We have a customer who has several business loans secured by commercial real estate, A/R and inventory. The loans total more than $250,000 but no one loan is for $250,000. The value of the real estate is about 2/3 of the total collateral value. Is a full appraisal required or is an evaluation sufficient.

Oops I thought I was logged in. This anonymous is me.

The regs were written so that banks could not slice up loans to stay under the $250 thousand threshold. That is why the appraisal regs talk in terms of transaction values and not loan amounts. So if your transaction value is greater than $250 thousand it would seem you need a full appraisal. There are exceptions though, one of them being taking real property as collateral in an abundance of caution, which may fit your situation. You might look at that exception to see if you can sqeeze these loans in there.

Thank you for your response. That was how I understood the regs, but I was anticipating the response from the loan officer when told they would have to have an appraisal. I don't think the "abundance of caution" will apply here either.

I presented this particular scenerio to the compliance division of our regulator (FDIC) and was informed that the requirement had been interpreted as the lien amount.

Regarding your "abundance of caution", our practice has been that if your primary collateral supports your "lending policy", that one needs an outside appraisal for lien amounts over the thresold. The "other" collateral must clearly be documented as abundance of caution; if so, an in house evaluation is fine.