Real Estate Appraisals, 64945-64949 [2020-20928]

Download as PDF Federal Register / Vol. 85, No. 199 / Wednesday, October 14, 2020 / Rules and Regulations have no impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment. J. Review Under Executive Order 13211 Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use, (66 FR 28355, May 22, 2001), requires Federal agencies to prepare and submit to the Office of Information and Regulatory Affairs (OIRA), of the Office of Management and Budget (OMB), a Statement of Energy Effects for any proposed significant energy action. A ‘‘significant energy action’’ is defined as any action by an agency that promulgates or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order, (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution and use. This final rule is not a significant energy action. Accordingly, DOE has not prepared a Statement of Energy Effects. jbell on DSKJLSW7X2PROD with RULES K. Review Under the Treasury and General Government Appropriations Act, 2001 The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516, note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB’s guidelines were published at 67 FR 8452 (February 22, 2002), and DOE’s guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed this final rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines. L. Review Under the Administrative Procedure Act In accordance with 5 U.S.C. 553(b), the Administrative Procedure Act, DOE generally publishes a proposed rule and solicits public comment on it before issuing the rule in final. DOE also generally provides at least a 30-day delay in effective date for final rules VerDate Sep<11>2014 15:58 Oct 13, 2020 Jkt 253001 pursuant to 5 U.S.C. 553(d). This rulemaking, as a matter relating to grants, is exempt from the requirement to publish a notice of proposed rulemaking under 5 U.S.C. 553(a)(2). DOE, however, published this rule as an interim final rule on June 1, 2020 and allowed for public comments sixty (60) days after date of publication in the Federal Register. DOE received no comments in response to its publication of the interim final rule. DOE is waiving the 30-day delay in effective date pursuant to 5 U.S.C. 553(a)(2). M. Congressional Notification As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of this final rule prior to its effective date. The report will state that it has been determined that this final rule is not a ‘‘major rule’’ as defined by 5 U.S.C. 801(2). N. Approval by the Office of the Secretary of Energy The Secretary of Energy has approved publication of this final rule. List of Subjects in 2 CFR Part 910 Accounting, Administrative practice and procedure, Grant programs, Reporting and recordkeeping requirements. Signing Authority This document of the Department of Energy was signed on August 28, 2020, by S. Keith Hamilton, Deputy Associate Administrator for Acquisition and Project Management and Senior Procurement Executive, National Nuclear Security Administration, pursuant to delegated authority from the Administrator, National Nuclear Security Administration, and John R. Bashista, Director, Office of Acquisition Management and Senior Procurement Executive, Department of Energy, pursuant to delegated authority from the Secretary of Energy. These documents with the original signature and date are maintained by DOE/NNSA. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the Federal Register. PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 64945 Signed in Washington, DC, on September 8, 2020. Treena V. Garrett, Federal Register Liaison Officer, U.S. Department of Energy. Accordingly, the interim rule amending Chapter 9 of Title 2 of the Code of Federal Regulations which was published at 85 FR 32977 on June 1, 2020, is adopted as final without change. [FR Doc. 2020–20091 Filed 10–13–20; 8:45 am] BILLING CODE 6450–01–P NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 722 RIN 3133–AF17 Real Estate Appraisals National Credit Union Administration (NCUA). ACTION: Final rule. AGENCY: The NCUA Board (Board) is adopting as final an interim final rule to temporarily amend its regulations requiring all federally insured credit unions to provide appraisals of real estate for certain real estate related transactions. The final rule defers the requirement to obtain an appraisal or written estimate of market value 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. Credit unions 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 safety and soundness principles. The final rule allows credit unions 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 without change. The final rule is similar to a recent final rule issued by the Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (FRB); and Federal Deposit Insurance Corporation (FDIC) (collectively, the other banking agencies) that also defers 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. SUMMARY: E:\FR\FM\14OCR1.SGM 14OCR1 64946 Federal Register / Vol. 85, No. 199 / Wednesday, October 14, 2020 / Rules and Regulations The final rule is effective October 14, 2020, through December 31, 2020. FOR FURTHER INFORMATION CONTACT: Technical information: Uduak Essien, Director—Credit Markets, (703) 518– 6399, and Lou Pham, Senior Credit Specialist, (703) 548–2745, Office of Examination and Insurance. Legal information: Rachel Ackmann, Senior Staff Attorney, (703) 548–2601, and Gira Bose, Staff Attorney, (703) 518–6562, Office of General Counsel, National Credit Union Administration, each at 1775 Duke Street, Alexandria, VA 22314. DATES: SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction II. Background III. Overview of the Interim Final Rule and 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 Analysis E. Executive Order 13132 F. Assessment of Federal Regulations and Policies on Families I. Introduction jbell on DSKJLSW7X2PROD with RULES Impact of the COVID Event on Appraisals and Written Estimates of Market Value. Due to the impact of the COVID event, and the need for businesses and individuals to quickly access additional liquidity, the Board published an interim final rule in the Federal Register on April 21, 2020 (interim final rule),1 to defer the requirement to obtain an appraisal or written estimate of market value 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–19 event.2 In this final rule, the Board is adopting the interim final rule as final and without change. The amendments to the NCUA’s appraisal regulations allow for the deferral of appraisals and written estimates of market value for qualifying transactions through December 31, 2020, as detailed further below. 1 85 FR 22014 (Apr. 21, 2020). coronavirus disease 2019 outbreak was declared a national emergency under Proclamation 9994, 85 FR 15337 (Mar. 18, 2020). 2 The VerDate Sep<11>2014 15:58 Oct 13, 2020 Jkt 253001 II. Background Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI) 3 directs each Federal 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 Title XI directs the Board to prescribe appropriate standards for Title XI appraisals under its jurisdiction.