The National Credit Union Administration Board's proposal to quadruple the appraisal threshold for nonresidential real estate loans to $1 million could significantly undermines the safety and soundness of the commercial lending market, according to an op-ed in the American Banker.
In a BankThink piece, Stephen Wagner, the president of the Appraisal Institute, expressed deep concerns regarding this proposed rule.
Wagner wrote that increasing the appraisal threshold to $1 million "would drastically increase the number of nonresidential real estate loans that would not require an appraisal."
He worries that this would result in a lower level of risk mitigation and will create an environment of loan driven-production.
Wagner points out that NCUA's threshold would be double that of the other federal banking regulators at $500,000 and he believes that this could cause bank regulators to further relax their appraisal requirements.
Wagner also expressed concern about the lack of experience of NCUA regulating commercial real estate loans. He wrote that NCUA is "the agency with the least direct experience in overseeing business and commercial real estate lending," but it will be driving appraisal policies for the entire financial regulatory system.
Read the BankThink piece.
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