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Greer Advisors, LLC is the creator of www.AppraisalRegulations.com.
The following links, references and tools are provided primarily for the banking industry with an emphasis toward commercial real estate lending and valuation.
Feel free to contact Everett (Allen) Greer with questions, comments, updates. Contact information is at the bottom of this page.
Domestic links are half-way down the page. International links are near the bottom of this page.
Appraisal and lending regulations tends to remaining farily static until a financial crisis occurs; then, politicians and regulators tend to create regulations to prevent future crises. During the late 1980's and early 1990's, the United States experienced the "Savings and Loan (S&L) Crisis."
As a result, the U.S. government spent enormous amounts of money related to the failures of numerous S&Ls across the country.
Following the crisis, the government enacted various laws collectively known as FIRREA (Financial Institution Recovery, Reform and Enforcement Act).
The laws were written under different jurisdictional bodies and within different publications. The 2007-2010 financial crisis led to the transfer of tens of billions of dollars of corporate/investment bank losses to public debt via TALF, TARP, QE1, QE2 and QE3. Two U.S. Senators created a series of legislation, i.e. the Dodd-Frank Act (DFA), which resulted in numerous changes to FIRREA and a revision to the Interagency Appraisal and Evaluation Guidelines. The DFA brought numerous changes to consumer lending, especially payday loans, home equity loans, home loans. The biggest changes for home lending were requirements to disallow use of a 'teaser' rate for underwriting an applicant's ability to pay a loan, and the requirement to use the higher of the fully indexed interest rate or start rate. The act also included significantly more disclosure documents and other modifications to underwriting. The DFA had little impact to commercial real estate lending. Due to the virtual collapse of the securitized bond market, i.e. RMBS, CMBS, and CDO, the authors of the act intended to 'clean up' the securitization market; however, lobbying by investment banks and issues of securitized debt instruments successfully eliminated most of 'the teeth' in the regulations. The authors had a goal to require issuers of securitized debt to keep a sizeable first-loss piece of the issue; however, investment banks argued that most of the debt was sold to qualified institutional buyers (QIBs), who understood the risks; hence, QIB clawback provisions eliminated most of the teeth within the regulations. Lastly, the authors intended to clean up the derivative markets; however, the investment banks lobbied to ensure that all value at risk (VAR) calculations were based on the 'net' exposure, not the gross exposure; hence, the teeth were once again eliminated. Lastly, the authors intended to use one set of VAR derivative calculations for institutions buying derivatives as an 'insurance-like' product for bonds they held and another set of VAR calculations for investment banks that trade derivatives merely for the purpose of trading profits, i.e. they have no bonds they are protecting. Once again, investment banks won on this issue. The problem is that if they buy protection from one entity, and sell the same type of protection to another entity, they are on the 'hook' for the selling side, and the ability of the protection provider to pay may be uncertain.
The following file provides additional historical information pertaining to events and laws (or the relaxing of laws) that contributed to the S&L Crisis.
History of Regulations pre-2009 Link to PPT deck with a pre-2009 history of appraisal-related regulations.
The most common publications were the Code of Federal Regulations (CFR), Federal Register (FR), and later within the Federal Depository Insurance Corporation Improvement Act (FDICIA).
Most of the laws were eventually written in the Code of Federal Regulations, which is broken into sections. Volume 12 of CFR pertains to Banking. Sections 1-199 are for FRB. Sections 200-399 apply to OCC. Sections 400-599 apply to other regulatory bodies.
There were five regulatory bodies that oversaw U.S. financial institutions:
Federal Reserve Board (FRB), Federal Depository Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS) and National Credit Union Administration (NCUA). In 2011, the OTS was merged into the OCC.
Generally, the agencies issues statements and rules jointly; hence, the statements are often named "Interagency Statements."
Though each organization publishes a copy of the statement under its separate entity, most of the agencies do not publish the statements on an "easy to access" web site; therefore, most statements are not immediately or easily accessible via the internet.
Over the years, the Federal Reserve Board has been the sole agency that electronically publishes all statements on an "easy to access" web site.
Therefore, this site references FRB publications more than any other regulatory entity. However, other agencies have numerous regulations related to real estate, such as the Small Business Administration, FNMA / Freddie Mac, HUD, and others. Also, additional regulations than impact real estate exist, such as HMDA.
Generally, the charter of the financial institution will dictate which regulatory agency provides oversight. For example, credit unions are regulated by the NCUA. Commercial banks may be regulated by the OCC (largest banks), FDIC or FRB.
