Credit Unions, Trades Say NCUA's Appraisal Rule Would 'Level the Playing Field'

The NCUA’s proposal to increase the threshold for residential mortgages that require an appraisal from $250,000 to $400,000 would help level the playing field for credit unions since banking regulators already have adopted a similar plan, credit unions and their trade groups told the agency.

The plan also would help simplify the home-buying process and provide additional regulatory relief for credit unions, they said.

“The time and expense associated with residential appraisals is often significant for homebuyers; increasing the threshold to at least $400,000 will have a substantial benefit on credit union members seeking to obtain a mortgage,” Brad Douglas, president/CEO of the Heartland Credit Union Association, said.

“At Gesa Credit Union, appraisals have cost anywhere between $600 and $1,000,” Scott Adkins, EVP of the Richland, Wash.-based credit union with almost $3.7 billion in assets, said.

He added, “In addition, appraisals have taken as much as four weeks to process, causing unnecessary delays in closing that have impacted the costs of providing credit.”

However, as might be expected, the appraisal industry is opposing the proposal, contending that decreasing the number of home purchases that would require an appraisal increases safety and soundness risks for the credit union industry.

Comments on the NCUA plan were due on Tuesday. The proposed rule would continue to require credit unions to obtain written estimates of market value for purchases that would be exempt from the appraisal requirement.

One credit union cited how large of an impact the change would have. Meridian Trust Credit Union has processed 494 real estate loan applications year to date, according to K.L Stubbs, vice president of consumer lending at the Cheyenne, Wyo.-based credit union.

Of that number, 44 required an appraisal since they exceeded the $250,000 threshold. However, if the threshold were increased to $400,000, only six would have required an appraisal, said Stubbs, whose institution has assets of about $415.5 million.

Some credit unions and trade groups cited regional issues in commenting on the rule.

“Obtaining appraisals in rural states such as North and South Dakota has added cost and time for consumers to obtain homeownership,” officials from the Credit Union Association of the Dakotas told the agency. “This lack of appraisers causes a delay in providing financial services to consumers and has caused severe stress on many of our credit unions and their members.”

It has been a particular problem in western North Dakota, where there has been extraordinary growth in the energy production industry, they said.

However, Greg Badovinac, chief compliance officer at the Gardena, Calif.-based Northrop Grumman Federal Credit Union, said the change will not assist many of its members in the institution’s home area of Los Angeles County.

At the end of 2019, the median home value in that county stood at $638,000. The NCUA and federal banking regulators should increase the proposed $400,000 threshold in areas with homes that exceed that limit, said Badovinac, whose institution has more than $500 million in assets.

But representatives of the appraisal industry said the NCUA should abandon the effort.

“Consumer protection is being left out of the equation,” Joseph Mier, president of the Louisiana Real Estate Appraisers Coalition, said. “Having a human appraiser remain as the independent party to the transactions of less than $250,000 or less keeps the checks and balances in place during the process of a homebuyer possibly making the largest investment of their lifetime.”

And David Bunton, president of the Appraisal Foundation called an appraisal by a licensed or certified appraiser a “lynchpin in the proper evaluation of real estate collateral.”