12 CFR 722.3 (1-1-20 Ed)

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§ 722.3

12 CFR Ch. VII (1–1–20 Edition)

(1) The sale, lease, purchase, investment in or exchange of real estate, including interests in property, or the financing thereof; or
(2) The refinancing of real estate or
interests in real estate; or
(3) The use of real estate or interests
in property as security for a loan or investment, including mortgage-backed
securities.
Residential real estate transaction
means a real estate-related financial
transaction that is secured by a single
1-to-4 family residential property.
Staff appraiser means a State-certified or a State-licensed appraiser
that is an employee of the credit union.
State-certified appraiser means any individual who has satisfied the requirements for certification in a state or
territory whose criteria for certification as a real estate appraiser currently meet the minimum criteria for
certification issued by the Appraiser
Qualification Board of the Appraisal
Foundation. No individual shall be a
state-certified appraiser unless such individual has achieved a passing grade
upon a suitable examination administered by a state or territory that is
consistent with and equivalent to the
Uniform State Certification Examination issued or endorsed by the Appraiser Qualification Board. In addition, the Appraisal Subcommittee
must not have issued a finding that the
policies, practices, or procedures of a
state or territory are inconsistent with
title XI of FIRREA. The National Credit Union Administration may, from
time to time, impose additional qualification criteria for certified appraisers
performing appraisals in connection
with federally related transactions
within its jurisdiction.
State-licensed appraiser means any individual who has satisfied the requirements for licensing in a state or territory where the licensing procedures
comply with title XI of FIRREA and
where the Appraisal Subcommittee has
not issued a finding that the policies,
practices, or procedures of the State or
territory are inconsistent with title XI.
The NCUA may, from time to time, impose additional qualification criteria
for licensed appraisers performing appraisals in connection with federally

related transactions within its jurisdiction.
Tract development means a project of
five units or more that is constructed
or is to be constructed as a single development.
Transaction value means:
(1) For loans or other extensions of
credit, the amount of the loan or extension of credit; and
(2) For sales, leases, purchases, and
investments in or exchanges of real estate, the market value of the real estate interest involved; and
(3) For the pooling of loans or interests in real estate for resale or purchase, the amount of the loan or market value of the real estate calculated
with respect to each such loan or interest in real estate.
[84 FR 35536, July 24, 2019]

§ 722.3 Appraisals and written estimates of market value requirements for real estate-related financial transactions.
(a) Real estate-related financial transactions not requiring an appraisal under
this part. Provided the transaction is
not a ‘‘higher-priced mortgage loan’’
under 12 CFR 1026.35, which must meet
separate appraisal requirements under
section 129H of the Truth in Lending
Act, 15 U.S.C. 1639h, an appraisal is not
required for a real estate-related financial transaction in which:
(1) The transaction involves an existing extension of credit at the lending
credit union, provided that:
(i) There is no advancement of new
monies, other than funds necessary to
cover reasonable closing costs; or
(ii) There has been no obvious and
material change in market conditions
or physical aspects of the property that
threatens the adequacy of the credit
union’s real estate collateral protection after the transaction, even with
the advancement of new monies;
(2) A lien on real estate has been
taken as collateral through an abundance of caution and where the terms
of the transaction as a consequence
have not been made more favorable
than they would have been in the absence of a lien;
(3) A lien on real estate has been
taken for purposes other than the real
estate’s value;

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National Credit Union Administration

§ 722.3

(4) A lease of real estate is entered
into, unless the lease is the economic
equivalent of a purchase or sale of the
leased real estate;
(5) The transaction involves the purchase, sale, investment in, exchange of,
or extension of credit secured by, a
loan or interest in a loan, pooled loans,
or interests in real estate, including
mortgage-backed securities, and each
loan or interest in a loan, pooled loan,
or real estate interest met the requirements of this regulation, if applicable,
at the time of origination; or
(6) The transaction either qualifies
for sale to a United States government
agency or United States governmentsponsored agency, or involves a residential real estate transaction in
which the appraisal conforms to the
Federal National Mortgage Association
or Federal Home Loan Mortgage Corporation appraisal standards applicable
to that category of real estate.
(b) Real estate-related financial transactions requiring an appraisal by a statecertified appraiser. An appraisal performed by a state-certified appraiser is
required for any real estate-related financial transaction not exempt under
paragraph (a) of this section in which:
(1) The transaction value is $1,000,000
or more; or
(2) The transaction is complex, involves a residential real estate transaction, $250,000 or more of the transaction value is not insured or guaranteed by a United States government
agency or United States governmentsponsored agency, and the transaction
does not meet the criteria in paragraph
(f) of this section.
(c) Real estate-related financial transactions requiring an appraisal by either a
state-certified or state-licensed appraiser.
(1) An appraisal performed by a statecertified appraiser or a state-licensed
appraiser is required for any real estate-related financial transaction not
exempt under paragraph (a) of this section in which the transaction is not
complex, involves a residential real estate transaction, $250,000 or more of
the transaction value is not insured or
guaranteed by a United States government agency or United States government-sponsored agency, and the transaction does not meet the criteria in
paragraph (f) of this section.

