Now I have another question, how does this impact the appraisal threshold and multiple properties? Again, I have confused myself so badly, I'm not even sure I am asking the right questions.

1. I have a consumer purpose loan using two 1-4 family residential properties as collateral. Do we estimate the value of each and then use the $500,000 threshold to determine evaluation or appraisal?

2. I have a business purpose loan using a single 1-4 family residential property and a commercial property. Do we apply the $400,000 or $500,000 threshold to the single 1-4 family residential property to determine evaluation or appraisal? Does the commercial property appraisal threshold then look back to the transaction value and the source of repayment being sale or rental of RE to determine evaluation or appraisal?

Thanks in advance to anyone who can help restore my sanity.

Transaction amount is the loan amount regardless of the value of the collateral.

No problem as these rule can make your head spin - I've second guessed myself plenty of times as I've been preparing for upcoming training on this.

1. The threshold is based off the "transaction value" which will typically be the amount of the loan or extension of credit. See footnote 17 in the April 2018 rule or footnote 16 in the Oct 2019 rule.

2. The $500,000 threshold will apply since you have more than one 1-4 residential property (which is really the only transaction that qualifies for the $400,000 threshold).

Thank you so much for the clarification.

@ Adam, so you have 7 single family homes securing a $600,000 loan, which is over the $500,000 threshold. Do you get an appraisal for each? . . . That's not the way it works from what I understand.

That's not the way it works from what I understand.

What is your understanding for how it works?

Probably referring too:

If an institution enters into a transaction that is secured by several individual properties that are not part of a tract development, the estimate of value of each individual property should determine whether an appraisal or evaluation would be required for that property. For example, an institution makes a loan secured by seven commercial properties in different markets with two properties valued in excess of the appraisal threshold and five properties valued less than the appraisal threshold. An institution would need to obtain an appraisal on the two properties valued in excess of the appraisal threshold and evaluations on the five properties below the appraisal threshold, even though the aggregate loan commitment exceeds the appraisal threshold.

I don't disagree Randy, in fact we use that passage as an example in our appraisal policy for multiple properties.

Sorry for the delay, I switched computers and lost my login information and was being lazy about resetting it.

Yes, what @Randy referred to is correct; however, in speaking with the OCC contact listed in the Final Rule for the increased threshold, he mentioned that this part of the Interagency guidance is not worded accurately and should not quite be understood that way, which was kind of funny to me because I did a Field Office training on this when I was an OCC examiner.

Anyways, his assertion was that the Agencies' understanding is that each property that secures the loan should be given a transaction value and, then, that particular transaction value should be matched up against the property type and the threshold that applies. So, for instance, in my example of 6 single-family homes and a $600k loan, you would look to Collateral Home #1, and say, "how much of the $600,000 loan is attributable to Collateral Home #1." Let's say the Collateral Home #1 was assigned a transaction value of $150k. You would then match the $150k up against the threshold. What nobody can give me an answer on is whether the threshold for that would be $500k (because you have multiple properties securing the loan) or $400k (because the assigned transaction value is based on a single 1-4 family here). It seems that it would be $500k, since the transaction as a whole is "commercial." You would proceed to do the same thing for the remaining 5 properties. This is the same hole in the Final Rule if you go by the language about multiple properties in the existing Interagency Guidance. If you use the property values in making the determination, what would the threshold be based on - $400k or $500k?