CFR Part: "12 CFR Parts 701 and 722"
RIN Number: "RIN 3133-AE36"
Citation: "79 FR 36248"
SUMMARY: As part of NCUA's Regulatory Modernization Initiative, the NCUA Board (Board) is proposing to revise two of NCUA's regulations regarding appraisals. Firstly, the Board is proposing to amend NCUA's regulations to eliminate the now duplicative requirement that federal credit unions (FCUs) make available, to any requesting member/applicant, a copy of the appraisal used in connection with that member's application for a loan secured by a first lien on a dwelling. A recent amendment to the
The proposal would also make a minor technical amendment to the definition of the term "application." These changes will modernize NCUA's regulations by better aligning them with the modern marketplace, while also reducing costs for FICUs and their members, and removing outdated regulatory requirements.
EFFECTIVE DATE: Comments must be received on or before
ADDRESSES: You may submit comments, identified by RIN 3133-AE36, by any of the following methods (Please send comments by one method only):
* Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
* NCUA Web site: http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx. Follow the instructions for submitting comments.
* Email: Address to email@example.com. Include "[Your name]--Comments on Proposed Rule: Appraisals" in the email subject line.
* Fax: (703) 518-6319. Use the subject line described above for email.
* Mail: Address to
* Hand Delivery/Courier: Same as mail address.
You can view all public comments on NCUA's Web site at http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as submitted, except for those we cannot post for technical reasons. NCUA will not edit or remove any identifying or contact information from the public comments submitted. You may inspect paper copies of comments in NCUA's law library at
FOR FURTHER INFORMATION CONTACT:
II. Proposed Rule
III. Regulatory Procedures
NCUA is committed to regulatory modernization, including modifying, streamlining, refining, or repealing outdated rules that are not required by statute and would not jeopardize the safety and soundness of the credit union industry. Each year, NCUA reviews one-third of its regulations for substance and clarity, and provides notice to the public of those regulations under review so that the public may have an opportunity to provide comments. In 2013, NCUA reviewed part 722, along with several other parts of NCUA's regulations. /1/ Part 722 sets forth the appraisal requirements for federally-related real estate transactions. The appraisal requirements in part 722 are generally equivalent to the appraisal requirements of the other federal financial regulatory agencies (Other Banking Agencies). /2/ However, NCUA received numerous responses during the public comment period requesting a specific change to
FOOTNOTE 1 As part of the 2013 Regulatory Review process, NCUA also reviewed parts 711, 712, 713, 714, 715, 716, 717, 721, 723, 724, 725, 740, 741, 745, and 747 of NCUA's regulations. END FOOTNOTE
In addition, a number of commenters requested that NCUA eliminate the duplicative portion of the requirements in
In response to the comments received and NCUA's regulatory review, the Board proposes to broaden the scope of
* * * * *
II. Proposed Rule
A. What changes are being proposed to the requirement in
The Board is proposing to amend
FOOTNOTE 3 See 12 CFR 1002.14; and 78 FR 7216 (
FOOTNOTE 4 See 12 CFR 1002.2(l), providing in relevant part:
Creditor means a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of the credit. The term creditor includes a creditor's assignee, transferee, or subrogee who so participates. For purposes of SUBSEC 1002.4(a) and (b), the term creditor also includes a person who, in the ordinary course of business, regularly refers applicants or prospective applicants to creditors, or selects or offers to select creditors to whom requests for credit may be made. END FOOTNOTE
FOOTNOTE 5 See 78 FR 7216, 7234-7235 (
While the two sections differ slightly in scope and mechanism, /6/ the requirements in
FOOTNOTE 6 Under SEC 701.31(c)(5) FCUs are only required to provide a copy of an appraisal to the application if the applicant requests a copy, while
FOOTNOTE 7 42 U.S.C. 3601 et seq. END FOOTNOTE
FOOTNOTE 8 44 FR 51191. END FOOTNOTE