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. 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 is regulated or engaged in by a federal financial institutions regulatory 3 12 U.S.C. 3331 et seq.; Public Law 101–73; 103 Stat. 183. 4 The term ‘‘Federal financial institutions regulatory agencies’’ means the FRB, 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 estaterelated 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. 7 12 U.S.C. 3339. 8 Id. 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. PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 agency and requires the services of an appraiser.10 The Board has the 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 Board has exercised this authority by exempting certain categories of real estate-related financial transactions from its appraisal requirements.12 The Board has used its safety and soundness authority to require written estimates of market value for a subset of transactions for which an appraisal is not required.13 Under the appraisal regulations, for these transactions, credit unions must obtain an appropriate written estimate of market value that is consistent with safe and sound practices.14 Authority To Defer Appraisals and Written Estimates of Market Value In general, the Board requires 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 written estimates of market value.16 Under the interim final rule, and this final rule, deferrals of appraisals and written estimates of market value allow for expeditious access to credit. The Board authorized the deferrals, which are temporary, in response to the COVID event. Credit unions that defer receipt of an appraisal or written estimate of market value are still expected to conduct their lending activity consistent with safe and sound underwriting principles, such as the ability of a borrower to repay a loan and 10 12 U.S.C. 3350(4). estate-related financial transactions that the Board has exempted from its appraisal requirement are not federally related transactions under its appraisal regulations. 12 See 12 CFR 722.3(a). The NCUA has determined that these categories of transactions do not require appraisals by state-certified or statelicensed appraisers in order to protect federal financial and public policy interests or to satisfy principles of safety and soundness. 13 See 12 CFR 722.3(d). 14 The NCUA and the other banking agencies have provided guidance on appraisals and evaluations (referred to as written estimates of market value in part 722) through the Interagency Guidelines on Appraisals and Evaluations. See 75 FR 77450 (Dec. 10, 2010), available at https://www.ncua.gov/files/ letters-credit-unions/LCU2010-23Encl.pdf. 15 See 12 CFR 722.3(a), 722.4(b)&(d) (requiring an appraisal to: (1) Contain sufficient information and analysis to support the credit union’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://www.ncua.gov/files/letters-credit-unions/ LCU2010-23Encl.pdf. 11 Real E:\FR\FM\14OCR1.SGM 14OCR1 Federal Register / Vol. 85, No. 199 / Wednesday, October 14, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES other relevant laws and regulations.17 These deferrals are not an exercise of the NCUA’s waiver authority, because appraisals and written estimate of market value 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. The deferral of written estimates of market value reflects the same considerations relating to the impact of the COVID event as the deferral of appraisals. The Board requires written estimates of market value for certain exempt transactions as a matter of safety and soundness. Written estimates of market value do not need to comply with USPAP, but must be sufficiently robust to support a valuation conclusion. A written estimate of market value can be less complex than an appraisal and usually takes less time to complete than an appraisal, but it also commonly involves a physical property inspection. For these reasons, the Board also is using its safety and soundness authority 18 to allow for deferral of written estimates of market value. By the end of the deferral period, credit unions must obtain appraisals or written estimates of market value that are consistent with safe and sound practices as required by the NCUA’s appraisal regulations. III. The Interim Final Rule and Summary of Comments The Board issued the interim final rule to allow a temporary deferral of the requirements for appraisals and written estimates of market value under the NCUA’s 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 Board is excluding transactions for acquisition, development, and construction of real estate because these loans present heightened risks not associated with the financing of existing real estate. The Board found good cause to issue the interim final rule without advance notice-and-comment procedures, but provided for a 45-day comment period. The comment period ended on June 5, 2020. The Board received five comments. Comments were received from credit union trade associations, a 17 See, 12 U.S.C. 1786(b) and (e); and 12 CFR 723.4; 12 CFR 741.3(b). 18 Id. VerDate Sep<11>2014 15:58 Oct 13, 2020 Jkt 253001 state credit union league, and an organization of state credit union supervisors. All of the commenters expressed general support for the interim final rule, and none opposed it. A few commenters suggested amendments and clarifications to the interim final rule, which are discussed in detail below. Supervisory Expectations Under the interim final rule, credit unions may close a real estate loan without a contemporaneous appraisal or written estimate of market value, subject to a requirement that credit unions obtain the appraisal or written estimate of market value, as would have been required under the appraisal regulations without the deferral, within a period of 120 days after closing of the transaction. While appraisals and written estimates of market value can be deferred, the Board expects credit unions to use best efforts and available information to develop a well-informed estimate of the collateral value of the subject property. In addition, the Board continues to expect credit unions 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. The NCUA also stated in a Letter to Credit Unions that the agency ‘‘encourages credit unions to make every effort to obtain an appraisal or written estimate of value during the early stages of a real estate loan transaction.’’ 