d) loans secured by real estate the proceeds of
                which are to be used to acquire and improve developed and undeveloped
                [[Page 65669]]
                property, and (e) loans made under Title I or Title X of the National
                Housing Act that conform to the definition of construction stated above
                and that are secured by real estate. This is consistent with the
                agencies' intent in excluding certain ``acquisition, development, and
                construction'' transactions from the 120-day deferral period, and
                reflects institutions' routine reporting of such assets for purposes of
                the Call Report.
                Managing Loans Using COVID Event Flexibilities
                 One commenter requested that the agencies clarify post-crisis
                expectations for managing loans for which regulatory flexibilities have
                been used. Generally, the agencies expect that, after the COVID event,
                banks should continue to adhere to practices consistent with the
                established safety and soundness standards and should refer to risk
                management guidance for managing loans that have been issued during the
                COVID event. Existing flexibilities in appraisal standards and the
                interagency appraisal regulations are described in the Interagency
                Statement on Appraisals and Evaluations for Real Estate Related
                Financial Transactions Affected by the Coronavirus.\22\ Institutions
                should also consider the Joint Statement on Additional Loan
                Accommodations Related to COVID-19 \23\ (Joint Statement), issued by
                the FFIEC member agencies.\24\ The Joint Statement provides guidance on
                managing loans as they approach the end of COVID event-related
                accommodation periods. The Joint Statement also provides guidance on
                offering additional accommodations.
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                 \22\ See Interagency Statement on Appraisals and Evaluations for
                Real Estate Related Transactions Affected by the Coronavirus (Apr.
                14, 2020), available at https://www.occ.gov/news-issuances/news-releases/2020/nr-ia-2020-54.html.
                 \23\ Joint Statement on Additional Loan Accommodations Related
                to COVID-19, OCC Bulletin 2020-72; Board SR Letter 20-18; FDIC
                Financial Institution Letter FIL-74-2020.
                 \24\ The FFIEC is composed of the following: a member of the
                Board, appointed by the Chairman of the Board; the Chairman of the
                FDIC; the Chairman of the National Credit Union Administration; the
                Comptroller of the OCC; the Director of the Bureau of Consumer
                Financial Protection; and, the Chairman of the State Liaison
                Committee.
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                 Commenters also requested that the agencies provide a remedy for
                loans with deferred appraisals when the appraised value is lower than
                expected. The agencies did not prescribe methods or documentation
                standards for valuations estimated during the deferral period, but
                prudent institutions should retain information that was used to support
                a best estimate. Institutions should continue to develop a loan-to-
                value estimate in accordance with real estate lending standards and
                overall standards for safety and soundness. Some examples of
                information that may help to develop an informed estimate are existing
                appraisals, tax assessed values, comparable sales, and lender
                estimates. As stated in the interim final rule, the agencies expect
                each institution to develop an appropriate risk mitigation strategy if
                the appraisal or evaluation ultimately determines a market value for a
                property that is significantly lower than expected when the loan was
                made. Appropriate risk mitigation strategies may vary based on
                circumstances and borrower. The Joint Statement clarifies that a
                reasonable accommodation may not necessarily result in an adverse risk
                rating solely because of a decline in the value of underlying
                collateral, provided that the borrower has the ability to perform
                according to the terms of the loan. However, institutions should
                recognize a heightened degree of risk if the subsequently obtained
                appraisal or evaluation ultimately reveals a market value significantly
                lower than the expected market value and take appropriate action to
                mitigate the risk.
                Other Expectations for Deferred Appraisals
                 A commenter requested guidance on what effective date appraisers
                should use for appraisals that are deferred for 120 days. The agencies
                continue to leave the effective dates for these transactions to the
                discretion of the bank as established by the scope of work of the
                appraisal engagement. Another commenter suggested the agencies tailor
                the interim final rule to different types of real estate or based on
                the price of the property. Another commenter requested the agencies
                make the changes in the interim final rule and the Interagency
                Statement on Appraisals and Evaluations for Real Estate Related
                Transactions Affected by the Coronavirus \25\ permanent. The agencies
                have no plans to extend or change the interim final rule at this time
                but will continue to consider flexibilities as needed while supporting
                safe and sound collateral valuation practices during and after the
                COVID event.
