PART 34—REAL ESTATE LENDING AND APPRAISALS Authority: 12 U.S.C. 1 et seq., et seq., et seq., Subpart A—General Source: 61 FR 11300, Mar. 20, 1996, unless otherwise noted. § 34.1 Purpose and scope. (a) Purpose. (b) Scope. (1) A building where there is a valid and binding agreement entered into by a financially responsible lender or other party to advance the full amount of the bank's loan upon completion of the building; or (2) A residential or farm building. § 34.2 Definitions. (a) Due-on-sale clause (b) Escrow account (c) State (d) State law limitations [61 FR 11300, Mar. 20, 1996, as amended at 91 FR 29347, May 19, 2026] § 34.3 General rule. (a) A national bank may make, arrange, purchase, or sell loans or extensions of credit, or interests therein, that are secured by liens on, or interests in, real estate (real estate loans), subject to 12 U.S.C. 1828(o) and such restrictions and requirements as the Comptroller of the Currency may prescribe by regulation or order. (b) A national bank shall not make a consumer loan subject to this subpart based predominantly on the bank's realization of the foreclosure or liquidation value of the borrower's collateral, without regard to the borrower's ability to repay the loan according to its terms. A bank may use any reasonable method to determine a borrower's ability to repay, including, for example, the borrower's current and expected income, current and expected cash flows, net worth, other relevant financial resources, current financial obligations, employment status, credit history, or other relevant factors. (c) A national bank shall not engage in unfair or deceptive practices within the meaning of section 5 of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1), and regulations promulgated thereunder in connection with loans made under this part. (d) National banks may establish or maintain escrow accounts. The terms and conditions of any such escrow account, including the investment of escrowed funds, fees assessed for the provision of such accounts, or whether and to what extent interest or other compensation is calculated and paid to customers whose funds are placed in the escrow account, are business decisions to be made by each national bank in its discretion. [68 FR 70131, Dec. 17, 2003, as amended at 69 FR 1917, Jan. 13, 2004; 91 FR 29347, May 19, 2026] § 34.4 Applicability of state law. (a) A national bank may make real estate loans under 12 U.S.C. 371 and § 34.3, without regard to state law limitations concerning: (1) Licensing, registration (except for purposes of service of process), filings, or reports by creditors; (2) The ability of a creditor to require or obtain private mortgage insurance, insurance for other collateral, or other credit enhancements or risk mitigants, in furtherance of safe and sound banking practices; (3) Loan-to-value ratios; (4) The terms of credit, including schedule for repayment of principal and interest, amortization of loans, balance, payments due, minimum payments, or term to maturity of the loan, including the circumstances under which a loan may be called due and payable upon the passage of time or a specified event external to the loan; (5) The aggregate amount of funds that may be loaned upon the security of real estate; (6) Escrow accounts, impound accounts, and similar accounts; (7) Security property, including leaseholds; (8) Access to, and use of, credit reports; (9) Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents; (10) Processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages; (11) Disbursements and repayments; (12) Rates of interest on loans; 1 1 See (13) Due-on-sale clauses except to the extent provided in 12 U.S.C. 1701j-3 and 12 CFR part 591; and (14) Covenants and restrictions that must be contained in a lease to qualify the leasehold as acceptable security for a real estate loan. (b) State laws on the following subjects are not inconsistent with the real estate lending powers of national banks and apply to national banks to the extent consistent with the decision of the Supreme Court in Barnett Bank of Marion County, N.A. Nelson, Florida Insurance Commissioner, et al., (1) Contracts; (2) Torts; (3) Criminal law; 2 2 Easton Iowa, Id. (4) Homestead laws specified in 12 U.S.C. 1462a(f); (5) Rights to collect debts; (6) Acquisition and transfer of real property; (7) Taxation; (8) Zoning; and (9) Any other law that the OCC determines to be applicable to national banks in accordance with the decision of the Supreme Court in Barnett Bank of Marion County, N.A. Nelson, Florida Insurance Commissioner, et al., [69 FR 1917, Jan. 13, 2004, as amended at 76 FR 43569, July 21, 2011] § 34.5 Due-on-sale clauses. A national bank may make or acquire a loan or interest therein, secured by a lien on real property, that includes a due-on-sale clause. Except as set forth in 12 U.S.C. 1701j-3(d) (which contains a list of transactions in which due-on-sale clauses may not be enforced), due-on-sale clauses in loans, whenever originated, will be valid and enforceable, notwithstanding any State law limitations to the contrary. For the purposes of this section, the term real property includes residential dwellings such as condominium units, cooperative housing units, and residential manufactured homes. § 34.6 Applicability of state law to Federal savings associations and subsidiaries. In accordance with section 1046 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 25b), Federal savings associations and their subsidiaries