A federally related transaction involves a refinance of a single-family home with a loan amount of $180,000. Which of the following is required under Title XI?
Correct Answer
C) An evaluation may be sufficient
Since the loan amount is below the $250,000 threshold for Title XI, an evaluation may be sufficient for this federally related transaction, though the lender may still choose to require an appraisal.
Why This Is the Correct Answer
Option C is correct because the $180,000 loan amount falls below the $250,000 threshold established under Title XI for requiring a full appraisal by a state licensed or certified appraiser. For federally related transactions below this threshold, an evaluation performed by someone with appropriate competency may be sufficient to meet regulatory requirements. However, the lending institution retains the discretion to require a full appraisal even when not mandated by Title XI.
Why the Other Options Are Wrong
Option A: A state certified appraiser must perform the appraisal
A state certified appraiser is not required because the loan amount is below the $250,000 threshold, and certified appraisers are typically required for more complex properties or higher loan amounts above $1,000,000.
Option B: A state licensed appraiser must perform the appraisal
A state licensed appraiser is not required because the $180,000 loan amount falls below the $250,000 threshold where Title XI mandates a licensed or certified appraiser.
Option D: No appraisal or evaluation is required
This is incorrect because Title XI still requires some form of valuation for federally related transactions - either an appraisal or evaluation depending on the loan amount and transaction type.
Quarter Million Rule
Remember 'Quarter Million = Quarter Standards' - Below $250,000 (quarter million), you only need quarter standards (evaluation), but above $250,000, you need full standards (licensed/certified appraiser).
How to use: When you see a loan amount in a Title XI question, immediately compare it to $250,000. If below, think 'evaluation may suffice'; if above, think 'licensed/certified appraiser required'.
Exam Tip
Always identify the loan amount first in Title XI questions and compare it to the key thresholds: $250,000 and $1,000,000. The loan amount drives the appraiser qualification requirements.
Common Mistakes to Avoid
- -Confusing the $250,000 threshold with other regulatory thresholds
- -Assuming all federally related transactions require licensed appraisers regardless of amount
- -Not distinguishing between what Title XI requires versus what lenders may choose to require
Concept Deep Dive
Analysis
This question tests knowledge of Title XI appraisal requirements for federally related transactions, specifically the threshold amounts that determine when a full appraisal versus an evaluation is required. Title XI of FIRREA establishes minimum standards for appraisals in federally related transactions, with specific dollar thresholds that trigger different requirements. The key concept is understanding that below certain loan amounts, lenders have flexibility in their valuation requirements while still maintaining regulatory compliance.
Background Knowledge
Title XI of FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) establishes federal standards for real estate appraisals in federally related transactions. The law sets specific dollar thresholds: $250,000 for requiring licensed/certified appraisers, and $1,000,000 for requiring certified appraisers for non-residential properties.
Real-World Application
In practice, many lenders choose to require full appraisals even for loans below $250,000 to maintain consistent underwriting standards and reduce risk, but Title XI gives them the flexibility to use evaluations for smaller loan amounts.
More Report Writing Questions
Under FIRREA, which federal agency has the authority to set minimum standards for real estate appraisals in federally related transactions?
What is the minimum transaction threshold for requiring a state licensed or certified appraiser under Title XI for most federally related transactions?
The Dodd-Frank Act established which requirement specifically related to appraisal independence?
Which of the following is NOT a responsibility of the Appraisal Subcommittee (ASC)?
State appraiser regulatory agencies are primarily responsible for which of the following functions?
People Also Study
Valuation Principles & Procedures
25% of exam
Property Description & Analysis
20% of exam
Market Analysis & Highest/Best Use
15% of exam
Appraisal Math & Statistics
15% of exam
USPAP (Ethics & Standards)
15% of exam
Related Tools
Previous Question
What is the minimum transaction value threshold above which Title XI requires a state-licensed or certified appraiser for federally related transactions involving residential properties?
Next Question
What is the minimum transaction threshold for requiring a state licensed or certified appraiser under Title XI for most federally related transactions?