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                 \25\ Press Release: Interagency Statement on Appraisals and
                Evaluations for Real Estate Related Transactions Affected by the
                Coronavirus (Apr. 14, 2020).
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                IV. Summary of the Final Rule
                 For the reasons discussed above, the agencies are adopting as final
                the interim final rule with one revision, which is the clarification of
                the meaning of ``acquisition, development, and construction loans.''
                Accordingly, under the final rule, regulated institutions may defer
                required appraisals and evaluations for up to 120 days for all
                residential and commercial real estate-secured transactions, excluding
                transactions for acquisition, development, and construction of real
                estate, which mean, for purposes of this rule, loans secured by real
                estate made to finance (a) land development (i.e., the process of
                improving land--laying sewers, water pipes, etc.) preparatory to
                erecting new structures, (b) the on-site construction of industrial,
                commercial, residential, or farm buildings (including not only
                construction of new structures, but also additions or alterations to
                existing structures and the demolition of existing structures to make
                way for new structures), (c) loans secured by vacant land, except land
                known to be used or useable for agricultural purposes, such as crop and
                livestock production, (d) loans secured by real estate the proceeds of
                which are to be used to acquire and improve developed and undeveloped
                property, and (e) loans made under Title I or Title X of the National
                Housing Act that conform to the definition of construction stated above
                and that are secured by real estate.
                 The temporary provision allowing regulated institutions to defer
                appraisals or evaluations for covered transactions will expire on
                December 31, 2020, unless extended by the agencies. As with the interim
                final rule, this final rule does not revise any of the existing
                appraisal exceptions or any other requirements with respect to the
                performance of evaluations. The agencies expect all appraisals,
                including deferred appraisals, to comply with USPAP, as issued by the
                Appraisal Standards Board of the Appraisal Foundation.
                V. Administrative Law Matters
                A. Administrative Procedure Act
                 The Administrative Procedure Act (APA) generally requires that a
                final rule be published in the Federal Register no less than 30 days
                before its effective date except for (1) substantive rules, which grant
                or recognize an exemption or relieve a restriction; (2) interpretative
                rules and statements of policy; or (3) as otherwise provided by the
                agency for good cause.\26\ Because the final rule relieves a
                restriction, the final rule is exempt from the APA's delayed effective
                date requirement.\27\ Additionally, the agencies find good cause to
                publish the final rule with an
                [[Page 65670]]
                immediate effective date. The agencies believe that the public interest
                is best served by implementing the final rule as soon as possible. As
                discussed above, recent events have suddenly and significantly affected
                global economic activity, increasing businesses' and households' need
                to have timely access to liquidity from real estate equity. In
                addition, the spread of COVID-19 has greatly increased the difficulty
                of performing real estate appraisals and evaluations in a timely
                manner. The relief provided by the final rule will continue to allow
                regulated institutions to better focus on supporting lending to
                creditworthy households and businesses in light of recent strains on
                the U.S. economy as a result of COVID-19, while reaffirming the safety
                and soundness principle that valuation of collateral is an essential
                part of the lending decision. Finally, the agencies believe that
                implementing the final rule as soon as possible, with its clarifying
                language, is consistent with the agencies' intent to continue to grant
                expedited relief to the regulated entities. Therefore, the final rule
                will become effective October 16, 2020 through December 31, 2020.
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                 \26\ 5 U.S.C. 553(d).
                 \27\ 5 U.S.C. 553(d)(1).
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                B. Congressional Review Act
                 For purposes of Congressional Review Act, the Office of Management
                and Budget (OMB) makes a determination as to whether a final rule
                constitutes a ``major'' rule.\28\ If a rule is deemed a ``major rule''
                by the OMB, the Congressional Review Act generally provides that the
                rule may not take effect until at least 60 days following its
                publication.\29\
                ---------------------------------------------------------------------------
                 \28\ 5 U.S.C. 801 et seq.
                 \29\ 5 U.S.C. 801(a)(3).