The consumer protections provided by the two sections do not, however, overlap entirely. Under current
FOOTNOTE 9 See 12 CFR 701.31(a)(3) (" Real estate-related loan means any loan for which application is made to finance or refinance the purchase, construction, improvement, repair, or maintenance of a dwelling."). END FOOTNOTE
Proposed SEC 701.31(c)(5) would require FCUs to make available, to any requesting member/applicant, a copy of the appraisal used in connection with the member's application for a loan to be secured by a subordinate lien on a dwelling. Consistent with the amendment to the first sentence of that section, the second sentence in proposed
By limiting the requirements to apply only to applications for loans secured by a subordinate lien on a dwelling, NCUA believes the proposed rule would eliminate the duplicative portion of the current requirement while maintaining the current protections provided under
B. What changes are being proposed to the exemption in
Part 722 of NCUA's regulations implements Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), /10/ setting forth, among other things, minimum requirements for real estate-related appraisals used in connection with "federally related transactions." /11/ Section 722.3(a) requires FICUs to obtain an appraisal for all real estate-related financial transactions unless the transaction meets one of nine specifically enumerated exemptions. Current
FOOTNOTE 10 Public Law 101-73, Title XI, 103
FOOTNOTE 11 12 U.S.C. 3339. END FOOTNOTE
Although much of the language is identical, the exemption in
FOOTNOTE 12 OCC: 12 CFR part 34, subpart C; FRB: 12 CFR part 208, subpart E and 12 CFR part 225, subpart G; and
FOOTNOTE 13 OCC: 12 CFR 34.43(a)(7); FRB: 12 CFR 225.63(a)(7); and
NCUA has received a number of comments regarding the lack of parity between NCUA's and the Other Banking Agencies' appraisal exemptions and the added burden of
Section 722.3(a)(5) was originally issued in its current form in 1995 as part of a larger final rule making several amendments to NCUA's appraisal regulations. /14/ In the preamble to that final rule, the Board specifically explained that it did not adopt an exemption in
FOOTNOTE 14 60 FR 51889 (
FOOTNOTE 15 See, id. at 51891 (Providing in relevant part: One "commenter stated that banks . . . have this exemption and credit unions would be at a competitive disadvantage without it. The Board believes that an appraisal is necessary if new funds are advanced. The Board believes that safety and soundness concerns outweigh the possible minimal effects on competition."). END FOOTNOTE
The financial crisis that began in 2008 left large numbers of financially distressed homeowners owing more on their mortgages than their homes were worth. During this same period, financial institutions across the nation experienced high levels of mortgage loan defaults and foreclosures. Many borrowers were unable to make their mortgage payments because of unemployment or a reduction in income. Others were unable to afford significant payment increases when their adjustable rate mortgages reset, and they were unable to refinance their loans because of declines in their properties' values. Some borrowers who owed more on their mortgages than their homes were worth simply walked away from their homes because they lacked the incentive to keep their mortgage payments current.
In response to the levels of mortgage loan defaults and foreclosures that occurred in the wake of the financial crisis, NCUA issued guidance to credit unions in 2009 regarding providing loan modifications to residential mortgage borrowers who were unable to meet their contractual payment obligations by offering them loan modification options. /16/ The letter encouraged credit unions to take action to identify and potentially assist borrowers whose financial stress may lead to future impairment in mortgage loan performance. By proactively identifying "at risk" loans, credit unions could measure the potential impacts of borrower defaults on net worth, assess internal liquidity available to help borrowers through loan modifications, and closely monitor the performance of these loans. Moreover, by identifying and assisting "at risk" members before delinquency occurs, a credit union could improve chances for successful modifications and reduce potential losses.