19 Two commenters were concerned about supervisory expectations for credit unions that exercise their option to defer an appraisal or written estimate of market value. One commenter stated that the NCUA should ensure credit unions that avail themselves of the deferment period are not penalized, regardless of the steps they took to obtain an appraisal during the COVID event. The commenter suggested adopting a supervisory policy stating that when considering enforcement actions the NCUA will consider the circumstances that credit unions may face as a result of the pandemic and will be sensitive to good-faith efforts demonstrably designed to assist members. The commenter also stated that such a good-faith policy is consistent with the recent Executive 19 Residential Appraisals Threshold Increase and Other COVID–19 Related Relief Measures, Letter to Credit Unions 20–CU–10 (Apr. 2020), available at https://www.ncua.gov/regulation-supervision/ letters-credit-unions-other-guidance/residentialappraisals-threshold-increase-and-other-covid-19related-relief-measures. PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 64947 Order on regulatory relief.20 Another commenter similarly expressed concern that there is no assurance of a safe harbor for credit unions and requested further commentary or guidance to direct examiners to be flexible in working with credit unions delaying appraisals and written estimates of market value. The Board understands the difficulties caused by the COVID event and intends to be sensitive to good-faith efforts to comply with applicable rules during the pandemic. The Board also notes recent efforts to clarify post crisis expectations for managing loans for which regulatory flexibilities have been used. Generally, the Board expects that, after the COVID event, credit unions should continue to adhere to safety and soundness standards and should refer to prudent risk management guidance for managing loans that were made 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.21 Credit unions should also consider the Joint Statement on Additional Loan Accommodations Related to COVID–19 22 (Joint Statement), issued by the Federal Financial Institutions Examination Council (FFIEC) member agencies.23 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. Acquisition, Development, and Construction Loans Under the interim final rule, transactions for acquisition, development, and construction of real estate are excluded from the flexibility to defer appraisals and written estimates of market value for 120 days. One commenter requested case-by-case leeway to delay valuation for 20 Exec. Order No. 13,924, 85 FR 31353 (May 22, 2020). 21 Press Release: Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions Affected by the Coronavirus (Apr. 14, 2020). 22 Joint Statement on Additional Loan Accommodations Related to COVID–19, available at https://www.ncua.gov/files/press-releases-news/ joint-statement-additional-loanaccommodations.pdf. 23 The FFIEC is composed of the following: a member of the FRB, appointed by the Chairman of the FRB; the Chairman of the FDIC; the Chairman of the NCUA; the Comptroller of the Currency; the Director of the Bureau of Consumer Financial Protection; and, the Chairman of the State Liaison Committee. E:\FR\FM\14OCR1.SGM 14OCR1 64948 Federal Register / Vol. 85, No. 199 / Wednesday, October 14, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES acquisition, development, and construction loans as well, if, for example, additional collateral secures such borrowings and all other legal and safety and soundness requirements are met and documented. The Board does not believe it is prudent to allow deferrals of appraisals or written estimates of market value for acquisition, development, and construction loans. As discussed in the interim final rule, repayment of loans for such 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. Therefore, it would be more prudent to have a formal appraisal or written estimate of market value that can provide an accurate assessment of collateral before any credit extension is necessary for such transactions. Appraisals With Lower Valuations The interim final rule also stated that the Board expects credit unions to develop an appropriate risk mitigation strategy if the appraisal or written estimate of market value ultimately reveals a market value significantly lower than the expected market value. The interim final rule further provided that such a risk mitigation strategy should consider all risks that affect the credit union’s safety and soundness, balanced with mitigation of financial harm to COVID event affected borrowers. One commenter asked the NCUA to provide clear guidance to address instances where a final valuation differs from the initial assessment. The commenter did not believe that credit unions should be required to take any action pertaining to the borrower and the loan at issue. The Board did not prescribe methods or documentation standards for valuations estimated during the deferral period, but prudent credit unions should retain information that was used to support their estimates. Credit unions should continue to develop a loan-tovalue estimate in accordance with 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 Board expects credit unions to develop an appropriate risk mitigation strategy if the appraisal or written estimate of market value ultimately determines a market value for a property that is significantly lower than expected when the loan is made. Appropriate risk mitigation strategies may vary based on VerDate Sep<11>2014 15:58 Oct 13, 2020 Jkt 253001 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, credit unions should recognize a heightened degree of risk if the subsequently obtained appraisal or written estimate of market value ultimately reveals a market value significantly lower than the expected market value and take appropriate action to mitigate the risk. Effective Date The temporary provision permitting credit unions to defer an appraisal or written estimate of market value 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 Board. The Board believes that the limited timeframe for the deferral strikes the appropriate balance between safety and soundness and the need for immediate relief due to the COVID event. Two commenters requested an extension of the deferral period. One commenter specifically requested that the deferral period be extended through the first quarter of 2021. The commenter noted that states are in various phases of re-opening and credit unions may not have the ability to get an appraisal within the grace period based on local restrictions continuing until after the December expiration date. The commenter also noted that many credit unions were experiencing difficulties in obtaining an appraisal before the COVID event. The Board has no plans to extend the effective date of 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. Other Comments One commenter asked the NCUA to work closely with the Federal Housing Finance Agency to align real estate appraisal standards with those of the government-sponsored enterprises, Fannie Mae and Freddie Mac, and do so in a timely fashion. The Board agrees it is important to work closely with other agencies involved in the mortgage industry and align industry standards when appropriate. However, the Board notes that real estate loans that qualify for sale to Fannie Mae, Freddie Mac, and other federal agencies are exempt from the NCUA’s appraisal regulations. Credit unions that originate real estate PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 loans that qualify for this exemption should follow applicable appraisal requirements set forth by Fannie Mae, Freddie Mac, or other government agencies as appropriate.24 IV. Final Rule For the reasons discussed above, the Board is adopting the interim final rule as a final rule with no changes. Accordingly, under the final rule, credit unions may defer required appraisals and written estimates of market value for up to 120 days for all residential and commercial real estate-secured transactions, excluding transactions for acquisition, development, and construction of real estate. The temporary provision allowing credit unions to defer appraisals or written estimates of market value for covered transactions will expire on December 31, 2020, unless extended by the Board. 