Following nearly a year of deliberation, federal regulators on Friday approved a long-awaited proposal to waive appraisal requirements on certain home sales of $400,000 and under.
Approved by the Federal Reserve on Friday, the adjustment, from $250,000 to $400,000, marks the first time in 25 years such an appraisal threshold has changed. The decision comes a month after the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation signed off on the rule.
“The appraisal threshold was last changed in 1994,” according to a press release issued by the Board of Governors of the Federal Reserve System. “Given price appreciation in residential real estate transactions since that time, the change will provide burden relief without posing a threat to the safety and soundness of financial institutions.”
The increased appraisal threshold, however, does not apply to loans insured by the U.S. Department of Housing and Urban Development, Fannie Mae, Freddie Mac, the Department of Veterans Affairs or the Federal Housing Administration, according to rules issued by the Fed.
“The data are limited to first-lien, single-family mortgage originations on residential properties by FDIC-insured institutions and affiliated institutions that are not sold to [government-sponsored entities] or otherwise insured or guaranteed by a U.S. government agency,” the rules state.
The change, which will go into effect once recorded in the Federal Register, was first proposed in November by the FDIC, OCC and the Board of Governors of the Federal Reserve.