FOOTNOTE 16 09-CU-19 (
Consistent with the positions noted above, the Board believes that extending the appraisal exemption in
Proposed SEC 722.3(a)(5) would exempt a transaction from the appraisal requirement in
Valuation requirement. Secured transactions exempted from appraisal requirements pursuant to paragraphs (a)(1) and (a)(5) of this section and not otherwise exempted from this regulation or fully insured shall be supported by a written estimate of market value, as defined in this regulation, performed by an individual having no direct or indirect interest in the property, and qualified and experienced to perform such estimates of value for the type and amount of credit being considered. END FOOTNOTE
C. What other changes would the proposed rule make?
For clarity, the proposed rule would also make a technical amendment to the definition of the term "application" in
FOOTNOTE 18 See SEC 701.31(a)(1) (Quoting regulation B as follows: "Application means an oral or written request for an extension of credit that is made in accordance with procedures established by a creditor for the type of credit requested." (emphasis added).). END FOOTNOTE
FOOTNOTE 19 See SEC 1002.2(f) (Defining the term "application" as follows: Application means an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested. The term application does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. A completed application means an application in connection with which a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested (including, but not limited to, credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral). The creditor shall exercise reasonable diligence in obtaining such information. (emphasis added)). END FOOTNOTE
To avoid the possibility of a similar situation arising in the future, NCUA proposes to remove the parenthetical quote in
III. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) /20/ requires NCUA to provide an initial regulatory flexibility analysis with a proposed rule to certify that the rule will not have a significant economic impact on a substantial number of small entities (defined for purposed of the RFA to include credit unions with assets less than or equal to
FOOTNOTE 20 5 U.S.C.
FOOTNOTE 21 78 FR 4032 (
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency by rule creates a new paperwork burden on regulated entities or increases an existing burden. /22/ For purposes of the PRA, a paperwork burden may take the form of a reporting or recordkeeping requirement, both referred to as information collections. This proposed rule would not impose or expand upon any existing reporting or recordkeeping requirements. Accordingly, this proposed rule would not create new paperwork burdens or increase any existing paperwork burdens.
FOOTNOTE 22 44 U.S.C. 3507(d); 5 CFR part 1320. END FOOTNOTE
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. NCUA, an independent regulatory agency, as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order to adhere to fundamental federalism principles. The proposed rule would not have substantial direct effects on the states, on the relationship between the national government and the states, or the distribution of power and responsibilities among the various levels of government. NCUA has, therefore, determined that this proposal does not constitute a policy that has federalism implications for purposes of the executive order.
Assessment of Federal Regulations and Policies on Families
NCUA has determined that this proposed rule will not affect family well-being within the meaning of
List of Subjects
12 CFR Part 701
Advertising, Aged, Civil rights, Credit, Credit unions, Fair housing, Individuals with disabilities, Insurance, Marital status discrimination, Mortgages, Religious discrimination, Reporting and recordkeeping requirements, Sex discrimination.
12 CFR Part 722
Appraisals, Credit unions, Mortgages, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board on
Secretary of the Board.
For the reasons discussed above, the NCUA Board proposes to amend 12 CFR parts 701 and 722 as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
1. The authority citation for part 701 continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1786, 1787, 1789. Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C.
a. In paragraph (a)(1) delete the words ", which is as follows:" and delete the parenthetical "an oral or written request for an extension of credit that is made in accordance with procedures established by a creditor for the type of credit requested";
b. In paragraph (c)(5) in the first sentence, remove the words "a copy of the appraisal used in connection with that member's real estate related loan application" and add in their place the words "a copy of the appraisal used in connection with that member's application for a loan to be secured by a subordinate lien on a dwelling", and, in the second sentence, remove the words "real estate-related loan application" and add in their place the words "application for a loan to be secured by a subordinate lien on a dwelling".
4. The authority citation for part 722 continues to read as follows:
Authority: 12 U.S.C. 1766, 1789 and 3339. Section 722.3(f) is also issued under 15 U.S.C. 1639h.
a. In paragraph (a)(5) add the word "lending" before the words "credit union";
b. In paragraph (a)(5)(i) remove the word "and" and add in its place the word "or"; and
c. In paragraph (a)(5)(ii) add the words ", even with the advancement of new monies" to the end of the paragraph.
[FR Doc. 2014-14889 Filed 6-25-14;
BILLING CODE 7535-01-P
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