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 written estimates of market value. The Board expects all appraisals, including deferred appraisals, to comply with USPAP. 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.25 Because the final rule relieves a restriction, the final rule is exempt from the APA’s delayed effective date requirement.26 Additionally, as an independent basis, the NCUA finds good cause to publish the final rule with an immediate effective date. The NCUA believes 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 the needs of businesses and individuals for timely access to liquidity from equity in real estate. 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 24 12 CFR 722.3(a), Real estate related financial transactions not requiring an appraisal under this part. 25 5 U.S.C. 553(d). 26 5 U.S.C. 553(d)(1). E:\FR\FM\14OCR1.SGM 14OCR1 Federal Register / Vol. 85, No. 199 / Wednesday, October 14, 2020 / Rules and Regulations the final rule will continue to allow credit unions to better focus on supporting lending to creditworthy individuals and businesses in light of recent strains on the U.S. economy as a result of the COVID event, while reaffirming the safety and soundness principle that valuation of collateral is an essential part of the lending decision. Finally, the Board believes that implementing the final rule as soon as possible is consistent with its intent to grant expedited relief. Therefore, the final rule will become effective October 14, 2020, through December 31, 2020. B. Congressional Review Act The Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121) (SBREFA) generally provides for congressional review of agency rules.27 A reporting requirement is triggered in instances where the NCUA issues a final rule as defined by Section 551 of the APA.28 As required by SBREFA, the NCUA submitted the April 2020 interim final rule to OMB for it to determine if it was a ‘‘major rule’’ for purposes of SBREFA. OMB determined the interim final rule was not a major rule. The NCUA also filed the appropriate reports with Congress and the Government Accountability Office so this rule may be reviewed. This final rule makes no changes to the interim final rule. jbell on DSKJLSW7X2PROD with RULES C. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency by rule creates a new paperwork burden on regulated entities or modifies an existing burden.29 For purposes of the PRA, a paperwork burden may take the form of a reporting, recordkeeping, or a third-party disclosure requirement, referred to as an information collection. The NCUA may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a valid OMB control number. The information collection requirements of this part are approved under OMB control number 3133–0125, which requires that a federally insured credit union retain a record of either the appraisal or estimate, which ever applies. The deferral to obtain an appraisal or estimate will not result in a change in burden; therefore, no submission will be made to OMB for review. D. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) 30 generally requires an agency to consider whether the rule it proposes will have a significant economic impact on a substantial number of small entities. For purposes of the RFA, the Board considers credit unions with assets less than $100 million to be small entities.31 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).32 Since the NCUA was 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 Board has concluded that the RFA’s requirements relating to a final regulatory flexibility analysis do not apply. Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. The NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order to adhere to fundamental federalism principles. This final rule does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. The Board has therefore determined that this rule does not constitute a policy that has federalism implications for purposes of the executive order. F. Assessment of Federal Regulations and Policies on Families The NCUA has determined that this rule will not affect family well-being within the meaning of § 654 of the Treasury and General Government Appropriations Act, 1999, Pub. L. 105– 277, 112 Stat. 2681 (1998). List of Subjects in 12 CFR Part 722 Appraisal, Appraiser, Credit unions, Mortgages, Reporting and recordkeeping requirements, Truth in lending. U.S.C. 601 et seq. Interpretive Ruling and Policy Statement 15–1. 80 FR 57512 (Sept. 24, 2015). 32 5 U.S.C. 604(a). 31 NCUA U.S.C. 801–804. 28 5 U.S.C. 551. 29 44 U.S.C. 3507(d). VerDate Sep<11>2014 15:58 Oct 13, 2020 Jkt 253001 By the National Credit Union Administration Board on September 17, 2020. Gerard Poliquin, Secretary of the Board. For the reasons set forth in the preamble, the Board adopts the interim rule amending 12 CFR part 722, which was published at 85 FR 22014 on April 21, 2020, as final without change. ■ [FR Doc. 2020–20928 Filed 10–13–20; 8:45 am] BILLING CODE 7535–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2020–0336; Product Identifier 2020–NM–032–AD; Amendment 39–21280; AD 2020–21–07] RIN 2120–AA64 E. Executive Order 13132 30 5 27 5 64949 PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 Airworthiness Directives; Airbus SAS Airplanes Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Final rule. AGENCY: The FAA is adopting a new airworthiness directive (AD) for all Airbus SAS Model A350–941 and –1041 airplanes. This AD was prompted by a report that sticking effects have been observed affecting the breathing bag on certain passenger oxygen masks. This AD requires replacement of affected passenger oxygen masks, as specified in a European Union Aviation Safety Agency (EASA) AD, which is incorporated by reference. The FAA is issuing this AD to address the unsafe condition on these products. DATES: This AD is effective November 18, 2020. The Director of the Federal Register approved the incorporation by reference of a certain publication listed in this AD as of November 18, 2020. ADDRESSES: For material incorporated by reference (IBR) in this AD, contact the EASA, Konrad-Adenauer-Ufer 3, 50668 Cologne, Germany; phone: +49 221 8999 000; email: ADs@ easa.europa.eu; internet: www.easa.europa.eu. You may find this IBR material on the EASA website at https://ad.easa.europa.eu. You may view this IBR material at the FAA, Airworthiness Products Section, Operational Safety Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206–231–3195. SUMMARY: E:\FR\FM\14OCR1.SGM 14OCR1

