As Prepared for Delivery on November 21, 2019
Thank you to you and your team for all the hard work that went into this proposal. Since I assumed the chairmanship at the NCUA over seven months ago, I’ve made reforming outdated regulations a top priority. This rule continues our updates to the NCUA’s appraisal regulation and, like the other federal banking agencies, proposes to increase the appraisal threshold for residential transactions from $250,000 to $400,000.
As with other regulatory reforms, this was not an issue we approached lightly. We carefully studied market conditions, assessed industry norms and consulted with stakeholders to determine the appropriate way to proceed. That due diligence meant that we could move forward with confidence that this reform would not compromise the safety and soundness of the credit union industry.
Credit unions by and large prudently underwrite residential real estate loans. They typically use secondary market underwriting standards set by the government-sponsored enterprises. Thus, credit union lenders may continue to require appraisals on properties valued below the proposed new $400,000 threshold at their own discretion.
If this rule becomes final, credit unions will still be expected, as always, to wisely manage risk in their loan portfolios and to ensure they continue to follow appropriate lending practices. In fact, credit unions are already well known for their prudent approach to underwriting residential real estate loans.
Many credit union residential mortgage loans are made under federal or state guarantee programs like the Federal Housing Administration, Department of Veterans Affairs, Rural Housing Service or Farm Service Agency. Loans issued under these programs are already largely exempt from the NCUA’s appraisal requirements. Thus, the proposed threshold increase will not even be applicable to a portion of credit union mortgage assets.
This appraisal threshold was last raised in 2002. But in the ensuing 17 years, the housing market has experienced increased demand, tight supplies, and increasing home values.
This rule does not undermine consumer protection. The CFPB –the agency primarily charged with consumer protection—has approved the $400,000 residential real estate appraisal threshold recently finalized by the other banking agencies.
This a reasonable, common sense adjustment that will benefit both lenders and borrowers by lowering costs and reducing the time needed to complete residential lending transactions.