NACUSO Commercial Lending CUSOs Urge Caution with new Appraisal Rules

The Business Services Advisory Group of the National Association of Credit Union Service Organizations consists of commercial lending credit unions and CUSOs throughout the country.  The Group recently discussed the new appraisal rule.  Bill Beardsley, CEO of the commercial lending CUSO Michigan Business Connection, and the Group’s Chair, summarized the discussion.  “There is a lot of appreciation for the flexibility that the new rule provides, and the confidence that is being placed on credit unions by the NCUA.  Our group consists of very experienced commercial lending professionals, who have seen the ups and downs of many economic cycles.  As a result, the consensus of our group is to recommend careful restraint in applying the full extent of new rule”.

The new appraisal rule, slated to take effect October 22, 2019, increases the threshold above which appraisals are required for commercial real estate transactions from $250,000 to $1,000,000.  Instead of requiring an appraisal, the rule allows reliance on a less formal valuation called simply a “written estimate of market value”.  “We believe that there are a lot of circumstances where a formal appraisal is still the most prudent valuation, and encourage credit unions to author policies that, while permitting the use of “written estimates”, do so as a function of credit strength and the risk of the transaction” Beardsley noted.   Indeed, most of the CUSO members seem to be continuing to recommend formal appraisals for loans less than $1,000,000.

Jack Antonini, CEO of NACUSO added:  “Our commercial lending members put safety and soundness and regulatory compliance at the forefront of serving credit unions and their members.  Our Advisory Groups are very helpful to NACUSO to stay connected with current opportunities and concerns, and provide a forum for idea and best practice exchange between members.”