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Financial regulators' recent revisions to their 1994 real estate appraisal and evaluation guidelines are the subject of NCUA Letter 10-CU-23, posted recently on the agency's website.

The guidelines, released last week, are set to take effect upon publication in the Federal Register.

Thelettersays credit union boards are responsible for reviewing and adopting policies and procedures that establish and maintain an effective, independent real estate appraisal and evaluation program for all lending functions.

Highlights noted include the need for:

• a collateral valuation process independent from other parts of the lending process;
• effective quality controls that provide for a periodic review of work completed by appraisers and for individuals selected to hold appropriate state certification or licenses;
• appraisals that contain an opinion of market value as defined in the appraisal regulations;
• an understanding that use of the automated valuation model, a computerized valuation system, is not itself an appraisal;
• the need for appraisals to adjust to include appropriate adjustments to market value for factors such as prospective improvements, lease terms and market conditions (and that they not incorporate factors such as favorable financing or special value to a specific property user);
• the need to develop policies for determining an appropriate collateral valuation methodology for various transactions.

The letter also addresses the management of relationships with third parties.

Again, more changes may be ahead under the Dodd-Frank reform law, which requires the Federal Reserve to issue a rule on appraiser independence. Compliance with the Fed's interim final rule is required by April 1. Comments are due to the Fed Dec. 29.

For more on the Fed's interim rule, see NAFCU'sRegulatory Alert.

• http://www.ncua.gov/news/express/xfiles/10-CU-23.pdf
• http://www.ncua.gov/news/express/xfiles/10-CU-23attachment.pdf