FRH4.20090515.omb

Supporting Statement for the
Recordkeeping Requirements Associated with Real Estate Appraisal Standards for
Federally Related Transactions Pursuant to Regulations H and Y
(FR H-4; OMB No. 7100-0250)
Summary
The Board of Governors of the Federal Reserve System, under delegated authority from
the Office of Management and Budget (OMB), proposes to extend for three years, without
revision, the Recordkeeping Requirements Associated with the Real Estate Appraisal Standards
for Federally Related Transactions Pursuant to Regulations H and Y (FR H-4; OMB No. 71000250). These requirements are specified in Title XI of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (FIRREA) as set forth in the Board's Regulations H (12
CFR 208.18) and Y (12 CFR 225.61). These regulations require that, for federally related
transactions, regulated institutions obtain real estate appraisals performed by certified or licensed
appraisers in conformance with uniform appraisal standards. The estimated number of reporters
under the regulation includes 878 state member banks (SMBs) and 612 bank holding company
(BHC) nonbank subsidiaries that extend mortgage credit.1 There is no formal reporting form,
and the information is not submitted to the Federal Reserve. The estimated annual burden for
these recordkeeping requirements is 94,943 hours.
Background and Justification
Title XI of FIRREA, 12 U.S.C. 3331 et seq., directs the federal financial institutions
regulatory agencies2 to publish appraisal rules for federally related transactions within the
jurisdiction of each agency. The purpose of the statute is “. . . to provide that federal financial
and public policy interests in real estate related transactions will be protected by requiring that
real estate appraisals utilized in connection with federally related transactions are performed in
writing, in accordance with uniform standards, by individuals whose competency has been
demonstrated and whose professional conduct will be subject to effective supervision.”3
Section 1121 of FIRREA, 12 U.S.C. 3350(4), defines a federally related transaction as a
real estate-related financial transaction that is regulated by or engaged in by a federal financial
institutions regulatory agency and requires the services of an appraiser. In addition, a real estaterelated financial transaction is defined as any transaction that involves: (i) the sale, lease,
purchase, investment in or exchange of real property, including interests in property, or the
financing thereof; (ii) the refinancing of real property or interests in real property; and (iii) the
use of real property or interests in real property as security for a loan or investment, including
mortgage-backed securities.

1

As of the December 31, 2007, Consolidated Reports of Condition and Income (FFIEC 031 & 041; OMB No. 7100-0036)
report and the December 31, 2007, the Financial Statements of U.S. Nonbank Subsidiaries of U.S. Bank Holding Companies
(FR Y-11; OMB No. 7100-0244).
2
The federal financial institutions regulatory agencies consist of: the Federal Reserve, the Office of the Comptroller of the
Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the National
Credit Union Administration (NCUA).
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Section 1101, Title XI of FIRREA

In 1990, the agencies published regulations to meet the requirements of Title XI of
FIRREA. The regulations identify which transactions require an appraiser, set forth minimum
standards for performing appraisals, and distinguish those appraisals requiring the services of a
state certified appraiser from those requiring a state licensed appraiser. The regulations further
identify categories of real estate-related financial transactions that do not require the services of
an appraiser and, accordingly, they are subject to neither Title XI of FIRREA nor those
provisions of the agencies' regulations governing appraisals.
In 1991, as part of a burden reduction study mandated by the FDIC Act, the agencies
determined that the appraisal requirements of Title XI could impose additional costs on both
lenders and borrowers. The agencies decided that there were certain real estate-related
transactions that Title XI appraisals imposed significant costs without promoting, to a significant
extent, the safety and soundness of regulated institutions or furthering the purposes of Title XI of
FIRREA. Therefore, in June 1994, the agencies amended their regulations to clarify and expand
the circumstances under which certain real estate-related transactions would not require Title XI
appraisals. Also, in October 1994, the agencies issued the Interagency Appraisal and Evaluation
Guidelines (interagency guidelines) to provide further clarification to the regulations and to set
forth prudent appraisal and evaluation policies and practices. In November 1998, the Board
amended the Regulation Y real estate appraisal requirement for BHCs and their nonbank
subsidiaries. The amendment permits a BHC, or its nonbank subsidiary that has the authority to
underwrite or deal in mortgage-backed securities, to do so without demonstrating that the loans
underlying the securities are supported by appraisals that at origination met the Board's appraisal
regulation.
While the Board has not amended the regulation since 1998, the Federal Reserve and the
other agencies have issued additional guidance and clarification to their appraisal regulations and
the interagency guidelines. On November 19, 2008, the agencies issued proposed revisions to
the interagency guidelines for public comment.4 The proposal incorporates several appraisalrelated guidance documents5 that the agencies have issued over the past several years and
provides clarification to the agencies’ expectations for a regulated institution’s compliance with
the appraisal regulation. The comment period expired on January 20, 2009. The Federal
Reserve received 77 comments that are currently under review. If the review of the comment
letters results in changes to the information collection requirements, then a proposal to revise the
information collection will be brought forth to the Board for review.
Description of Information Collection
For federally related transactions, Title XI of FIRREA requires SMBs and BHCs with
credit-extending nonbank subsidiaries to use appraisals prepared in accordance with minimum
appraisal standards in the regulation, including the Uniform Standards of Professional Appraisal
Practice promulgated by the Appraisal Standards Board of the Appraisal Foundation. Generally,
these standards prescribe the requirements for analyzing the value of real property as well as the
4