shall be subject to the same laws and legal standards, including regulations of the OCC, as are applicable to national banks and their subsidiaries, regarding the preemption of state law. [76 FR 43569, July 21, 2011] § 34.7 OCC preemption determinations. (a) Purpose. (b) Escrow. (1) California: Cal. Civ. Code sec. 2954.8; (2) Connecticut: Conn. Gen. Stat. sec. 49-2a; (3) Guam: 11 Guam Code Ann. sec. 106103; (4) Maine: Me. Rev. Stat. Ann. tit. 9-B, sec. 429; Me. Rev. Stat. Ann. tit. 33, sec. 504; (5) Maryland: Md. Code Ann., Com. Law secs. 12-109, 12-109.2; (6) Massachusetts: Mass. Gen. L. ch. 183, sec. 61; (7) Minnesota: Minn. Stat. Ann. sec. 47.20, subd. 9; (8) New York: N.Y. Gen. Oblig. Law sec. 5-601; (9) Oregon: Or. Rev. Stat. secs. 86.245, 86.250; (10) Rhode Island: 19 R.I. Gen. Laws sec. 19-9-2; (11) United States Virgin Islands: V.I. Code tit. 9, sec. 67; (12) Utah: Utah Code Ann. sec. 7-17-3; (13) Vermont: Vt. Stat. Ann. tit. 8, sec. 10404; and (14) Wisconsin: Wis. Stat. secs. 138.051, 138.052. [91 FR 29358, May 19, 2026] Subpart B—Adjustable-Rate Mortgages Source: 61 FR 11301, Mar. 20, 1996, unless otherwise noted. § 34.20 Definitions. Adjustable-rate mortgage (ARM) loan § 34.21 General rule. (a) Authorization. (b) Purchase of loans not in compliance. (c) Purchase of loans from a subsidiary or affiliate. [61 FR 11300, Mar. 20, 1996, as amended at 73 FR 22251, Apr. 24, 2008] § 34.22 Index. (a) In general. i.e., (b) Exception. [61 FR 11300, Mar. 20, 1996, as amended at 73 FR 22251, Apr. 24, 2008] § 34.23 Prepayment fees. A national bank offering or purchasing ARM loans may impose fees for prepayments notwithstanding any State law limitations to the contrary. For purposes of this section, prepayments do not include: (a) Payments that exceed the required payment amount to avoid or reduce negative amortization; or (b) Principal payments, in excess of those necessary to retire the outstanding debt over the remaining loan term at the then-current interest rate, that are made in accordance with rules governing the determination of monthly payments contained in the loan documents. § 34.24 Nonfederally chartered commercial banks. Pursuant to 12 U.S.C. 3803(a), a State chartered commercial bank may make ARM loans in accordance with the provisions of this subpart. For purposes of this section, the term “State” shall have the same meaning as set forth in § 34.2(b). § 34.25 Transition rule. If, on October 1, 1988, a national bank had made a loan or binding commitment to lend under an ARM loan program that complied with the requirements of 12 CFR part 29 in effect prior to October 1, 1988 (see 12 CFR Parts 1 to 199, revised as of January 1, 1988) but would have violated any of the provisions of this subpart, the national bank may continue to administer the loan or binding commitment to lend in accordance with that loan program. All ARM loans or binding commitments to make ARM loans that a national bank entered into after October 1, 1988, must comply with all provisions of this subpart. Subpart C—Appraisals Source: 55 FR 34696, Aug. 24, 1990, unless otherwise noted. § 34.41 Authority, purpose, and scope. (a) Authority. et seq. (b) Purpose and scope. regulated institutions (2) This subpart: (i) Identifies which real estate-related financial transactions require the services of an appraiser; (ii) Prescribes which categories of federally related transactions shall be appraised by a State certified appraiser and which by a State licensed appraiser; and (iii) Prescribes minimum standards for the performance of real estate appraisals in connection with federally related transactions under the jurisdiction of the OCC. [55 FR 34696, Aug. 24, 1990, as amended at 79 FR 28400, May 16, 2014] § 34.42 Definitions. (a) Appraisal (b) Appraisal Foundation (c) Appraisal Subcommittee (d) Business loan (e) Commercial real estate transaction (f) Complex appraisal for a residential real estate transaction (g) Federally related transaction (1) The OCC or any of its regulated institutions engages in or contracts for; and (2) Requires the services of an appraiser. (h) Market value (1) Buyer and seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what they consider their own best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (i) Real estate real property (j) Real estate-related financial transaction (1) The sale, lease, purchase, investment in or exchange of real property, including interests in property, or the financing thereof; or (2) The refinancing of real property or interests in real property; or (3) The use of real property or interests in property as security for a loan or investment, including mortgage-backed securities. (k) Residential real estate transaction (l) State certified appraiser (m) State licensed appraiser (n) Tract development (o) Transaction value (1) For loans or other extensions of credit, the amount of the loan or extension of credit; (2) For sales, leases, purchases, and investments in or exchanges of real property, the market value of the real property interest involved; and (3) For the pooling of loans or interests in real property for resale or purchase, the amount of the loan or market value of the real property calculated with respect to each such loan or interest in real property. [55 FR 34696, Aug. 24, 1990, as amended at 57 FR 12202, Apr. 9, 1992; 59 FR 29499, June 7, 1994; 79 FR 28400, May 16, 2014; 83 FR 15035, Apr. 9, 2018; 84 FR 53597, Oct. 8, 2019] § 34.43 Appraisals required; transactions requiring