we have a real estate loan that had an evaluation done
when the loan was first made. Now we've done an extension,
no new funds. Do we need to do and updated evaluation due
to the extension? or is this an exempt item since we already have one in the file & no new funds etc done.
Thanks

Is this for a loan $250,000 or less?

Whether or not you need a new evaluation on a piece of R/E should be described in your bank's procedures.

(Unless the loan amount is > $250M, then Reg. Y comes into play.)

the loan is under $250. The reason for the question is
to verify that when you do a extension of a r/e loan we need to update the current evaluation. Some say no and some say yes. From reading I can't tell for sure enough to agree or disagree and explain why
thanks

I am guessing you are asking for how other banks handle appraisal requirements in their procedures?

What $ amount are you referring to?

There is nothing in the appraisal guidelines that addresses the age of an appraisal or evaluation. We address that in our loan policy (i.e. no older than 6 months)

Per SR 94-55 Interagency Appraisal and Evaluation Guidelines:

" Valid Appraisals and Evaluations

The agencies allow an institution to use an existing appraisal or evaluation to support a subsequent transaction, if the institution documents that the existing estimate of value remains valid. Therefore, a prudent appraisal and evaluation program should include criteria to determine whether an existing appraisal or evaluation remains valid to support a subsequent transaction. Criteria for determining whether an existing appraisal or evaluation remains valid will vary depending upon the condition of the property and the marketplace, and the nature of any subsequent transaction. Factors that could cause changes to originally reported values include: the passage of time; the volatility of the local market; the availability of financing; the inventory of competing properties; improvements to, or lack of maintenance of, the subject property or competing surrounding properties; changes in zoning; or environmental contamination. The institution must document the information sources and analyses used to conclude that an existing appraisal or evaluation remains valid for subsequent transactions.

Renewals, Refinancings, and Other Subsequent Transactions

While the agencies' appraisal regulations generally allow appropriate evaluations of real estate collateral in lieu of an appraisal for loan renewals and refinancings, in certain situations an appraisal is required. If new funds are advanced over reasonable closing costs, an institution would be expected to obtain a new appraisal for the renewal of an existing transaction when there is a material change in market conditions or the physical aspects of the property that threatens the institution's real estate collateral protection.

The decision to reappraise or reevaluate the real estate collateral should be guided by the exemption for renewals, refinancings, and other subsequent transactions. Loan workouts, debt restructurings, loan assumptions, and similar transactions involving the addition or substitution of borrowers may qualify for the exemption for renewals, refinancings, and other subsequent transactions. Use of this exemption depends on the condition and quality of the loan, the soundness of the underlying collateral and the validity of the existing appraisal or evaluation.

A reappraisal would not be required when an institution advances funds to protect its interest in a property, such as to repair damaged property, because these funds should be used to restore the damaged property to its original condition. If a loan workout involves modification of the terms and conditions of an existing credit, including acceptance of new or additional real estate collateral, which facilitates the orderly collection of the credit or reduces the institution's risk of loss, a reappraisal or reevaluation may be prudent, even if it is obtained after the modification occurs.

An institution may engage in a subsequent transaction based on documented equity from a valid appraisal or evaluation, if the planned future use of the property is consistent with the use identified in the appraisal or evaluation. If a property, however, has reportedly appreciated because of a planned change in use of the property, such as rezoning, an appraisal would be required for a federally related transaction, unless another exemption applied."

The letter in its entirety is here:

http://www.federalreserve.gov/boarddocs/srletters/1994/SR9455.HTM