[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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\7\ 12 U.S.C. 3339.
\8\ Id.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\19\ See 12 U.S.C. 1831p-1.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\20\ See OCC: 12 CFR 3.32(g); Board: 12 CFR 217.32(g); and FDIC:
12 CFR 324.32(g).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\25\ Press Release: Interagency Statement on Appraisals and
Evaluations for Real Estate Related Transactions Affected by the
Coronavirus (Apr. 14, 2020).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\26\ 5 U.S.C. 553(d).
\27\ 5 U.S.C. 553(d)(1).
---------------------------------------------------------------------------
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