Very large banks are regulated by multiple agencies. Certain institutions have regulators assigned to their institution on a full time basis.
For example, the largest two or three institutions may have 50+ regulators working inside each institution on a full time basis, with permanent offices inside the bank.
Nearly 10 years after the United States' S&L Crisis, the world faced a financial crisis. Issues arose in Japan, Russia and across Europe.
There were no global accounting standards. Some countries allowed banks to value loans on their books at the face amount of the loan, even if the borrower had completely defaulted and the loan was worthless.
The disparity of accounting systems made it virtually impossible to compare the health, safety or soundness of one institution with another institution in a different country.
Hence, an international regulatory body in Basel Switzerland named the Bank of International Settlements (BIS) reacted to requests from various countries, the world bank, the international monetary fund, and several other organizations.
Initially, BIS began working on uniform standards to measure capital and capital reserves. Simultaneously, while the U.S. had the Financial Accounting Standards Board (FASB), the development of a Global Accounting Standards Board (GASB) was underway.
Likewise, the North American Industrial Classification System (NAICS) was being replaced by the Global Industrial Classification System (GICS) in many countries.
Ultimately, BIS published the "Basel Accord" (aka Basel Capital Accord), a comprehensive set of guidelines and standards related to capital.
The Basel Accord has experienced several iterations, and is now in its 3rd version. Pertaining to valuation, a set of guidelines known as the International Valuation Standards were also developed.
| Guide to all Letters |
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| SR 91-2 (FIS) on Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits -- Jan 31, 1991 |
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| SR 91-16 (FIS) on Supplementary Examination Guidelines on Real Estate Loans and Certain Reporting Issues Pertaining to Nonaccrual Loans -- July 16, 1991 |
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| SR 91-20 (FIS) on Environmental Liability -- Oct 11, 1991 |
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| SR 91-24 (FIS) on Interagency Examination Guidance on Commercial Real Estate Loans -- November 7, 1991 |
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| SR 91-25 (FIS) on Interagency Examination Guidance on Commercial Real Estate Loans -- November 7, 1991 |
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| SR 93-1 (FIS) on Real Estate Lending Standards -- January 11, 1993 |
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| SR 93-11 (FIS) on Real Estate Lending Standard -- March 11, 1993 |
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| SR 93-33 (FIS) on Clarification on Real Estate Lending Standards -- June 14, 1993 |
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| SR 93-42 (FIS) on Interagency Guidance on Accounting for Disposition of Other Real Estate Owned -- July 16, 1993 |
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| SR 93-70 (FIS) on Interagency Policy Statement on the Allowance for Loan and Lease Losses (December 22, 1993) -- December 22, 1993 |
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| SR 94-35 (FIS) on amendments to the real estate appraisal regulation -- June 8, 1994 |
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| SR 94-55 (FIS) on interagency appraisal and evaluation guidelines -- October 28, 1994 |
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| SR 95-16 (SUP) on Real Estate Appraisal Requirements for Other Real Estate Owned (OREO) -- March 28, 1995 |
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| SR 95-27 (SUP) on interagency statement on appraisals for affordable housing loans -- May 3, 1995 |
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| SR 95-34 (SUP) on Sharing of Facilities and Staff by Banking Organizations -- May 30, 1995 |
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| SR 95-38 (SUP) on Supervisory Guidance Related to FASB Statement No. 114 (Loan Losses) -- June 26, 1995 |
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| SR 97-20 (GEN) on Superseded SR Letters -- July 10, 1997 |
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| SR 98-18 (SUP) on Lending Standards for Commercial Loans -- June 23, 1998 |
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| SR 99-26 (SUP) on Interagency Guidance on High Loan-To-Value Residential Real Estate Lending -- October 12, 1999 |
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| SR 99-32 (SUP) on Capital Treatment for Synthetic Collateralized Loan Obligations -- November 17, 1999 |
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| SR 00-10 (SUP) on Revised Review Procedures for Reports Required under Section 36 of the Federal Deposit Insurance Act (FDI Act) -- June 26, 2000 |
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| SR 00-17 (SPE) on Guidance on the Risk Management of Outsourced Technology Services -- November 30, 2000 |
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| SR 01-25 (GEN) on Guidelines for Using External Experts on Examinations, Inspections, and Other Bank Supervision Matters -- October 12, 2001 |
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| SR 02-19 on Use of Statistical Sampling in the Review of Commercial and Industrial Loans and Commercial Real Estate Loans during On-Site Safety and Soundness Examinations of Community Banks -- October 29, 2002 |
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| SR 02-20 on The Sarbanes-Oxley Act of 2002 -- October 29, 2002 |
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| SR 03-04 on Risk Management and Valuation of Mortgage Servicing Assets Arising from Mortgage Banking Activities -- February 25, 2003 |