                ---------------------------------------------------------------------------
                 The Congressional Review Act defines a ``major rule'' as any rule
                that the Administrator of the Office of Information and Regulatory
                Affairs of the OMB finds has resulted in or is likely to result in (A)
                an annual effect on the economy of $100,000,000 or more; (B) a major
                increase in costs or prices for consumers, individual industries,
                Federal, State, or local government agencies or geographic regions; or
                (C) significant adverse effects on competition, employment, investment,
                productivity, innovation, or on the ability of United States-based
                enterprises to compete with foreign-based enterprises in domestic and
                export markets.\30\
                ---------------------------------------------------------------------------
                 \30\ 5 U.S.C. 804(2).
                ---------------------------------------------------------------------------
                 As required by the Congressional Review Act, the agencies will
                submit the final rule and other appropriate reports to Congress and the
                Government Accountability Office for review.
                C. Paperwork Reduction Act
                 In accordance with the requirements of the Paperwork Reduction Act
                of 1995 \31\ (PRA), the agencies may not conduct or sponsor, and a
                respondent is not required to respond to, an information collection
                unless it displays a currently valid OMB control number. The agencies
                have reviewed this final rule and determined that it would not
                introduce any new or revise any collection of information pursuant to
                the PRA. Therefore, no submissions will be made to OMB for review.
                ---------------------------------------------------------------------------
                 \31\ 44 U.S.C. 3501-3521.
                ---------------------------------------------------------------------------
                D. Regulatory Flexibility Act
                 The Regulatory Flexibility Act (RFA) requires an agency to consider
                whether the rules it proposes will have a significant economic impact
                on a substantial number of small entities. The RFA applies only to
                rules for which an agency publishes a general notice of proposed
                rulemaking pursuant to 5 U.S.C. 553(b). Since the agencies were not
                required to issue a general notice of proposed rulemaking associated
                with the interim final rule or this final rule, no RFA is required.
                Accordingly, the agencies have concluded that the RFA's requirements
                relating to initial and final regulatory flexibility analysis do not
                apply.
                E. Riegle Community Development and Regulatory Improvement Act of 1994
                 Pursuant to section 302(a) of the Riegle Community Development and
                Regulatory Improvement Act (RCDRIA),\32\ in determining the effective
                date and administrative compliance requirements for new regulations
                that impose additional reporting, disclosure, or other requirements on
                insured depository institutions (IDIs), each Federal banking agency
                must consider, consistent with the principle of safety and soundness
                and the public interest, any administrative burdens that such
                regulations would place on depository institutions, including small
                depository institutions, and customers of depository institutions, as
                well as the benefits of such regulations. In addition, section 302(b)
                of RCDRIA requires new regulations and amendments to regulations that
                impose additional reporting, disclosure, or other new requirements on
                IDIs generally to take effect on the first day of a calendar quarter
                that begins on or after the date on which the regulations are published
                in final form.\33\ Each Federal banking agency has determined that the
                final rule would not impose any additional reporting, disclosure, or
                other new requirements on IDIs, and thus the requirements of the RCDRIA
                do not apply.
                ---------------------------------------------------------------------------
                 \32\ 12 U.S.C. 4802(a).
                 \33\ 12 U.S.C. 4802.
                ---------------------------------------------------------------------------
                F. Use of Plain Language
                 Section 722 of the Gramm-Leach-Bliley Act \34\ requires the Federal
                banking agencies to use plain language in all proposed and final rules
                published after January 1, 2000. The agencies have sought to present
                the final rule in a simple and straightforward manner and did not
                receive any comments on the use of plain language.
                ---------------------------------------------------------------------------
                 \34\ 12 U.S.C. 4809.
                ---------------------------------------------------------------------------
                G. OCC Unfunded Mandates Reform Act of 1995 Determination
                 Under the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C.
                1531 et seq., the OCC prepares a budgetary impact statement before
                promulgating a rule that includes a Federal mandate that may result in
                the expenditure by State, local, and tribal governments, in the
                aggregate, or by the private sector, of $100 million or more in any one
                year. However, the UMRA does not apply to final rules for which a
                general notice of proposed rulemaking was not published.\35\ Therefore,
                because the OCC found good cause to dispense with notice and comment
                for the interim final rule, the OCC has not prepared an economic
                analysis of the final rule under the UMRA.
                ---------------------------------------------------------------------------
                 \35\ See 2 U.S.C. 1532(a).
                ---------------------------------------------------------------------------
                List of Subjects
                12 CFR Part 34
                 Appraisal, Appraiser, Banks, banking, Consumer protection, Credit,
                Mortgages, National banks, Reporting and recordkeeping requirements,
                Savings associations, Truth in lending.
