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4000 - Advisory Opinions

Whether Appraisal is Required for Refinancings of FHA and VA Loans or with Loans Financing Purchase of Homes Acquired by FHA/VA Through Foreclosure Where No Current Appraisal is Required Under FHA/VA Rules


April 3, 1992

Walter P. Doyle, Counsel

Thank you for your March 30 letter inquiring whether the FDIC appraisal regulation, as recently amended, requires an appraisal in connection with certain refinancings of FHA and VA loans or with loans made to finance the purchase of homes acquired by the FHA or VA through foreclosure, where no current appraisal is required by FHA or VA rules.

A literal wording of our appraisal regulation seems clearly to exempt loans insured or guaranteed by an agency of the United States only if "the transaction is supported by an appraisal that conforms to the appraisal rules or other written requirements of the federal agency providing the insurance or guarantee" (§ 323.3(a)(6)). You suggest that a literal interpretation of this exemption is inconsistent with the perceived intent of the regulatory preamble that the federal agency bearing the risk of loss should determine what type of appraisal, if any, is necessary.

We believe you read too much into the preamble language. In our view, an objective reading of the preamble would have to take note of the fact that there are at least six references therein to a "second" or "separate" appraisal or to "additional" appraisal requirements (57 Fed. Reg. 9047-48). Moreover, in the preamble to the proposed rule (56 Fed. Reg. 47036) it was stated that this new exemption "would eliminate" the need "to obtain two separate appraisals in order to comply with the requirements of the federal insurer or guarantor and the requirements of part 323 . . . . if the transaction is supported by a current appraisal that conforms to the requirements of the insuring or guaranteeing agency."

Accordingly, it is our opinion that a current appraisal is required by our regulation in connection with a "real estate-related financial transaction" of the type described in your letter that is entered into by a regulated institution and is not otherwise exempted under § 323.3(a), as amended. While not part of your question, we would clarify that "current'' does not mean contemporaneous with the transaction. Current means that the results of the most recent appraisal on file still fairly reflect values for the purpose of the transaction.

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

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