a State certified or licensed appraiser. (a) Appraisals required. (1) The transaction is a residential real estate transaction that has a transaction value of $400,000 or less; (2) A lien on real estate has been taken as collateral in an abundance of caution; (3) The transaction is not secured by real estate; (4) A lien on real estate has been taken for purposes other than the real estate's value; (5) The transaction is a business loan that: (i) Has a transaction value of $1 million or less; and (ii) Is not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment; (6) A lease of real estate is entered into, unless the lease is the economic equivalent of a purchase or sale of the leased real estate; (7) The transaction involves an existing extension of credit at the lending institution, provided that: (i) There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the institution's real estate collateral protection after the transaction, even with the advancement of new monies; or (ii) There is no advancement of new monies, other than funds necessary to cover reasonable closing costs; (8) The transaction involves the purchase, sale, investment in, exchange of, or extension of credit secured by, a loan or interest in a loan, pooled loans, or interests in real property, including mortgaged-backed securities, and each loan or interest in a loan, pooled loan, or real property interest met OCC regulatory requirements for appraisals at the time of origination; (9) The transaction is wholly or partially insured or guaranteed by a United States government agency or United States government sponsored agency; (10) The transaction either: (i) Qualifies for sale to a United States government agency or United States government sponsored agency; or (ii) Involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate; (11) The regulated institution is acting in a fiduciary capacity and is not required to obtain an appraisal under other law; (12) The OCC determines that the services of an appraiser are not necessary in order to protect Federal financial and public policy interests in real estate-related financial transactions or to protect the safety and soundness of the institution; (13) The transaction is a commercial real estate transaction that has a transaction value of $500,000 or less; or (14) The transaction is exempted from the appraisal requirement pursuant to the rural residential exemption under 12 U.S.C. 3356. (b) Evaluations required. (c) Appraisals to address safety and soundness concerns. (d) Transactions requiring a State certified appraiser All transactions of $1,000,000 or more. (2) Commercial real estate transactions of more than $500,000. (3) Complex appraisals for residential real estate transactions of more than $400,000. (i) The regulated institution may ask the licensed appraiser to complete the appraisal and have a certified appraiser approve and co-sign the appraisal; or (ii) The institution may engage a certified appraiser to complete the appraisal. (e) Transactions requiring either a State certified or licensed appraiser. [55 FR 34696, Aug. 24, 1990, as amended at 57 FR 12202, Apr. 9, 1992; 59 FR 29499, June 7, 1994; 79 FR 28400, May 16, 2014; 83 FR 15035, Apr. 9, 2018; 84 FR 53597, Oct. 8, 2019; 84 FR 53597, Oct. 8, 2019] § 34.44 Minimum appraisal standards. For federally related transactions, all appraisals shall, at a minimum: (a) Conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation, ( www.appraisalfoundation.org (b) Be written and contain sufficient information and analysis to support the institution's decision to engage in the transaction; (c) Be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice; (d) Analyze and report appropriate deductions and discounts for proposed construction or renovation, partially leased buildings, non-market lease terms, and tract developments with unsold units; (e) Be based upon the definition of market value as set forth in this subpart; and (f) Be performed by State licensed or certified appraisers in accordance with requirements set forth in this subpart. [59 FR 29500, June 7, 1994, as amended at 79 FR 28400, May 16, 2014; 84 FR 53597, Oct. 8, 2019] § 34.45 Appraiser independence. (a) Staff appraisers. (b) Fee appraisers. (2) A regulated institution also may accept an appraisal that was prepared by an appraiser engaged directly by another financial services institution, if: (i) The appraiser has no direct or indirect interest, financial or otherwise, in the property or the transaction; and (ii) The regulated institution determines that the appraisal conforms to the requirements of this subpart and is otherwise acceptable. [55 FR 34696, Aug. 24, 1990, as amended at 59 FR 29500, June 7, 1994] § 34.46 Professional association membership; competency. (a) Membership in appraisal organizations. (b) Competency. § 34.47 Enforcement. Institutions and institution-affiliated parties, including staff appraisers and fee appraisers, may be subject to removal and/or prohibition orders, cease and desist orders, and the imposition of civil money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., Subpart D—Real Estate Lending Standards Source: 57 FR 62889, Dec. 31, 1992, unless otherwise noted. § 34.61 Purpose and scope. This subpart, issued pursuant to section 304 of the Federal Deposit Insurance Corporation Improvement Act of 1991, 12 U.S.C. 1828(o), prescribes standards for real estate lending to be used by national banks in adopting internal real estate lending policies. § 