The NCUA board unanimously agreed on Thursday to publish a proposed rule that would increase the threshold for required appraisals for residential real estate transactions from $250,000 to $400,000.

The threshold has not been increased since 2002, Larry Fazio, director of NCUA's Office of Examination and Insurance, told the board.

If adopted, the rule could exempt an additional $14 billion in mortgage balances, Kenneth Acuña, a senior credit specialist with the agency said.

NCUA board Chairman Rodney Hood said the proposal is part of the board's efforts to update its rules.

Board member Todd Harper, the lone Democratic on the board, said he had approached the proposal with skepticism, adding that the board must "take measured steps to make sure we are not jumping off a cliff."

However, Harper said the proposal would provide some relief to consumers, adding that he also would like the agency to address the issue of appraisal portability. Currently, he said homebuyers need to get a new appraisal each time they go to a new lender.

Harper had voted against a final rule earlier this year that would increase the threshold for real estate appraisals from $250,000 to $1 million.

During the meeting, the board also received an update on the Share Insurance Fund. In a report submitted to the board, prepared by CFO Rendell Jones, it states that two federally insured credit unions failed in the third quarter of 2019. By the third quarter of last year, six had failed. Losses linked to failed credit unions totalled $40.3 million, compared with $752 million in the third quarter of 2018.

He told the board that at the end of June, the agency's equity ratio was 1.33%. The board last year set the agency normal operating level was 1.38%. Jones said he is not concerned that the equity ratio was below the normal operating level.

The board also gave final approval to its Second Chance Initiative. Under the policy, credit unions would no longer be required to submit applications to the agency to employ people who have bounced checks for a moderate amount or have been convicted of small dollar simple theft, false identification, simple drug possession, and isolated minor offenses committed by covered persons as young adults.

Credit union trade groups said they were pleased with the appraisal proposal.

"Not only will this proposal reduce the significant time and expenses for homebuyers associated with residential appraisals, it will address a competitive disadvantage credit unions have faced since federal banking regulators raised the threshold to $400,000 in September 2019," CUNA Chief Deputy Advocacy Officer Elizabeth Eurgubian said.

NASCUS President/CEO Lucy Ito said that while the proposed rule aligns with other banking regulators, "NASCUS will closely review the rule to evaluate potential positive and negative impacts on both state system safety and soundness and state credit union regulatory burden."

"The proposed rulemaking would help ensure credit unions receive parity with for-profit banks when it comes to residential real estate appraisals; they should not be placed at a disadvantage while also being the stronger, more member-centric lenders," said Ann Kossachev, NAFCU's director of regulatory affairs said.

Instant Insights /

NCUA Board Approves Proposal to Boost Residential Appraisal Threshold

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