Agencies

[Federal Register Volume 85, Number 199 (Wednesday, October 14, 2020)]
[Rules and Regulations]
[Pages 64945-64949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20928]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 722

RIN 3133-AF17


Real Estate Appraisals

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is adopting as final an interim final 
rule to temporarily amend its regulations requiring all federally 
insured credit unions to provide appraisals of real estate for certain 
real estate related transactions. The final rule defers the requirement 
to obtain an appraisal or written estimate of market value 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. Credit unions 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 safety and soundness principles. The final rule 
allows credit unions 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 without change. The final rule 
is similar to a recent final rule issued by the Office of the 
Comptroller of the Currency, Treasury (OCC); Board of Governors of the 
Federal Reserve System (FRB); and Federal Deposit Insurance Corporation 
(FDIC) (collectively, the other banking agencies) that also defers 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.

[[Page 64946]]


DATES: The final rule is effective October 14, 2020, through December 
31, 2020.

FOR FURTHER INFORMATION CONTACT: Technical information: Uduak Essien, 
Director--Credit Markets, (703) 518-6399, and Lou Pham, Senior Credit 
Specialist, (703) 548-2745, Office of Examination and Insurance. Legal 
information: Rachel Ackmann, Senior Staff Attorney, (703) 548-2601, and 
Gira Bose, Staff Attorney, (703) 518-6562, Office of General Counsel, 
National Credit Union Administration, each at 1775 Duke Street, 
Alexandria, VA 22314.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Background
III. Overview of the Interim Final Rule and 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 Analysis
    E. Executive Order 13132
    F. Assessment of Federal Regulations and Policies on Families

I. Introduction

Impact of the COVID Event on Appraisals and Written Estimates of Market 
Value.

    Due to the impact of the COVID event, and the need for businesses 
and individuals to quickly access additional liquidity, the Board 
published an interim final rule in the Federal Register on April 21, 
2020 (interim final rule),\1\ to defer the requirement to obtain an 
appraisal or written estimate of market value 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-19 event.\2\
---------------------------------------------------------------------------

    \1\ 85 FR 22014 (Apr. 21, 2020).
    \2\ The coronavirus disease 2019 outbreak was declared a 
national emergency under Proclamation 9994, 85 FR 15337 (Mar. 18, 
2020).
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    In this final rule, the Board is adopting the interim final rule as 
final and without change. The amendments to the NCUA's appraisal 
regulations allow for the deferral of appraisals and written estimates 
of market value 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 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\
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    \3\ 12 U.S.C. 3331 et seq.; Public Law 101-73; 103 Stat. 183.
    \4\ The term ``Federal financial institutions regulatory 
agencies'' means the FRB, 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.
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    Title XI directs the Board to prescribe appropriate standards for 
Title XI appraisals under its jurisdiction.\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 is regulated or engaged in by a 
federal financial institutions regulatory agency and requires the 
services of an appraiser.\10\ The Board has the 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 Board has exercised this authority by exempting 
certain categories of real estate-related financial transactions from 
its 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 Board 
has exempted from its appraisal requirement are not federally 
related transactions under its appraisal regulations.
    \12\ See 12 CFR 722.3(a). The NCUA has 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 
safety and soundness.
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    The Board has used its safety and soundness authority to require 
written estimates of market value for a subset of transactions for 
which an appraisal is not required.\13\ Under the appraisal 
regulations, for these transactions, credit unions must obtain an 
appropriate written estimate of market value that is consistent with 
safe and sound practices.\14\
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    \13\ See 12 CFR 722.3(d).
    \14\ The NCUA and the other banking agencies have provided 
guidance on appraisals and evaluations (referred to as written 
estimates of market value in part 722) through the Interagency 
Guidelines on Appraisals and Evaluations. See 75 FR 77450 (Dec. 10, 
2010), available at https://www.ncua.gov/files/letters-credit-unions/LCU2010-23Encl.pdf.
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Authority To Defer Appraisals and Written Estimates of Market Value

