NCUA Raises Commercial RE Appraisal Threshold to $1 Million

The NCUA Board voted two-to-one, July 18 to finalize a proposal to raise the commercial real estate (CRE) transactions threshold, at which credit unions must obtain appraisals for, from $250,000 to $1 million.

For transactions that would be exempted, federally insured credit unions would still be required to obtain a written estimate of market value of the real estate collateral that is consistent with safe and sound lending practices. (In April 2018, the banking agencies increased the same threshold for banks from $250,000 to $500,000.)

The $1 million threshold is consistent with the requirements of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and would exempt an additional 39 percent of commercial real estate transactions while still covering almost 90 percent of the total dollar volume of such transactions.

The rule also:

  1. a) restructures the regulation to clearly indicate when a written estimate of market value, an appraisal conducted by a state-licensed appraiser, or an appraisal conducted by a state certified appraiser is required;
  2. b) implements a provision of S. 2155 exempting from the appraisal requirements real estate transactions where the property is located in a rural area, valued below $400,000, and no state certified or licensed appraiser is available; and
  3. c) makes conforming amendments to the definitions section.