Which of the following transactions would be exempt from FIRREA's appraiser requirements?
Correct Answer
B) A $200,000 refinance transaction
FIRREA requires licensed or certified appraisers for federally related transactions of $250,000 or more. The $200,000 refinance falls below this threshold and would be exempt from the licensed/certified appraiser requirement.
Why This Is the Correct Answer
FIRREA requires licensed or certified appraisers for federally related transactions of $250,000 or more. The $200,000 refinance falls below this threshold and would be exempt from the licensed/certified appraiser requirement.
Why the Other Options Are Wrong
Option A: A $300,000 purchase money mortgage
The $300,000 purchase money mortgage exceeds the $250,000 FIRREA threshold, therefore it requires a licensed or certified appraiser and is not exempt from the appraiser requirements.
Option C: A $400,000 home equity line of credit
The $400,000 home equity line of credit significantly exceeds the $250,000 FIRREA threshold, making it subject to the licensed/certified appraiser requirement rather than being exempt.
Option D: A $150,000 construction loan
The $150,000 construction loan falls below the $250,000 threshold, but construction loans often have additional regulatory requirements that may still mandate licensed appraisers regardless of the FIRREA threshold.
Quarter Million Rule
Remember 'FIRREA's Quarter Million Rule' - any federally related transaction of $250,000 or MORE needs a licensed appraiser. Think 'Quarter Million = Quality Required'
How to use: When you see dollar amounts in FIRREA questions, immediately compare them to $250,000. If below, it's likely exempt; if at or above, it requires licensed/certified appraisers.
Exam Tip
Always check the loan amount against the $250,000 threshold first, but be aware that some transaction types may have additional requirements beyond FIRREA minimums.
Common Mistakes to Avoid
- -Confusing property value with loan amount when applying the threshold
- -Forgetting that the threshold is $250,000 or MORE (inclusive)
- -Not considering that some transaction types may have additional requirements beyond FIRREA
Concept Deep Dive
Analysis
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) establishes minimum standards for real estate appraisals in federally related transactions. The key threshold is $250,000 - transactions at or above this amount require a licensed or certified appraiser, while those below may use other valuation methods. This regulation was implemented to ensure quality and consistency in property valuations for federally insured financial institutions. The $250,000 threshold applies to the loan amount, not the property value, and covers various transaction types including purchases, refinances, and construction loans.
Background Knowledge
FIRREA was enacted in 1989 following the savings and loan crisis to strengthen oversight of financial institutions and establish uniform appraisal standards. The Act created the Appraisal Subcommittee and requires federally related transactions of $250,000 or more to be appraised by state-licensed or certified appraisers.
Real-World Application
In practice, many lenders require licensed appraisers even for transactions below $250,000 due to internal policies or investor requirements, but FIRREA only mandates it above the threshold.
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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