    In general, the Board requires 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 written 
estimates of market value.\16\ Under the interim final rule, and this 
final rule, deferrals of appraisals and written estimates of market 
value allow for expeditious access to credit. The Board authorized the 
deferrals, which are temporary, in response to the COVID event. Credit 
unions that defer receipt of an appraisal or written estimate of market 
value are still expected to conduct their lending activity consistent 
with safe and sound underwriting principles, such as the ability of a 
borrower to repay a loan and

[[Page 64947]]

other relevant laws and regulations.\17\ These deferrals are not an 
exercise of the NCUA's waiver authority, because appraisals and written 
estimate of market value 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 12 CFR 722.3(a), 722.4(b)&(d) (requiring an appraisal 
to: (1) Contain sufficient information and analysis to support the 
credit union'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://www.ncua.gov/files/letters-credit-unions/LCU2010-23Encl.pdf.
    \17\ See, 12 U.S.C. 1786(b) and (e); and 12 CFR 723.4; 12 CFR 
741.3(b).
---------------------------------------------------------------------------

    The deferral of written estimates of market value reflects the same 
considerations relating to the impact of the COVID event as the 
deferral of appraisals. The Board requires written estimates of market 
value for certain exempt transactions as a matter of safety and 
soundness. Written estimates of market value do not need to comply with 
USPAP, but must be sufficiently robust to support a valuation 
conclusion. A written estimate of market value can be less complex than 
an appraisal and usually takes less time to complete than an appraisal, 
but it also commonly involves a physical property inspection. For these 
reasons, the Board also is using its safety and soundness authority 
\18\ to allow for deferral of written estimates of market value.
---------------------------------------------------------------------------

    \18\ Id.
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    By the end of the deferral period, credit unions must obtain 
appraisals or written estimates of market value that are consistent 
with safe and sound practices as required by the NCUA's appraisal 
regulations.

III. The Interim Final Rule and Summary of Comments

    The Board issued the interim final rule to allow a temporary 
deferral of the requirements for appraisals and written estimates of 
market value under the NCUA's 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 Board is excluding transactions for 
acquisition, development, and construction of real estate because these 
loans present heightened risks not associated with the financing of 
existing real estate.
    The Board found good cause to issue the interim final rule without 
advance notice-and-comment procedures, but provided for a 45-day 
comment period. The comment period ended on June 5, 2020. The Board 
received five comments. Comments were received from credit union trade 
associations, a state credit union league, and an organization of state 
credit union supervisors. All of the commenters expressed general 
support for the interim final rule, and none opposed it. A few 
commenters suggested amendments and clarifications to the interim final 
rule, which are discussed in detail below.

Supervisory Expectations

    Under the interim final rule, credit unions may close a real estate 
loan without a contemporaneous appraisal or written estimate of market 
value, subject to a requirement that credit unions obtain the appraisal 
or written estimate of market value, as would have been required under 
the appraisal regulations without the deferral, within a period of 120 
days after closing of the transaction. While appraisals and written 
estimates of market value can be deferred, the Board expects credit 
unions to use best efforts and available information to develop a well-
informed estimate of the collateral value of the subject property. In 
addition, the Board continues to expect credit unions 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. The NCUA also stated in a Letter to Credit Unions 
that the agency ``encourages credit unions to make every effort to 
obtain an appraisal or written estimate of value during the early 
stages of a real estate loan transaction.'' \19\
---------------------------------------------------------------------------

    \19\ Residential Appraisals Threshold Increase and Other COVID-
19 Related Relief Measures, Letter to Credit Unions 20-CU-10 (Apr. 
2020), available at https://www.ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/residential-appraisals-threshold-increase-and-other-covid-19-related-relief-measures.
---------------------------------------------------------------------------