See 73 Federal Register 69647 (November 19, 2008)
Refer to SR letter 03-18, Interagency Statement on Independent Appraisal and Evaluation Function; SR letter 05-05, FAQs on
Interagency Statement on Independent Appraisal and Evaluation Function; SR letter 05-14, Interagency FAQs on Residential
Tract Development Lending; and SR letter 06-9, Interagency Statement on the Revisions to the Uniform Standards of
Professional Appraisal Practice.

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requirements for reporting such analysis and a value conclusion. An appraisal means a written
statement independently and impartially prepared by a qualified appraiser setting forth an
opinion as to the market value of an adequately described property as of a specific date(s),
supported by the presentation and analysis of relevant market information.
SMBs and BHCs with credit-extending nonbank subsidiaries are expected to maintain
records that demonstrate that appraisals used in their real estate-related lending activities comply
with these regulatory requirements. While there is no obligation for a regulated institution to file
appraisals with the Federal Reserve Board, institutions must have policies and procedures
governing their appraisal function to ensure compliance with the appraisal regulation. As part of
an on-site examination of an institution, examiners may collect information and data on a
particular appraisal or an institution’s appraisal policies and practices to assess the condition of
the institution and its compliance with the appraisal regulation.
Time Schedule for Information Collection
Bank examiners test for compliance with the appraisal regulation during examinations of
SMBs banks and inspections of BHCs' credit-extending nonbank subsidiaries. There is no
formal reporting form and the information is not submitted to the Federal Reserve.
Consultation Outside of the Agency and Discussion of Public Comment
In developing its appraisal regulation, the Federal Reserve consulted with the OCC,
FDIC, OTS, and NCUA. As required by Title XI, these agencies adopted substantially similar
appraisal regulations for the financial institutions they supervise.
On March 4, 2009, the Federal Reserve published a notice in the Federal Register
(74 FR 9401) requesting public comment for 60 days on the FR H-4 information collection. The
comment period for this notice expired on May 4, 2009. The Federal Reserve did not receive
any comments. On May 15, 2009, the Federal Reserve published a final notice in the Federal
Register (74 FR 22928).
Sensitive Questions
This recordkeeping requirement contains no questions of a sensitive nature, as defined by
OMB guidelines.
Legal Status
The Board’s Legal Division has determined that the recordkeeping requirements set forth
in the Board’s Regulations H and Y for appraisal standards are required by law (12 U.S.C.
Sections 3339). Further, the Board has the authority to collect information, including appraisals,
during the examination of a state member bank (12 U.S.C. Section 248(a) and 483) and a bank
holding company (12 U.S. C. section 1844(c)). Such documents would generally be exempt
from disclosure under the Freedom of Information Act (FOIA) (5 U.S.C Section 552 (b) (4) and
(b) (8)). Since the Federal Reserve does not collect this information, no issue of confidentiality
under FOIA arises.
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Estimate of Respondent Burden
The Federal Reserve estimates that these recordkeeping requirements affect
1,490 organizations supervised by the Federal Reserve. The annual frequency is an estimate of
the number of real estate-related credit transaction that the average respondent extends in a year.
This includes residential mortgages, multi-family mortgages, construction and development
loans, and nonfarm/nonresidential real estate loans. Each federally related transaction is
expected to average 15 minutes for reviewing and recordkeeping. The total annual burden is
estimated to be 94,943 hours, as shown below, which represents less than 2 percent of the total
Federal Reserve System paperwork burden.
Estimated
number of
respondents

Annual
frequency

Estimated
average hours
per response

SMBs

878

160

0.25

35,120

BHC Subs

612

391

0.25

59,823

Total

1,490

Estimated
annual
burden hours

94,943

The total cost to the public is estimated to be $5,288,325.6
Estimate of Cost to the Federal Reserve System
The Federal Reserve System does not incur any direct costs as a result of this information
collection.

6

Total cost to the public was estimated using the following formula. Percent of staff time, multiplied by annual burden hours,
multiplied by hourly rate: 20% Administrative or Junior Analyst @ $25, 70% Managerial or Technical @ $55, 5% Senior
Management @ $100, and 5% Legal Counsel @ $144. Hourly rate estimates for each occupational group are averages using
data from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages 2007,
http://www.bls.gov/news.release/ocwage.nr0.htm Occupations are defined using the BLS Occupational Classification System.
http://www.bls.gov/soc/

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