                12 CFR Part 225
                 Administrative practice and procedure, Banks, banking, Federal
                Reserve System, Capital planning, Holding companies, Reporting and
                recordkeeping requirements, Securities, Stress testing.
                12 CFR Part 323
                 Banks, banking, Mortgages, Reporting and recordkeeping
                requirements, Savings associations.
                DEPARTMENT OF THE TREASURY
                Office of the Comptroller of the Currency
                12 CFR Chapter I
                Authority and Issuance
                 For the reasons set forth in the joint preamble, the OCC amends
                part 34 of
                [[Page 65671]]
                chapter I of title 12 of the Code of Federal Regulations as follows:
                PART 34--REAL ESTATE LENDING AND APPRAISALS
                0
                1. The authority citation for part 34 continues to read as follows:
                 Authority: 12 U.S.C. 1 et seq., 25b, 29, 93a, 371, 1462a, 1463,
                1464, 1465, 1701j-3, 1828(o), 3331 et seq., 5101 et seq., and
                5412(b)(2)(B) and 15 U.S.C. 1639h.
                0
                2. Section 34.43 is amended by revising paragraph (f) to read as
                follows:
                Sec. 34.43 Appraisals required; transactions requiring a State
                certified or licensed appraiser.
                * * * * *
                 (f) Deferrals of appraisals and evaluations for certain residential
                and commercial transactions--(1) 120-day grace period. The completion
                of appraisals and evaluations required under paragraphs (a) and (b) of
                this section may be deferred up to 120 days from the date of closing.
                 (2) Covered transactions. The deferrals authorized under paragraph
                (f)(1) of this section apply to all residential and commercial real
                estate-secured transactions, excluding transactions for the
                acquisition, development, and construction of real estate which, for
                purposes of this rule, mean those loans described in paragraphs
                (f)(2)(i) through (iv) of this section. The term ``construction'' as
                used in this paragraph (f)(2) includes not only construction of new
                structures, but also additions or alterations to existing structures
                and the demolition of existing structures to make way for new
                structures. The following loan transactions are excluded from the
                deferrals authorized under paragraph (f)(1) of this section:
                 (i) Loans secured by real estate made to finance:
                 (A) Land development (such as the process of improving land--laying
                sewers, water pipes, etc.) preparatory to erecting new structures; or
                 (B) The on-site construction of industrial, commercial,
                residential, or farm buildings;
                 (ii) Loans secured by vacant land (except land known to be used or
                usable for agricultural purposes);
                 (iii) Loans secured by real estate to acquire and improve developed
                or undeveloped property; and
                 (iv) Loans made under Title I or Title X of the National Housing
                Act that:
                 (A) Conform to the definition of ``construction'' as defined in
                paragraph (f)(2) of this section; and
                 (B) Are secured by real estate.
                 (3) Sunset. The appraisal and evaluation deferrals authorized by
                paragraph (f) of this section will expire for transactions closing
                after December 31, 2020.
                Federal Reserve Board
                12 CFR Chapter II
                Authority and Issuance
                 For the reasons set forth in the joint preamble, the Board amends
                part 225 of chapter II of title 12 of the Code of Federal Regulations
                as follows:
                PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
                (REGULATION Y)
                0
                3. The authority citation for part 225 continues to read as follows:
                 Authority: 12 U.S.C. 1817(j)(13), 1818, 1828(o), 1831i, 1831p-1,
                1843(c)(8), 1844(b), 1972(1), 3106, 3108, 3310, 3331-3351, 3906,
                3907, and 3909; 15 U.S.C. 1681s, 1681w, 6801 and 6805.
                0
                4. Section 225.63 is amended by revising paragraph (f) to read as
                follows:
                Sec. 225.63 Appraisals required; transactions requiring a State
                certified or licensed appraiser.
                * * * * *
                 (f) Deferrals of appraisals and evaluations for certain residential
                and commercial transactions--(1) 120-day grace period. The completion
                of appraisals and evaluations required under paragraphs (a) and (b) of
                this section may be deferred up to 120 days from the date of closing.