    Two commenters were concerned about supervisory expectations for 
credit unions that exercise their option to defer an appraisal or 
written estimate of market value. One commenter stated that the NCUA 
should ensure credit unions that avail themselves of the deferment 
period are not penalized, regardless of the steps they took to obtain 
an appraisal during the COVID event. The commenter suggested adopting a 
supervisory policy stating that when considering enforcement actions 
the NCUA will consider the circumstances that credit unions may face as 
a result of the pandemic and will be sensitive to good-faith efforts 
demonstrably designed to assist members. The commenter also stated that 
such a good-faith policy is consistent with the recent Executive Order 
on regulatory relief.\20\ Another commenter similarly expressed concern 
that there is no assurance of a safe harbor for credit unions and 
requested further commentary or guidance to direct examiners to be 
flexible in working with credit unions delaying appraisals and written 
estimates of market value. The Board understands the difficulties 
caused by the COVID event and intends to be sensitive to good-faith 
efforts to comply with applicable rules during the pandemic. The Board 
also notes recent efforts to clarify post crisis expectations for 
managing loans for which regulatory flexibilities have been used. 
Generally, the Board expects that, after the COVID event, credit unions 
should continue to adhere to safety and soundness standards and should 
refer to prudent risk management guidance for managing loans that were 
made 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.\21\ Credit 
unions should also consider the Joint Statement on Additional Loan 
Accommodations Related to COVID-19 \22\ (Joint Statement), issued by 
the Federal Financial Institutions Examination Council (FFIEC) member 
agencies.\23\ 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.
---------------------------------------------------------------------------

    \20\ Exec. Order No. 13,924, 85 FR 31353 (May 22, 2020).
    \21\ Press Release: Interagency Statement on Appraisals and 
Evaluations for Real Estate Related Financial Transactions Affected 
by the Coronavirus (Apr. 14, 2020).
    \22\ Joint Statement on Additional Loan Accommodations Related 
to COVID-19, available at https://www.ncua.gov/files/press-releases-news/joint-statement-additional-loan-accommodations.pdf.
    \23\ The FFIEC is composed of the following: a member of the 
FRB, appointed by the Chairman of the FRB; the Chairman of the FDIC; 
the Chairman of the NCUA; the Comptroller of the Currency; the 
Director of the Bureau of Consumer Financial Protection; and, the 
Chairman of the State Liaison Committee.
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Acquisition, Development, and Construction Loans

    Under the interim final rule, transactions for acquisition, 
development, and construction of real estate are excluded from the 
flexibility to defer appraisals and written estimates of market value 
for 120 days. One commenter requested case-by-case leeway to delay 
valuation for

[[Page 64948]]

acquisition, development, and construction loans as well, if, for 
example, additional collateral secures such borrowings and all other 
legal and safety and soundness requirements are met and documented. The 
Board does not believe it is prudent to allow deferrals of appraisals 
or written estimates of market value for acquisition, development, and 
construction loans. As discussed in the interim final rule, repayment 
of loans for such 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. Therefore, 
it would be more prudent to have a formal appraisal or written estimate 
of market value that can provide an accurate assessment of collateral 
before any credit extension is necessary for such transactions.

Appraisals With Lower Valuations

    The interim final rule also stated that the Board expects credit 
unions to develop an appropriate risk mitigation strategy if the 
appraisal or written estimate of market value ultimately reveals a 
market value significantly lower than the expected market value. The 
interim final rule further provided that such a risk mitigation 
strategy should consider all risks that affect the credit union's 
safety and soundness, balanced with mitigation of financial harm to 
COVID event affected borrowers. One commenter asked the NCUA to provide 
clear guidance to address instances where a final valuation differs 
from the initial assessment. The commenter did not believe that credit 
unions should be required to take any action pertaining to the borrower 
and the loan at issue.
    The Board did not prescribe methods or documentation standards for 
valuations estimated during the deferral period, but prudent credit 
unions should retain information that was used to support their 
estimates. Credit unions should continue to develop a loan-to-value 
estimate in accordance with 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 
Board expects credit unions to develop an appropriate risk mitigation 
strategy if the appraisal or written estimate of market value 
ultimately determines a market value for a property that is 
significantly lower than expected when the loan is 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, credit unions should recognize a heightened degree of risk if 
the subsequently obtained appraisal or written estimate of market value 
ultimately reveals a market value significantly lower than the expected 
market value and take appropriate action to mitigate the risk.

Effective Date

    The temporary provision permitting credit unions to defer an 
appraisal or written estimate of market value 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 
Board. The Board believes that the limited timeframe for the deferral 
strikes the appropriate balance between safety and soundness and the 
need for immediate relief due to the COVID event. Two commenters 
requested an extension of the deferral period. One commenter 
specifically requested that the deferral period be extended through the 
first quarter of 2021. The commenter noted that states are in various 
phases of re-opening and credit unions may not have the ability to get 
an appraisal within the grace period based on local restrictions 
continuing until after the December expiration date. The commenter also 
noted that many credit unions were experiencing difficulties in 
obtaining an appraisal before the COVID event. The Board has no plans 
to extend the effective date of 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.