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| SR 03-18 on Independent Appraisal and Evaluation Functions -- October 28, 2003 |
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| SR 04-07 on SEC Guidance on the Potential Liability of Financial Institutions for Securities Law Violations Arising from Deceptive Structured Finance Products and Transactions -- May 14, 2004 |
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| SR 04-09 on Revised Uniform Agreement on the Classification of Assets and Appraisal of Securities Held by Banks and Thrifts -- June 15, 2004 |
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| SR 05-05 on interagency FAQs on the Agencies' Appraisal Regulations and Independence of Appraisal and Evaluation Functions -- March 22, 2005 |
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| SR 05-11 on interagency Credit Risk Management Guidance for Home Equity Lending -- May 16, 2005 |
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| SR 05-14 on interagency FAQs on Residential Tract Development Lending -- September 8, 2005 |
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| SR 05-18 on Waiver of the Appraisal Regulation for Regulated Institutions Affected by Hurricanes Katrina and Rita -- October 11, 2005 |
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| SR 06-09 on Revisions to the Uniform Standards of Professional Appraisal Practice -- June 22, 2006 |
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| SR 06-15 / CA 06-12 on Interagency Guidance on Nontraditional Mortgage Product Risks -- October 10, 2006 |
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| SR 06-17 on Interagency Policy Statement on the Allowance for Loan and Lease Losses (ALLL) -- December 13, 2006 |
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| SR 07-1 on Interagency Guidance on Concentrations in Commercial Real Estate -- January 4, 2007 |
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| SR 07-1a2 Attachment: Concentrations in Commercial Real Estate -- December 12, 2006 |
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| OCC Guide to All Regulatory Letters |
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| 2000-7a - Risk-Based Capital Standards; Recourse and Direct Credit, Substitutes |
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| 2001-18a - Leveraged Financing (#1 most-used section for Going Concern |
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| 2003-9a - Independent Appraisal and Evaluation Functions (Full Document) |
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| 2004-1 - Nonconforming Loans Due to Collateral Shortfall (note: when value falls, banks have 30 days to get back into conformity with Supervisory Exceptions) |
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| 2005-6 - Appraisal Regulations and the Interagency Statement on Independent Appraisal and Evaluation Functions: Frequently Asked Questions |
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| 2005-32 - Residential Tract Development Lending: Frequently Asked Questions |
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| Notice 71 FR2302 - 2006-2 - Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices |
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| 2006-3 - Comptroller Dugan Issues Statement Regarding Real Estate Rulings |
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| 2006-21 - Federal Financial Regulatory Agencies Extend Comment Period on Nontraditional Mortgage Products |
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| 2006-29 - Agencies Extend Comment Period on Interagency Guidance On Concentrations in Commercial Real Estate Lending |
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| 2006-45 - Comptroller Dugan Tells Bankers Commercial Real Estate Concentrations Raise Concerns, but Can Be Safe if Effectively Managed |
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| 2006-68 - OCC Chief of Staff Discusses Mortgage Guidance at National Housing Advisory Council |
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| 2006-94a - Agencies Seek Public Comment on Basel II and Market Risk Proposed Rulemakings |
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| 2006-94b - Risk-Based Capital Standards, Market Risk |
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| 2006-94e - Template |
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| 2006-94c - Risk-Based Capital Standards, Advanced Capital Adequacy Framework |
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| 2006-94d - Template |
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| 2006-96 - Testimony |
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| 2006-96a - Comptroller Dugan Tells House Panel that Goal of Basel II Capital Framework And Commercial Real Estate Guidance is to Address Risks Facing Banking System |
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| 2006-107a - Federal Financial Regulatory Agencies Issue Final Guidance on Nontraditional Mortgage Product Risks |
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| 2006-107b - Proposed Illustrations of Consumer Information for Nontraditional Mortgage Products |
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| 2006-107c - Interagency Credit Risk Management Guidance for Home Equity Lending |
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| 2006-108 - Comptroller of the Currency Praises Interagency Work on Non-Traditional Mortgage Guidance |
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| 2006-131 - Federal Banking Agencies Issue Final Guidance On Concentrations in Commercial Real Estate Lending |
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| 2006-131a - Guidance |
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| 2006-134 - Federal Financial Regulatory Agencies Issue Interagency Policy Statement on the Allowance for Loan and Lease Losses and Frequently Asked Questions |
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| 2006-134a - Comptroller's Statement |
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| 2006-134b - Interagency Policy Statement |
