Federally Related Financial Transactions (frt)

[JEREMY SAPOSNEK]

How do we determine if its an "FRT"?

 

[Terrel L. Shields]

Check the appropriate agency regulations...i.e.- FDIC, OTS, etc. The language is something like this:

FRT means any real estate -related finacial transaction entered into on or after August 9, 1990 that:
A-The regulated institution engages in or contracts for; and B-requires the services of an appraiser.

Appraisals (appraisers) are not required if the transaction value is below the de minimus ($250,000)

All transactions of $1 million or more require a Certified appraiser
Non-residential and 1-4 family residential transactions of $250,000 or more require a Certified appraiser. Complex residential properties of $250,000 or more require a certified appraiser. A regulated institution may assume that a 1-4 family residential property is not complex....but if a licensed appraiser identifies factors that are atypical....the regulated institution can ask the licensed appraiser to get a certified co-signature and/or hire a certified appraiser to do the report.

"The regulated institution shall be responsible for making the final determination of whether the appraisal is complex." [just thought i'd throw that in]

So....is the institution a regulated institution? [FDIC, Off of Thrift Supervision, Fed REserve, Off of Comptroller of the Currency; or, Natl Credit Union Admin.]

Does the transaction value exceed $250,000?

Everything else is moot subject.

 

[JEREMY SAPOSNEK]

Thank you much Terrel L. Shields another "PRICELESS" reply from the AppraisersForum.

JMS :usa:




"Men think in herds, go mad in herds, and recover their senses, slowly, one by one.

So true

 

[Jo Ann Meyer Stratton]

Note: Fannie Mae, Freddie Mac, FHA and VA are NOT Federally Related Transactions. They are not included in that list that Terrell provided.

 

[Carnivore]

Joann,

My comment to follow is not directed at you. My comment is posted to cause a discussion of the intent of the FRT rule.

If Big Bank ABC orders an appraisal report and does not identify ALL the intended users of the report then it can be assumed that the request is for an FRT.

Lets assume Big Bank ABC identifies Fannie Mae or some other non-frt entity as and intended user. I feel this still does not relieve the Client of compliance with FRT rule. The reasons are as follow; FR meaning federally regulated.

1. Big Bank is a FR.

2. The statement of limitations states a wide(blanket) variety of intended users, and specifically does not exclude FR institutions.

3. FR Big Bank ABC for example may under the terms of agreement with fannie mae be required to re-purchase the original loan for a variety of reasons. Some of which include fraud, failure to meet minimum guidelines, etc etc.

Comments?

 

[Jo Ann Meyer Stratton]

I agree that every residential report for a lender should be prepared as if it will go to a Federally Related institution. And also unless the report is specifically identified as either a FHA or a VA, then the report should also be prepared to meet Fannie Mae's guidelines plus any additional specific guidelines the client may have. Appraisals wander around the lending world for years as loans are found to suit the original application and then resold and resold and resold again through the years. That appraisal will drift in and out of Fannie Mae, Freddie Mac, portfolio, in house, etc, etc through the years. And also the report should be prepared as if the appraiser will be defending it in front of their state board. All bases should be attempted to be covered before the report goes out the door because once it leaves the appraiser's hands it is out there who knows where!

 

[Carnivore]

Your last post demonstrates why identifying intended users and intended use has little meaning or reason outside of the appraiser circle.

Someone in another thread gave and example of a judge ignoring the reasons or purpose of identifying our reports per USPAP.

 

[Francois K. Gregoire]

Discussions of FRT's are interesting. For a non-appraisers tortured quest to determine the meaning, take a look at

Pennsylvania State Board of Certified Real Estate Appraisers and FNIS/Market Intelligence/Chicago Title

It can be found on the AARO site

http://www.aaro.net/ReadingRoom.htm

The judge also invents some new terms, just for the heck of it.

For those that tend to worry, the decision is binding only withing the jurisdiction of this court, the Eastern District of Pennsylvania.

 

[Rich Heyn]

Very few residential loans are FRT's. Most residential loans are exempted. If the appraisal conforms to the standards of Fannie or Freddie, the transaction is exempted from the category of an FRT, even if the loan is never sold. Strange but true.

Check out FAQ #180 for more detail, or read page 26 of the 2004 USPSP 7-hr. student manual.

Rich Heyn

 

[JEREMY SAPOSNEK]

I recently did my 2004 USPAP update, and on top of all the course material the Instructor strongly suggested developing a Letter of Engagement and stressed the need to determine if the loan will originate as a "Federally Related Transaction" prior to the release of the appraisal. And if unable to determine that it will originate as an "FRT" the client should be aware that it will be written accordingly.

I posted this topic because Appraisers are being charged with "Technical Violations" resulting from a lack of knowledge.

Partial repro. Page 26 National USPAP Update Course

What is a Federally Related Transaction?

Earlier in this course you learned that a number of federal agencies are represented under Title XI of FIRREA. There are two legal terms presceibed by this law that are defined in appraisal regulations:

1. A real estate-related transaction, and

2. A federally related transaction (FRT)

Generally, appraisal regulations apply to real estate-related transactions entered into by these federal agencies, or by federally regulated financial institutions. However, not all real estate-related transactions are federally related transactions. Here's the critical issue to understand.

"A real estate-related transaction is a federally related transaction unless the transaction is specifically exempted from the agencies' appraisal regulations".

"For example, FHA, VA, Fannie Mae, and Freddie Mac are not under the agencies' supervision and are not subject to the agencies' appraisal regulations. Because of this, the majority of residential loans are not FRTs. Of course, federally regulated financial institutions do engage in real estate-related transactions with these entities, such as the sale of loans. Even so, under the agencies' regulations, transactions that qualify for sale to a United States government agency or a U.S. government sponsored agency (such as FHA, VA, Fannie Mae, Freddie Mac, Farmer Mac, and Sally Mae) are exempted and, therefore, are not federally related transactions. Indeed, the agencies' regulations also contain an exemption for transactions that involve a residential real estate transaction in which a regulated institution's appraisal conforms to the appraisal standards of Fannie Mae of Freddie Mac."


Thanks Rich Heyn B)