(2) If, during the course of an appraisal of a residential real estate
transaction performed by a state-licensed appraiser, factors are identified
that result in the transaction meeting
the definition of complex, then the
credit union may either:
(i) Ask the state-licensed appraiser to
complete the appraisal and have a
state-certified appraiser approve and
cosign the appraisal; or
(ii) Engage a state-certified appraiser
to complete the appraisal.
(d) Real estate-related financial transactions requiring a written estimate of
market value—(1) Applicability. Any real
estate-related financial transaction
must be supported by a written estimate of market value, unless:
(i) An appraisal performed by a statecertified or state-licensed appraiser
was obtained;
(ii) An appraisal is not required
under paragraphs (a)(2) through (6) of
this section; or
(iii) The transaction is fully insured
or guaranteed by a United States government agency or United States government-sponsored agency.
(2) Requirements. All written estimates of market value required under
this paragraph must be performed by
an individual:
(i) Independent of the loan production and collection processes (if independence cannot be achieved, the credit union must be able to demonstrate
clearly that it has prudent safeguards
to isolate its collateral valuation program from influence or interference
from the loan production process and
collection process);
(ii) Having no direct, indirect, or prospective interest, financial or otherwise, in the property or the transaction; and
(iii) Qualified and experienced to perform such estimates of value for the
type and amount of credit being considered.
(e) Appraisals to address safety and
soundness concerns. The NCUA reserves
the right to require an appraisal under
this subpart whenever the agency believes it is necessary to address safety
and soundness concerns.
(f) Exemption from appraisals of real estate located in rural areas. (1) Notwithstanding any other provision of law, an

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§ 722.4

12 CFR Ch. VII (1–1–20 Edition)

appraisal in connection with a federally related transaction involving real
estate or an interest in real estate is
not required if:
(i) The real estate or interest in real
estate is located in a rural area, as described in 12 CFR 1026.35(b)(2)(iv)(A);
(ii) The transaction value is less than
$400,000;
(iii) Any party involved in the transaction that meets the definition of
mortgage originator must be subject to
oversight by a Federal financial institutions regulatory agency; and
(iv) Not later than three days after
the date on which the Closing Disclosure Form, made in accordance with 12
CFR parts 1024 and 1026, relating to the
federally related transaction is given
to the consumer, the credit union (or
other party involved in the transaction
that acts as the mortgage originator)
or its agent, directly or indirectly:
(A) Has contacted not fewer than
three state-certified appraisers or
state-licensed appraisers, as applicable,
on the credit union’s (or other party
involved in the transaction that acts as
the mortgage originator) approved appraiser list in the market area in accordance with 12 CFR part 226; and
(B) Has documented that no statecertified appraiser or state-licensed appraiser, as applicable, was available
within five business days beyond customary and reasonable fee and timeliness standards for comparable appraisal assignments, as documented by
the credit union (or other party involved in the transaction that acts as
the mortgage originator) or its agent.
(2) A credit union (or other party involved in the transaction that acts as
the mortgage originator) that makes a
loan without an appraisal under the
terms of paragraph (f)(1) of this section
shall not sell, assign, or otherwise
transfer legal title to the loan unless:
(i) The loan is sold, assigned, or otherwise transferred to another party by
reason of the credit union’s (or mortgage originator’s) bankruptcy or insolvency;
(ii) The loan is sold, assigned, or otherwise transferred to another party
regulated by a Federal financial institutions regulatory agency, so long as
the loan is retained in portfolio by the
other party;

(iii) The sale, assignment, or transfer
is pursuant to a merger of the credit
union (or mortgage originator) with
another party or the acquisition of the
credit union (or mortgage originator)
by another party or of another party
by the credit union (or mortgage originator); or
(iv) The sale, loan, or transfer is to a
wholly owned subsidiary of the credit
union (or mortgage originator), provided that, after the sale, assignment,
or transfer, the loan is considered to be
an asset of the credit union (or mortgage originator) under generally accepted accounting principles.
(3)(i) For purposes of this paragraph
(f), the term transaction value means
the amount of a loan or extension of
credit, including a loan or extension of
credit that is part of a pool of loans or
extensions of credit; and
(ii) The term mortgage originator has
the meaning given the term in section
103 of the Truth in Lending Act (15
U.S.C. 1602).
(4) This paragraph (f) does not apply
if:
(i) The NCUA requires an appraisal
under paragraph (e) of this section; or
(ii) The loan is a high-cost mortgage,
as defined in section 103 of the Truth in
Lending Act (15 U.S.C. 1602).
[84 FR 35537, July 24, 2019]

§ 722.4 Minimum appraisal standards.
For federally related transactions,
all appraisals shall, at a minimum:
(a) Conform to generally accepted appraisal standards as evidenced by the
Uniform Standards of Professional Appraisal Practice (USPAP) promulgated
by the Appraisal Standards Board of
the
Appraisal
Foundation,
1029
Vermont Ave., NW., Washington, DC
20005;
(b) Be written and contain sufficient
information and analysis to support
the institution’s decision to engage in
the transaction;
(c) Analyze and report appropriate
deductions and discounts for proposed
construction or renovation, partially
leased buildings, non-market lease
terms, and tract developments with
unsold units;
(d) Be based upon the definition of
market value as set forth in § 722.2(f);
and

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