Other Comments

    One commenter asked the NCUA to work closely with the Federal 
Housing Finance Agency to align real estate appraisal standards with 
those of the government-sponsored enterprises, Fannie Mae and Freddie 
Mac, and do so in a timely fashion. The Board agrees it is important to 
work closely with other agencies involved in the mortgage industry and 
align industry standards when appropriate. However, the Board notes 
that real estate loans that qualify for sale to Fannie Mae, Freddie 
Mac, and other federal agencies are exempt from the NCUA's appraisal 
regulations. Credit unions that originate real estate loans that 
qualify for this exemption should follow applicable appraisal 
requirements set forth by Fannie Mae, Freddie Mac, or other government 
agencies as appropriate.\24\
---------------------------------------------------------------------------

    \24\ 12 CFR 722.3(a), Real estate related financial transactions 
not requiring an appraisal under this part.
---------------------------------------------------------------------------

IV. Final Rule

    For the reasons discussed above, the Board is adopting the interim 
final rule as a final rule with no changes. Accordingly, under the 
final rule, credit unions may defer required appraisals and written 
estimates of market value for up to 120 days for all residential and 
commercial real estate-secured transactions, excluding transactions for 
acquisition, development, and construction of real estate. The 
temporary provision allowing credit unions to defer appraisals or 
written estimates of market value for covered transactions will expire 
on December 31, 2020, unless extended by the Board. 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 written estimates of market value. The Board expects all 
appraisals, including deferred appraisals, to comply with USPAP.

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.\25\ Because the final rule relieves a 
restriction, the final rule is exempt from the APA's delayed effective 
date requirement.\26\ Additionally, as an independent basis, the NCUA 
finds good cause to publish the final rule with an immediate effective 
date. The NCUA believes 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 the needs of businesses and individuals for timely 
access to liquidity from equity in real estate. 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

[[Page 64949]]

the final rule will continue to allow credit unions to better focus on 
supporting lending to creditworthy individuals and businesses in light 
of recent strains on the U.S. economy as a result of the COVID event, 
while reaffirming the safety and soundness principle that valuation of 
collateral is an essential part of the lending decision. Finally, the 
Board believes that implementing the final rule as soon as possible is 
consistent with its intent to grant expedited relief. Therefore, the 
final rule will become effective October 14, 2020, through December 31, 
2020.
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    \25\ 5 U.S.C. 553(d).
    \26\ 5 U.S.C. 553(d)(1).
---------------------------------------------------------------------------

B. Congressional Review Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) (SBREFA) generally provides for congressional review 
of agency rules.\27\ A reporting requirement is triggered in instances 
where the NCUA issues a final rule as defined by Section 551 of the 
APA.\28\ As required by SBREFA, the NCUA submitted the April 2020 
interim final rule to OMB for it to determine if it was a ``major 
rule'' for purposes of SBREFA. OMB determined the interim final rule 
was not a major rule. The NCUA also filed the appropriate reports with 
Congress and the Government Accountability Office so this rule may be 
reviewed. This final rule makes no changes to the interim final rule.
---------------------------------------------------------------------------

    \27\ 5 U.S.C. 801-804.
    \28\ 5 U.S.C. 551.
---------------------------------------------------------------------------

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden on regulated 
entities or modifies an existing burden.\29\ For purposes of the PRA, a 
paperwork burden may take the form of a reporting, recordkeeping, or a 
third-party disclosure requirement, referred to as an information 
collection. The NCUA may not conduct or sponsor, and the respondent is 
not required to respond to, an information collection unless it 
displays a valid OMB control number.
---------------------------------------------------------------------------

    \29\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    The information collection requirements of this part are approved 
under OMB control number 3133-0125, which requires that a federally 
insured credit union retain a record of either the appraisal or 
estimate, which ever applies. The deferral to obtain an appraisal or 
estimate will not result in a change in burden; therefore, no 
submission will be made to OMB for review.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \30\ generally requires an 
agency to consider whether the rule it proposes will have a significant 
economic impact on a substantial number of small entities. For purposes 
of the RFA, the Board considers credit unions with assets less than 
$100 million to be small entities.\31\
---------------------------------------------------------------------------

    \30\ 5 U.S.C. 601 et seq.
    \31\ NCUA Interpretive Ruling and Policy Statement 15-1. 80 FR 
57512 (Sept. 24, 2015).
---------------------------------------------------------------------------

    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).\32\ 
Since the NCUA was 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 Board has concluded that the RFA's 
requirements relating to a final regulatory flexibility analysis do not 
apply.
---------------------------------------------------------------------------

    \32\ 5 U.S.C. 604(a).
---------------------------------------------------------------------------

E. Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. The 
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order to adhere to fundamental 
federalism principles.
    This final rule does not have substantial direct effects on the 
states, on the relationship between the national government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. The Board has therefore determined that 
this rule does not constitute a policy that has federalism implications 
for purposes of the executive order.

F. Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this rule will not affect family well-
being within the meaning of Sec.  654 of the Treasury and General 
Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 
(1998).

List of Subjects in 12 CFR Part 722

    Appraisal, Appraiser, Credit unions, Mortgages, Reporting and 
recordkeeping requirements, Truth in lending.

    By the National Credit Union Administration Board on September 
17, 2020.
Gerard Poliquin,
Secretary of the Board.

0
For the reasons set forth in the preamble, the Board adopts the interim 
rule amending 12 CFR part 722, which was published at 85 FR 22014 on 
April 21, 2020, as final without change.

[FR Doc. 2020-20928 Filed 10-13-20; 8:45 am]
BILLING CODE 7535-01-P