Just what is an FRT and when does your appraisal Fall under Designation ?

[Mike Kennedy]

Title XI [12 U.S.C. 3331-3351] in SEC. 1121. Definitions [12 U.S.C. 3350(4)] — define a federally related transaction as any real estate related financial transaction which

1. a federal financial institutions regulatory agency or the Resolution Trust Corporation engages in, contracts for, or regulates; and
2. requires the services of an appraiser.

Real Estate Related Transactions

Title XI [12 U.S.C. 3350(5)] also defines a real estate related transaction as "any transaction involving:

1. the sale, lease, purchase, investment in or exchange of real property, including interests in property, or the financing thereof;
2. the refinancing of real property or interests in real property; and
3. the use of real property or interests in property as security for a loan or investment, including mortgage-backed securities."

Therefore, in determining whether an assignment is a federally related transaction , an appraiser must begin by answering two questions.

First does the appraisal involve the transfer of an interest in real property, the financing or refinancing of a transfer of an interest in real property, or the use of an interest in real property as security for a loan or for mortgage-backed securities.

Second, does the financial transaction for which the appraisal assignment is to be performed involve a federal financial regulatory agency or one of the agencies specifically named in Title XI that require the services of a licensed or certified appraiser.

Federal Financial Regulatory Agencies

Title XI identifies the following agencies as federal financial regulatory agencies :
(A) the Board of Governors of the Federal Reserve System (In addition to the 12 member banks, the Federal Reserve has regulatory authority over state-chartered banks and bank holding companies);
(B) Federal Deposit Insurance Corporation (FDIC) (In addition to insuring the accounts of depositors in member banks, the FDIC regulates savings banks and state-chartered banks that are not members of the Federal Reserve System);
(C) Office of the Comptroller of the Currency (OCC) (OCC regulates more than 2,500 national banks all across the U. S.);
(D) Office of Thrift Supervision (OTS) (The OTS regulates the nation's savings and loan or thrift institutions); and
(E) National Credit Union Administration (NCUA) (The NCUA insures the accounts of depositors in federally chartered credit union and regulates those institutions).
Other Affected Financial Institutions
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In addition, Title XI specifically requires appraisals by licensed or certified appraisers for financial transactions for the Federal National Mortgage Association (Fannie Mae); the Federal Home Loan Mortgage Corporation (Freddie Mac); or the Resolution Trust Corporation (RTC), the agency created by the Congress to liquidate the assets of the nation's failed savings and loan institutions. Although not specifically mentioned in Title XI, loans insured by the Federal Housing Administration (FHA) and loans guaranteed by the Veterans Administration (VA) are also considered federally related financial transactions.
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Requiring the Services of an Appraiser

The final consideration in determining whether an assignment involves a federally related transaction is whether the transaction requires the services of an appraiser. Title XI [12 U.S.C. 3341(b)] provides that each federal financial regulatory agency can establish a threshold below which a licensed or certified appraiser is not required for performing an appraisal in connection with a real estate related financial transaction . In 1992 the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of Thrift Supervision individually adopted appraisal guidelines that included a threshold transaction amount below which an appraisal would be required. Two years later those agencies formally and jointly adopted a threshold of $250,000, commonly referred to as the " de minimus ."
Therefore, in theory a real estate related financial transaction having a value of $250,000 or less is not a federally related transaction . However, the federal financial regulatory agencies and their regulated institutions may require appraisals by licensed or certified appraisers for real estate related financial transactions with values at or below the de minimus , effectively making those transactions federally related . Alternately in lieu of an appraisal, they can order an evaluation of the property containing an opinion of value. According the appraisal guidelines adopted by the federal regulatory agencies, evaluations do not require the services of licensed or certified appraisers and do not have to conform to USPAP.

 

[Marcia Langley]

Ray,

If you really want a way to get your client to engage in that determination at the time of the assignment, you could fix up a form letter listing the pertinent federal regulators and ask the client if they are regulated by any of those entities. It's a fairly short list and if sent to the company compliance officer or president would be easy for them to answer.

But don't expect a low level loan originator to know. They would not even know who in their organization to refer the question to.

Also, like Greg said, you may have state laws that apply.

If your assignment is not for a lending related purpose then the question does not need to be asked.

If the assignment is prepared to GSE, FHA, VA, etc guidelines, it is exempt, per the banking reg language.

 

[Ray Miller]

Taken from XI.



