Assume a federally regulated bank makes a $180,000 one-to-four-family residential refinance, no special exemption override or stricter loan-program rule applies, and the regulatory transaction value is $180,000. Under the federal banking-agency appraisal threshold, what may the bank generally obtain?
Correct Answer
D) An evaluation may satisfy the applicable bank regulatory valuation requirement
The federal banking agencies exempt qualifying residential real-estate transactions of $400,000 or less from their full appraisal requirement, but generally require an evaluation. Other applicable rules or investor requirements may still call for a full appraisal; the amount alone does not waive every valuation duty.
Why This Is the Correct Answer
Option D is correct because qualifying residential transactions of $400,000 or less are exempt from the federal banking agencies' appraisal requirement, and for such transactions the institution must at minimum obtain an evaluation consistent with the Interagency Guidelines. With a $180,000 transaction value and no overriding rule, an evaluation may satisfy the regulatory valuation requirement.
Why the Other Options Are Wrong
Option A: A state-certified appraisal is required for this loan
Option A, that a state-certified appraisal is required, is wrong because a $180,000 qualifying residential transaction falls below the $400,000 threshold, so the agencies' rule does not require an appraisal, certified or otherwise.
Option B: Neither an appraisal nor an evaluation can be required for a loan at this dollar amount
Option B, that neither an appraisal nor an evaluation can be required at this amount, is wrong because the exemption still calls for an evaluation, and lenders or other rules may require a full appraisal.
Option C: A state-licensed appraisal is required for this loan
Option C, that a state-licensed appraisal is required, is wrong because below the threshold the agencies' regulation requires an evaluation rather than a licensed appraisal.
Below threshold, still evaluate
Under the residential threshold the bank swaps the appraisal for an evaluation, but it does not skip valuation altogether.
How to use: Use this to reject options claiming no valuation is needed below the threshold.
Exam Tip
Exempt from an appraisal does not mean exempt from valuation; check whether investor or program rules could still require a full appraisal.
Common Mistakes to Avoid
- -Thinking a loan below the threshold needs no valuation at all
- -Assuming a certified appraisal is required for all bank residential loans
- -Ignoring investor or program rules that can require a full appraisal
Concept Deep Dive
Analysis
This question tests the federal banking agencies' appraisal threshold for residential transactions. A $180,000 residential transaction is below the $400,000 threshold, so the bank is exempt from the full appraisal requirement but must at minimum obtain an evaluation. The facts rule out special exemptions or stricter program rules.
Background Knowledge
Under FIRREA, the federal banking agencies require appraisals for federally related transactions above set thresholds. Transactions that qualify for an exemption, such as the residential threshold, generally require an evaluation, which is a less formal valuation that still must be credible and supported.
Real-World Application
A community bank refinances a $180,000 home loan it will hold in portfolio. Because the transaction is under the residential threshold and no other rule requires more, the bank orders an evaluation that meets the Interagency Guidelines.
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