Real Estate Appraisals, 64945-64949 [2020-20928]
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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.
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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
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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.
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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:
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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
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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
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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.
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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
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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.
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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.
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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.
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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
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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
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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).
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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
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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:
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]]>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.
-----------------------------------------------------------------------
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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
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\27\ 5 U.S.C. 801-804.
\28\ 5 U.S.C. 551.
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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.
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\29\ 44 U.S.C. 3507(d).
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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\
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\30\ 5 U.S.C. 601 et seq.
\31\ NCUA Interpretive Ruling and Policy Statement 15-1. 80 FR
57512 (Sept. 24, 2015).
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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.
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\32\ 5 U.S.C. 604(a).
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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
