Agencies Issue Clarifying Guidance on Evaluations Versus Appraisals

The federal banking agencies on Friday issued clarifying guidance on when an evaluation is permitted instead of an appraisal for loans secured by real estate. Appraisals are optional, while evaluations are required, for: loan amounts of $250,000 or less; renewals, refinances and other transactions involving existing extensions of credit; and real estate-secured business loans with a value of $1 million or less when income from the real estate is not the primary source of repaying the loan.

The guidance also provided information on how an evaluation should be prepared and by whom and the required contents of an evaluation report.