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Flashcards in Real Estate Appraisal Regulations Deck (21):
1

Is an appraisal required if the transaction value is $250,000 or less?

No

2

Is an appraisal required if the lien on real property has been taken as collateral solely out of an abundance of caution?

No

3

Is an appraisal required if the commercial loan is for $1 million or more?

Yes. The $1,000,000 applies to business loans of $1 million or less that are not dependent on the sale of or rental income derived from real estate as the primary source of repayment.

4

Is an appraisal required if the loan is for $250,000 or more but is NOT secured by 1-4 family residential real property?

Yes. The $250,000 applies to any type of loan, including business loans.

5

According to real estate appraisal regulations, what is a complex transaction?

A property, form of ownership or market conditions are atypical.

6

T/F: An institution may assume that a transaction secured by a 1-4 family residential property is NOT complex unless the institution has readily available information that the appraisal will be complex.

T

7

Appraisal reports must be based on ____ _____, the most probable price that the property should bring in a fair sale in a competitive and open market, with the buyer and seller each acting prudently and knowledgeably and with no undue stimulus on the price.

market value

8

The bank may use staff appraisers, but they must be ______ of the lending, investment and collection functions.

independent

9

If a loan that is secured by real property is not covered by the appraisal regulation because it is $250,000 or less, the business loan exemption applies, or the renewal exemption applies, what must the bank do?

The bank must make sure that an appropriate evaluation is obtained on the real property collateral.

10

Greg Smith, a real estate lending officer at XYZ Bank, is planning to make a $500,000 loan to Milton Womack, a good customer, to purchase a piece of commercial real estate from a local real estate broker. The loan will have a LTV ratio of 75%. Mr. Womack has offered Greg an appraisal given to him by the seller of the property. The appraisal is very complete and is approximately three months old. Greg would like to waive the normal appraisal requirement and simply have the original appraiser update the seller's appraisal because this would save Mr. Womack the money a new appraisal would cost. Can Greg legally use the updated appraisal? Why or why not?

a. Yes. Greg may use the appraisal provided it goes through the bank's established appraisal review process.
b. No. Greg may not use the appraisal because the appraiser was not engaged by another financial institution.
c. No. Greg may not use the appraisal because it is too old.
d. Yes. Greg may use the appraisal because it was done so completely, provided he knows the appraiser and has confidence in his work.

b. No. Greg may not use the appraisal because the appraiser was not engaged by another financial institution.

Under the appraisal regulation, an appraisal prepared for another financial services institution that otherwise meets the requirements of the regulation is acceptable. In this case, the bank needs its own, new appraisal because the real estate broker is not a financial services institution. Therefore, answer (a) is incorrect. Answers (c) and (d) are also wrong because regardless of the date of the appraisal, or the bank's confidence in the appraiser, the appraisal may not be used.

11

In which of the following cases would ABC Bank have to obtain an appraisal performed by a state-certified appraiser?

a. On a $200,000 loan made by Mr. and Mrs. Littlefield to purchase their home, which will be secured by their home.
b. On a $75,000 loan to be secured by a two-store commercial office building
c. On a $150,000 working capital loan fully secured by a bank certificate of deposit, on which the loan officer has also taken a lien on a vacant lot owned by the borrower
d. On a $300,000 loan to Mr. Burch secured by his life estate in his home. The home was left to Mr. Burch on the death of his father. The father's will states that the home will belong to Mr. Burch during his life but will revert to Mr. Burch's son on his death.

d. On a $300,000 loan to Mr. Burch secured by his life estate in his home. The home was left to Mr. Burch on the death of his father. The father's will states that the home will belong to Mr. Burch during his life but will revert to Mr. Burch's son on his death.

An appraisal by a certified appraiser is required on loans over $1 million, on nonresidential loans over $250,000 and on complex residential loans over $250,000. In this case, (d) is the correct answer because the title to the home owned by Mr. Burch is a life estate interest, which is atypical; therefore, the transaction is complex. Answers (a) and (b) are not correct because the loan amounts are below the regulatory limits for an appraisal by a certified appraiser. Answer (c) is not correct because if the loan is fully secured by a bank CD, the loan officer has taken the real estate simply as an abundance of caution and, therefore, an appraisal is not required.

12

First National Bank would like to establish a policy regarding the evaluation of loans that are not subject to the appraisal requirement. Which of the following is acceptable in this policy?

a. All loans under $250,000 secured by real estate must have an evaluation in the file.
b. All loans that do not require an appraisal by a state-certified appraiser must have an evaluation
c. The evaluations generally will be performed by the loan officer responsible for the transaction.
d. Evaluations may be performed by any loan officer in either commercial or consumer lending as well as any credit analyst.

a. All loans under $250,000 secured by real estate must have an evaluation in the file.

13

If a bank uses a staff appraiser to appraise property that secures loans at the bank, in which case would the appraiser most likely NOT be considered independent?

a. The appraiser is an employee of the bank's affiliated holding company
b. The appraiser is an employee of the bank's affiliated financial institution.
c. The appraiser is an employee int he commercial loan department.
d. The appraiser is employed by the bank but reports to the audit department.

c. The appraiser is an employee int he commercial loan department.

14

Value Inc. Is a federally regulated AMC and a subsidiary owned and controlled by ABC Bank, a federally insured depository institution. Value Inc. is subject to all of the following required EXCEPT:

a. The company must register with the State appraiser and certifying licensing agency in all states in which it operates
b. The company must maintain compliance with valuation independence standards set forth in TILA
c. The company must require that all appraisals comply with USPAP
d. The company must verify that only State-certified or State-licensed appraisers are used for Federally related transactions.

a. The company must register with the State appraiser and certifying licensing agency in all states in which it operates

If an AMC is federally regulated and a subsidiary owned and controlled by an insured depository institution it is not subject to the requirement to register with a state.

15

What is the general rule for real estate appraisal standards?

Every real estate loan must have an appraisal.

16

What is an appraisal? What standards must it conform with?

A formal opinion of the market value that is prepared by a state licensed or certified appraiser. It must conform to the Uniform Standards of Professional Appraisal Practice (USPAP).

17

Under the real estate appraisal requirements, what is the exception where an evaluation is required*, instead of a full blown appraisal?

*could be AVM

- Loans of $250,000 or less, or commercial loans of $1,000,000 or less, or
- Extending existing credit (whether or not new money is advanced, but with new money, cannot be any adverse change in circumstances).

18

Under the real estate appraisal requirements, what is the exception where neither an appraisal nor an evaluation is required?

When property is taken for other than its value (abundance of caution), loan is not dependent on value of the real estate. Property is taken for other than its value.

Or if meeting some other requirements, like government, GSE, secondary market transaction.

19

T/F: Banks must maintain a list of approved appraisers.

True. the Institution is charged with the duty to select and hire the appraiser (and they must be licensed or certified). The bank has to maintain a list to prove that they are meeting this requirement.

20

Appraisals must be ____ of the lending process.

independent. To the extent possible; otherwise prudent safeguards are required.

21

What is a transferred appraisal? Are they ok to use?

When the appraisal was done for another financial services provided, so long as you have the appraiser's permission.