"Alternately in lieu of an appraisal, they can order an evaluation of the property containing an opinion of value. According the appraisal guidelines adopted by the federal regulatory agencies, evaluations do not require the services of licensed or certified appraisers and do not have to conform to USPAP."

Can an appraiser do these or can just any one do these? What say you?

 

[CANative]

If your assignment is not for a lending related purpose then the question does not need to be asked.

What about "hard money" or "private lenders?" There is a real estate broker in my area that also makes private loans on real estate. Sometimes if a buyer or the property is "iffy" he'll recommend another appraiser. But when it's a loan he's doing he almost always hires me. He knows I'm brutally honest. We've been talking about my doing some simple commercial/non-residential/mixed-use properties for him.

I have a couple of friends who are CG's and would help me out but I'm also thinking I could probably do these without a CG's "official" supervision... because they would not be considered FRT's.

 

[KenRossman]

If I understand where you are going with this.

In a mandatory state, all appraisals must be done by a licensed or certified appraiser and can be scrutinized by the state regulatory agency.

In a voluntary state, if an appraiser is licensed or certified, all their work can be scrutinized by the state regulatory agency, regardless of whether it is for an FRT or not.

In a voluntary state if an appraiser is not licensed or certified, they can perform appraisals (or whatever else you want to call them) if they are not for an FRT and the state regulatory agency would probly not have jurisdiction to scrutinize their work.

 

[Ray Miller]

What about "hard money" or "private lenders?" There is a real estate broker in my area that also makes private loans on real estate. Sometimes if a buyer or the property is "iffy" he'll recommend another appraiser. But when it's a loan he's doing he almost always hires me. He knows I'm brutally honest. We've been talking about my doing some simple commercial/non-residential/mixed-use properties for him.

I have a couple of friends who are CG's and would help me out but I'm also thinking I could probably do these without a CG's "official" supervision... because they would not be considered FRT's.

Mr. Boyd,

I have the same question. It seem on the surface that you should be able to. I know that Wisconsin will accept that kind of work as credit towards your license and will review it.

 

[Michael Tipton]

Ray, the following is copied fron the attached link. You can start by reviewing 2231.0.8, 2231.0.9 and the following 2231.0.9.5. As stated in an earlier post, I have printed 2231.0 - Real Estate Appraisals and Evaluations and use it for reference. You'll also have to refer to your state's licensing laws.​

2231.0.9.5 Qualifications of Individuals
Who Can Perform Evaluations​

Evaluations can be performed by a competent
person who has experience in real estate–related
activities, including, but not limited to, appraisals,
real estate lending, real estate consulting,
and real estate sales. A banking organization
may also augment in-house expertise by hiring
an outside consultant familiar with a certain
market or a particular type of real estate. The
evaluation procedures should have established​

standards for selecting qualified individuals to
perform evaluations and for confirming their

qualifications and independence to evaluate a
particular transaction. An individual performing
an evaluation need not be licensed or certified.
However, if a banking organization desires, it
may use state-licensed or -certified appraisers to
prepare evaluations.​

http://www.federalreserve.gov/boarddocs/supmanual/bhc/200701/2000p7.pdf​

 

[CANative]

My question (and I think Ray's question) is: Can an appraiser work beyond the scope of practice for their license level when the assignment is not a federally related transaction?

 

[Marcia Langley]

Taken from XI.



"Alternately in lieu of an appraisal, they can order an evaluation of the property containing an opinion of value. According the appraisal guidelines adopted by the federal regulatory agencies, evaluations do not require the services of licensed or certified appraisers and do not have to conform to USPAP."

Can an appraiser do these or can just any one do these? What say you?

Michael Tipton gave you the scoop on what the lender has to consider.

But your state laws will tell you what the appraiser has to consider.

In my mandatory state, any expression of value by a licensed appraiser is an appraisal and must adhere to USPAP.

I'd think that part would be true in WI, too. But I know states are different. It would be true any time you were required to comply with USPAP.

 

[Ray Miller]

My question (and I think Ray's question) is: Can an appraiser work beyond the scope of practice for their license level when the assignment is not a federally related transaction?

That is the same question I have.



"I'd think that part would be true in WI, too. But I know states are different. It would be true any time you were required to comply with USPAP."

I can find nowhere, where the State of Wisconsin requires a non-liscensed appraiser to comply with USPAP. As of my readings yet.

If someone knows where this can be found for Wisconsin, I would like some direction please.