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| 2006-134c - FAQs |
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| 2006-136 - Agencies Announce Interim Decision on Impact of FAS 158 on Regulatory Capital |
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| Code of Federal Regulations - Year by Year Index (Title 12 is banking) |
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| Code of Federal Regulations - 2007 (OCC is Value I, Chapters 1-199) |
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| Title 12 - Banks and Banking, Chapter 1, Parts 1-199 |
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| Title 12 - Banks and Banking - Part 22 - Loans in Areas Having Special Flood Hazards |
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| Title 12 - Banks and Banking - Part 30 - Safety & Soundness |
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| Title 12 - Banks and Banking - Part 32 - Lending Limits |
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| Title 12 - Banks and Banking - Part 32.1 - Authority, Purpose and Scope |
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| Title 12 - Banks and Banking - Part 32.2 - Definitions |
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| Title 12 - Banks and Banking - Part 32.3 - Lending Limits |
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| Title 12 - Banks and Banking - Part 32.4 - Calculation of Lending Limits |
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| Title 12 - Banks and Banking - Part 32.5 - Combination Rules |
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| Title 12 - Banks and Banking - Part 32.6 - Nonconforming Loans |
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| Title 12 - Banks and Banking - Part 32.7 - Pilot Programs for Residential R.E. and Small Business Loans |
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| Title 12 - Banks and Banking - Part 34 - Real Estate Lending and Appraisals (note: FDICIA table is 34.62) |
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| Title 12 - Banks and Banking - Part 34.42 - Definition of Market Value |
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| Title 12 - Banks and Banking - Part 34.43 - Appraisals required; transactions requiring a State certified or licensed appraiser |
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| Title 12 - Banks and Banking - Part 34.44 - Minimum appraisal standards |
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| Title 12 - Banks and Banking - Part 34.45 - Appraiser independence |
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| Title 12 - Banks and Banking - Part 34.46 - Professional Association Membership; Competency |
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| Title 12 - Banks and Banking - Part 34.62 - Real estate lending standards |
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| Title 12 - Banks and Banking - Part 34.81 - Other Real Estate Owned, Definitions |
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| Title 12 - Banks and Banking - Part 34.83 - OREO, Disposition of Real Estate |
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| Title 12 - Banks and Banking - Part 34.85 - Appraisal requirements |
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| Title 12 - Banks and Banking - Part 37 - Debt Cancellation contracts and Debt Suspension Agreements |
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| Comptroller's Handbook on Commercial Real Estate and Construction Lending |
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| Federal Reserve Board - Commercial Bank Examination Manual |
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| FIRREA - Act of 1989 - text |
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| FIRREA - Act of 1989 |
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| FDIC - Important Banking Legislation |
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| FDIC - Regulations (also contains FDICIA (Insurance Act) - see section 1000) |
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| FDIC in 12 CFR - sections 300-399 (note: Supervisory Exception Table = 365.2) - text |
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| FDICIA - (FDIC Improvement Act) - text |
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| HMDA - Home Mortgage Disclosure Act |
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| HMDA - A Guide to HMDA Reporting - 2004 - FFIEC |
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| Julie L. Williams, First Senior Deputy Comptroller and Chief Counsel, Speech |
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| Appraisal Subcommittee |
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| Appraisal Foundation |
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| Appraisal Institute |
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| RICS Organization (Royal Institution of Chartered Surveyors) |
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| IVSC Home Page (International Valuation Standards Committee) |
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| Various Appraisal Organizations By Country |
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| IVSC by DT (Deloitte Touche Tohmatsu) |
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| GAAP vs IFRS |
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| Overview of IVSC as noted in Bank for International Settlements |
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| BIS Paper on Valuation (Bank for International Settlements) |
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| Recent BIS Paper on Valuation-refers to IFRS Standards |
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| IVSC Newsletter "We're working w/the Appraisal Foundation to create one Standard" |
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Telephone:
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LLC
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