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Appraisal exemptions would be extended under NCUA plan
ALEXANDRIA, Va. (6/20/14)--The National Credit Union Administration has issued a proposal to revise two of its regulations regarding appraisals. The amendments would equalize the NCUA and banking regulatory agencies' in treatment of exemptions from a requirement to obtain an appraisal for certain extensions of credit transactions.

This change is aimed at facilitating the ability of federally insured credit unions to modify a real estate-related loan held by the credit union more easily so they can better assist borrowers in times of a distressed housing market.

"Like our rule on Troubled Debt Restructuring, this proposed rule is an example of how NCUA is working to help keep credit union members in their homes," said NCUA Chair Debbie Matz said. "The proposed rule both gives relief to homeowners and reduces unnecessary paperwork for credit unions."

The proposal would eliminate a redundant requirement that federal credit unions make available to any requesting member a copy of an appraisal used in connection with that member's application for a first-lien loan on a dwelling. It would narrow the scope of this requirement to cover only loans secured by a subordinate lien on a dwelling. 

Federal credit unions would still be subject to the requirement that all creditors must automatically provide applicants with free copies of all appraisals and other written evaluations developed in connection with an application for a loan to be secured by a first lien on a dwelling. 

The proposed rule also requires the appraisal to be available for a period of 25 months after the applicant has received notice from the credit union of the action taken on the application for a loan secured by a subordinate lien on a dwelling.

The second proposed change would exempt a transaction from the appraisal requirement involving an existing extension of credit at the lending federally insured credit union, provided that: 
  • There is no advancement of new monies, other than funds necessary to  cover reasonable closing costs; or
  • There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the credit union's real estate collateral protection after the transaction, even with the advancement of new monies. 
The board is allowing a 60-day comment period for the proposed rule after it is published in the Federal Register. The Credit Union National Association will post a Regulatory Call to Action to seek feedback from credit unions on this proposed rule.

Use the resource link below for more information. Also, see related stories from the NCUA open meeting: NCUA proposes to allow FCUs to securitize own loans; New rule will reduce burdens on voluntary liquidations of FCUs; and, Mainstreet cites regulatory relief, desire for increased service, for charter change.

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