It was not that long ago when thresholds requiring real estate appraisals were raised that got bankers excited. It meant lower closing costs and faster processing times, but not all good deeds go unpunished. Just ask your credit underwriters and analysts who have been busy performing real estate evaluations since 2019. The increase in appraisal threshold also meant a substantial increase in internally prepared property valuations.
While this threshold change was a new opportunity for lenders to increase their loan pipelines, most of the appraisal regulation did not change, including the need for qualified and competent staff to perform such services. As mentioned in the Interagency Appraisal and Evaluation Guidelines, an institution should maintain documentation to demonstrate that the appraiser or person performing an evaluation is competent, independent, and has the relevant experience and knowledge for the market, location, and type of real property being valued. I would be remiss if I did not emphasize these qualifications, especially if you have an upcoming examination.
Just when we thought we might be gaining regulatory ground, it feels like we took two steps backwards. Banks found themselves in a new paradigm by turning staff into appraisers, but without the necessary education or, in some cases, independence. And you can bet that your next examination will have increased scrutiny, if it hasn’t already.
So, what is a banker to do to take advantage of the new thresholds? Recently, I sat down with Trendon Albers from Akrivis Real Estate Valuation Services to discuss this quandary and seek out alternative solutions. After all, ShareFI’s value-added services are here to help solve problems for community banks.
Trendon explained, “Since the inception of new appraisal thresholds, Akrivis Real Estate Evaluation Services’ niche is to provide property evaluations to community banks in a manner that compliments their credit needs and processes. And the use of quality evaluations is increasing as we see a decline in appraisers and extended appraisal times.” With their certified staff of professionals and access to many of the same data sets as full appraisals, they too are solving an ever-growing problem for our industry: increased reliance on good evaluations. That fit perfectly into ShareFI’s business model of continuous improvement and most likely would be a good fit for your bank as well. As we have learned over the years, not all regulatory relief comes without a price. Next time, let’s discuss appraisal reviews and how your bank can become more cost-efficient in this area. Until then, if you would like to learn more about ShareFI’s compliance risk and management services or how Akrivis Real Estate Valuation Services can benefit your credit operations, please reach me at firstname.lastname@example.org. I would love to chat.
Schmid is director-compliance & management services for FIPCO.