                 (2) Covered transactions. The deferrals authorized under paragraph
                (f)(1) of this section apply to all residential and commercial real
                estate-secured transactions, excluding transactions for the
                acquisition, development, and construction of real estate which, for
                purposes of this rule, mean those loans described in paragraphs
                (f)(2)(i) through (iv) of this section. The term ``construction'' as
                used in this paragraph (f)(2) includes not only construction of new
                structures, but also additions or alterations to existing structures
                and the demolition of existing structures to make way for new
                structures. The following loan transactions are excluded from the
                deferrals authorized under paragraph (f)(1) of this section:
                 (i) Loans secured by real estate made to finance:
                 (A) Land development (such as the process of improving land--laying
                sewers, water pipes, etc.) preparatory to erecting new structures; or
                 (B) The on-site construction of industrial, commercial,
                residential, or farm buildings;
                 (ii) Loans secured by vacant land (except land known to be used or
                usable for agricultural purposes);
                 (iii) Loans secured by real estate to acquire and improve developed
                or undeveloped property; and
                 (iv) Loans made under Title I or Title X of the National Housing
                Act that:
                 (A) Conform to the definition of ``construction'' as defined in
                paragraph (f)(2) of this section; and
                 (B) Are secured by real estate.
                 (3) Sunset. The appraisal and evaluation deferrals authorized by
                paragraph (f) of this section will expire for transactions closing
                after December 31, 2020.
                Federal Deposit Insurance Corporation
                12 CFR Chapter III
                Authority and Issuance
                 For the reasons set forth in the joint preamble, the FDIC amends
                part 323 of chapter III of title 12 of the Code of Federal Regulations
                as follows:
                PART 323--APPRAISALS
                0
                5. The authority citation for part 323 continues to read as follows:
                 Authority: 12 U.S.C. 1818, 1819(a) (``Seventh'' and ``Tenth''),
                1831p-1 and 3331 et seq.
                0
                6. Section 323.3 is amended by revising paragraph (g) to read as
                follows:
                Sec. 323.3 Appraisals required; transactions requiring a State
                certified or licensed appraiser.
                * * * * *
                 (g) Deferrals of appraisals and evaluations for certain residential
                and commercial transactions--(1) 120-day grace period. The completion
                of appraisals and evaluations required under paragraphs (a) and (b) of
                this section may be deferred up to 120 days from the date of closing.
                 (2) Covered transactions. The deferrals authorized under paragraph
                (g)(1) of this section apply to all residential and commercial real
                estate-secured transactions, excluding transactions for the
                acquisition, development, and construction of real estate which, for
                purposes of this rule, mean those loans described in paragraphs
                (g)(2)(i) through (iv) of this section. The term ``construction'' as
                used in this paragraph (g)(2) includes not only construction of new
                structures, but also additions or alterations to existing structures
                and the demolition of existing structures to make way for new
                structures. The following loan transactions are excluded from the
                deferrals authorized under paragraph (g)(1) of this section:
                [[Page 65672]]
                 (i) Loans secured by real estate made to finance:
                 (A) Land development (such as the process of improving land--laying
                sewers, water pipes, etc.) preparatory to erecting new structures; or
                 (B) The on-site construction of industrial, commercial,
                residential, or farm buildings;
                 (ii) Loans secured by vacant land (except land known to be used or
                usable for agricultural purposes);
                 (iii) Loans secured by real estate to acquire and improve developed
                or undeveloped property; and
                 (iv) Loans made under Title I or Title X of the National Housing
                Act that:
                 (A) Conform to the definition of ``construction'' as defined in
                paragraph (g)(2) of this section; and
                 (B) Are secured by real estate.
                 (3) Sunset. The appraisal and evaluation deferrals authorized by
                this paragraph (g) will expire for transactions closing after December
                31, 2020.
                Brian P. Brooks
                Acting Comptroller of the Currency Office of the Comptroller of the
                Currency Board of Governors of the Federal Reserve System.
                Ann E. Misback,
                Secretary of the Board.
                 Federal Deposit Insurance Corporation.
                 By order of the Board of Directors.
                 Dated at Washington, DC, on or about September 15, 2020.
                James P. Sheesley,
                Assistant Executive Secretary.
                [FR Doc. 2020-21563 Filed 10-15-20; 8:45 am]
                BILLING CODE 4810-33-P 6210-01-P 6714-01-P
                

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