By Richard A. Roth
The Federal Reserve Board, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation are proposing to make it easier for banks to originate commercial real estate loans by raising the threshold for loans that require appraisals. Under the proposal, the current $250,000 threshold would be increased to $400,000. Loans for lower amounts could be made based on less-detailed evaluations that could be completed by individuals who are not licensed or certified appraisers.
The current $250,000 threshold has been in effect since 1994. According to the proposal, a commercial property that sold for $250,000 in 1994 could have a market value of up to $830,000 today. However, CRE property values are volatile, and $400,000 is the approximate low point of the current cycle, which was set in 2010.
The proposal would have no effect on residential mortgage loans.
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