34.62 Real estate lending standards. (a) Each national bank shall adopt and maintain written policies that establish appropriate limits and standards for extensions of credit that are secured by liens on or interests in real estate, or that are made for the purpose of financing permanent improvements to real estate. (b)(1) Real estate lending policies adopted pursuant to this section must: (i) Be consistent with safe and sound banking practices; (ii) Be appropriate to the size of the institution and the nature and scope of its operations; and (iii) Be reviewed and approved by the bank's board of directors at least annually. (2) The lending policies must establish: (i) Loan portfolio diversification standards; (ii) Prudent underwriting standards, including loan-to-value limits, that are clear and measurable; (iii) Loan administration procedures for the bank's real estate portfolio; and (iv) Documentation, approval, and reporting requirements to monitor compliance with the bank's real estate lending policies. (c) Each national bank must monitor conditions in the real estate market in its lending area to ensure that its real estate lending policies continue to be appropriate for current market conditions. (d) The real estate lending policies adopted pursuant to this section should reflect consideration of the Interagency Guidelines for Real Estate Lending Policies established by the Federal bank and thrift supervisory agencies. Appendix A to Subpart D of Part 34—Interagency Guidelines for Real Estate Lending The agencies' regulations require that each insured depository institution adopt and maintain a written policy that establishes appropriate limits and standards for all extensions of credit that are secured by liens on or interests in real estate or made for the purpose of financing the construction of a building or other improvements. 1 1 Each institution's policies must be comprehensive, and consistent with safe and sound lending practices, and must ensure that the institution operates within limits and according to standards that are reviewed and approved at least annually by the board of directors. Real estate lending is an integral part of many institutions' business plans and, when undertaken in a prudent manner, will not be subject to examiner criticism. Loan Portfolio Management Considerations The lending policy should contain a general outline of the scope and distribution of the institution's credit facilities and the manner in which real estate loans are made, serviced, and collected. In particular, the institution's policies on real estate lending should: • Identify the geographic areas in which the institution will consider lending. • Establish a loan portfolio diversification policy and set limits for real estate loans by type and geographic market (e.g., limits on higher risk loans). • Identify appropriate terms and conditions by type of real estate loan. • Establish loan origination and approval procedures, both generally and by size and type of loan. • Establish prudent underwriting standards that are clear and measurable, including loan-to-value limits, that are consistent with these supervisory guidelines. • Establish review and approval procedures for exception loans, including loans with loan-to-value percentages in excess of supervisory limits. • Establish loan administration procedures, including documentation, disbursement, collateral inspection, collection, and loan review. • Establish real estate appraisal and evaluation programs. • Require that management monitor the loan portfolio and provide timely and adequate reports to the board of directors. The institution should consider both internal and external factors in the formulation of its loan policies and strategic plan. Factors that should be considered include: • The size and financial condition of the institution. • The expertise and size of the lending staff. • The need to avoid undue concentrations of risk. • Compliance with all real estate related laws and regulations, including the Community Reinvestment Act, anti-discrimination laws, and for savings associations, the Qualified Thrift Lender test. • Market conditions. The institution should monitor conditions in the real estate markets in its lending area so that it can react quickly to changes in market conditions that are relevant to its lending decisions. Market supply and demand factors that should be considered include: • Demographic indicators, including population and employment trends. • Zoning requirements. • Current and projected vacancy, construction, and absorption rates. • Current and projected lease terms, rental rates, and sales prices, including concessions. • Current and projected operating expenses for different types of projects. • Economic indicators, including trends and diversification of the lending area. • Valuation trends, including discount and direct capitalization rates. Underwriting Standards Prudently underwritten real estate loans should reflect all relevant credit factors, including: • The capacity of the borrower, or income from the underlying property, to adequately service the debt. • The value of the mortgaged property. • The overall creditworthiness of the borrower. • The level of equity invested in the property. • Any secondary sources of repayment. • Any additional collateral or credit enhancements (such as guarantees, mortgage insurance or takeout commitments). The lending policies should reflect the level of risk that is acceptable to the