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Each depositor insured to at least $250,000 per insured bank

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4000 - Advisory Opinions

Whether a New Appraisal is Required Pursuant to 12 C.F.R. §323 When a Line of Credit is Renewed and the Original Appraiser Was Not Certified


December 11, 1990

Walter P. Doyle, Counsel

Thank you for your December 3, 1990 letter regarding the renewal of a $1 million one-year credit, originally extended on October 1, 1990 in full compliance with FDIC's appraisal regulation, at an increased total of $1,100,000. Assuming satisfactory performance by the borrower and no deterioration in the borrower's credit standing or in market conditions or physical aspects of the real estate collateral, you inquire whether a new appraisal would be necessary because of the fact that the original appraiser was not certified, as no certification process was in place in October 1990.

Section 323.3(a)(4) exempts renewal transactions only if, as stated in clause (ii), "no new monies are advanced other than as previously agreed." Since an additional $100,000 would be advanced under your hypothetical example, beyond the originally agreed $1 million line, the renewal exemption would not apply and a new appraisal would be required for that reason. However, if no new funds were advanced beyond the originally agreed-upon credit line, then a new appraisal would not be necessary under your example, since the original appraisal was in compliance with the regulation when made and all the criteria of the renewal exemption in §323.3(a)(4) would be met.

Please let us know if we can be of any further assistance.

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