Under FIRREA, which of the following transactions would require a state-licensed or certified appraiser?
Correct Answer
B) A $300,000 purchase loan from a credit union
The $300,000 credit union loan is a federally related transaction above the $250,000 threshold, requiring a state-licensed or certified appraiser. Credit unions are federally regulated institutions, making this a federally related transaction under FIRREA.
Why This Is the Correct Answer
Option B is correct because credit unions are federally regulated financial institutions under NCUA oversight, making any loan they originate a federally related transaction. At $300,000, this purchase loan exceeds the $250,000 threshold for residential transactions requiring a state-licensed or certified appraiser. The loan is secured by real estate and involves a federally regulated institution, satisfying all FIRREA requirements. This transaction cannot use alternative valuation methods and must have a formal appraisal.
Why the Other Options Are Wrong
Option A: A $200,000 conventional loan from a community bank
While community banks are federally regulated, the $200,000 loan amount falls below the $250,000 threshold for residential transactions, so FIRREA does not require a state-licensed or certified appraiser for this transaction.
Option C: A $150,000 refinance from a private lender
Private lenders are not federally regulated financial institutions, so this transaction would not be considered a federally related transaction under FIRREA, regardless of the loan amount.
Option D: A $400,000 cash purchase with no financing
Cash purchases involve no financing or lending institution, so FIRREA appraisal requirements do not apply since there is no federally related transaction occurring.
FIRREA 250-500 Rule
Remember 'Federal Financial Institutions need Formal appraisals For amounts over 250 (residential) and 500 (commercial)' - the 4 F's plus the threshold numbers 250/500.
How to use: When you see a transaction question, ask: (1) Is it a federally regulated institution? (2) Does it exceed 250k (residential) or 500k (commercial)? (3) Is it secured by real estate? If all yes, FIRREA applies.
Exam Tip
Always identify the type of lender first (federally regulated vs. private) and then check the dollar threshold - private lenders and amounts below thresholds are common distractors on the exam.
Common Mistakes to Avoid
- -Confusing private lenders with federally regulated institutions
- -Not knowing the correct dollar thresholds ($250k residential, $500k commercial)
- -Thinking FIRREA applies to cash transactions without financing
Concept Deep Dive
Analysis
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) establishes mandatory appraisal requirements for federally related transactions above specific dollar thresholds. The key elements are: (1) the transaction must involve a federally regulated financial institution, (2) it must be secured by real estate, and (3) it must exceed the minimum threshold amounts. For residential transactions, the threshold is $250,000, while for commercial transactions it's $500,000. The regulation applies regardless of loan type (purchase, refinance, etc.) as long as it meets these criteria.
Background Knowledge
FIRREA was enacted in 1989 following the savings and loan crisis to establish uniform appraisal standards and licensing requirements. It requires federally regulated financial institutions to use state-licensed or certified appraisers for transactions above specified thresholds: $250,000 for residential and $500,000 for commercial properties.
Real-World Application
In practice, appraisers must verify that they hold appropriate state licensing before accepting assignments from banks, credit unions, or savings institutions for loans above FIRREA thresholds, as violations can result in significant penalties for both the appraiser and lender.
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?
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