Appraisals for closed-end loans during the COVID-19 times

Section 722.4 of NCUA’s regulations sets forth minimum requirements for appraisals when one is required for a loan. Recently, the compliance team at NAFCU has received some questions from members inquiring about appraisal flexibility amid the COVID-19 outbreak. Many credit unions have internal lending policies requiring appraisals (including an interior inspection) for most real estate secured loans. Credit unions with such policies may want to consider whether they are appropriate under the circumstances.

Although the U.S. Department of Homeland Security issued guidance recognizing “residential and commercial real estate services, including settlement services” as being part of the “Essential Critical Infrastructure” workforce, some states (such as New York and New Jersey) have deemed appraisers non-essential workers or have limited the ability of appraisers to leave their homes to perform an appraisal service. This has created some challenges, especially when it comes to conducting an interior inspection of a property as part of an appraisal.

Is there any flexibility?

As background, NCUA’s rule and relevant guidance does not explicitly require appraisals to include an interior inspection. NCUA expects appraisals to conform to generally accepted appraisal standards as set forth in the Uniform Standards of Professional Appraisal Practice (USPAP) , as evidenced in the 2010 interagency appraisal guidelines and in Section 722.4(a).

 

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