Dear Board of Directors and Chief Executive Officer:
On October 24, 2016, NCUA and the other federal financial institution regulatory agencies issued an exception from the appraisal requirements for all real estate-related financial transactions that require the services of an appraiser (federally related transactions) in the Louisiana parishes President Obama has designated as a major disaster area (opens new window).1 These areas qualify for special consideration as a result of recent severe storms and flooding. This exception expires December 31, 2017.
The exception provides flexibility to credit unions with loans secured by real estate located in the affected areas relative to appraisal requirements under Part 722 (opens new window) of NCUA rules and regulations. Whether or not a credit union elects to take advantage of this exception is a business decision that may be determined by a credit union on a case-by-case basis.
To qualify for the exception, a credit union must document that:
- (1) the transaction involves real property located in one of the parishes declared in the major disaster area (opens new window) by President Obama on August 14, 2016;
- (2) there is a binding commitment to fund a transaction that was entered into on or after August 14, 2016, but no later than December 31, 2017; and
- (3) the value of the real property supports the credit union’s decision to enter into the transaction. When a credit union decides to rely on the appraisal exception for a particular real estate-related transaction, the credit union should maintain sufficient documentation to estimate the collateral’s value and support the credit decision in the loan file. Credit unions should continue to extend credit on terms that are consistent with safe and sound lending principles, and such transactions will be reviewed by NCUA staff during the course of routine safety and soundness examinations.
If you have any questions or concerns about the exception described in this letter, please contact your NCUA Regional Office or state supervisory authority.
Joint release made by federal financial institution regulatory agencies include Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System.