board of directors and provide clear and measurable underwriting standards that enable the institution's lending staff to evaluate these credit factors. The underwriting standards should address: • The maximum loan amount by type of property. • Maximum loan maturities by type of property. • Amortization schedules. • Pricing structure for different types of real estate loans. • Loan-to-value limits by type of property. For development and construction projects, and completed commercial properties, the policy should also establish, commensurate with the size and type of the project or property: • Requirements for feasibility studies and sensitivity and risk analyses ( e.g., • Minimum requirements for initial investment and maintenance of hard equity by the borrower ( e.g., • Minimum standards for net worth, cash flow, and debt service coverage of the borrower or underlying property. • Standards for the acceptability of and limits on non-amortizing loans. • Standards for the acceptability of and limits on the use of interest reserves. • Pre-leasing and pre-sale requirements for income-producing property. • Pre-sale and minimum unit release requirements for non-income-producing property loans. • Limits on partial recourse or nonrecourse loans and requirements for guarantor support. • Requirements for takeout commitments. • Minimum covenants for loan agreements. Loan Administration The institution should also establish loan administration procedures for its real estate portfolio that address: • Documentation, including: Type and frequency of financial statements, including requirements for verification of information provided by the borrower; Type and frequency of collateral evaluations (appraisals and other estimates of value). • Loan closing and disbursement. • Payment processing. • Escrow administration. • Collateral administration. • Loan payoffs. • Collections and foreclosure, including: Delinquency follow-up procedures; Foreclosure timing; Extensions and other forms of forbearance; Acceptance of deeds in lieu of foreclosure. • Claims processing ( e.g., • Servicing and participation agreements. Supervisory Loan-to-Value Limits Institutions should establish their own internal loan-to-value limits for real estate loans. These internal limits should not exceed the following supervisory limits: Loan category Loan-to-value limit (percent) Raw land 65 Land development 75 Construction: Commercial, multifamily, 1 80 1- to 4-family residential 85 Improved property 85 Owner-occupied 1- to 4-family and home equity ( 2 1 2 The supervisory loan-to-value limits should be applied to the underlying property that collateralizes the loan. For loans that fund multiple phases of the same real estate project (e.g., a loan for both land development and construction of an office building), the appropriate loan-to-value limit is the limit applicable to the final phase of the project funded by the loan; however, loan disbursements should not exceed actual development or construction outlays. In situations where a loan is fully cross-collateralized by two or more properties or is secured by a collateral pool of two or more properties, the appropriate maximum loan amount under supervisory loan-to-value limits is the sum of the value of each property, less senior liens, multiplied by the appropriate loan-to-value limit for each property. To ensure that collateral margins remain within the supervisory limits, lenders should redetermine conformity whenever collateral substitutions are made to the collateral pool. In establishing internal loan-to-value limits, each lender is expected to carefully consider the institution-specific and market factors listed under “Loan Portfolio Management Considerations,” as well as any other relevant factors, such as the particular subcategory or type of loan. For any subcategory of loans that exhibits greater credit risk than the overall category, a lender should consider the establishment of an internal loan-to-value limit for that subcategory that is lower than the limit for the overall category. The loan-to-value ratio is only one of several pertinent credit factors to be considered when underwriting a real estate loan. Other credit factors to be taken into account are highlighted in the “Underwriting Standards” section above. Because of these other factors, the establishment of these supervisory limits should not be interpreted to mean that loans at these levels will automatically be considered sound. Loans in Excess of the Supervisory Loan-to-Value Limits The agencies recognize that appropriate loan-to-value limits vary not only among categories of real estate loans but also among individual loans. Therefore, it may be appropriate in individual cases to originate or purchase loans with loan-to-value ratios in excess of the supervisory loan-to-value limits, based on the support provided by other credit factors. Such loans should be identified in the institutions's records, and their aggregate amount reported at least quarterly to the institution's board of directors. (See additional reporting requirements described under “Exceptions to the General Policy.”) The aggregate amount of all loans in excess of the supervisory loan-to-value limits should not exceed 100 percent of total capital. 2 2 In determining the aggregate amount of such loans, institutions should: (a) Include all loans secured by the same property if any one of those loans exceeds the supervisory loan-to-value limits; and (b) include the recourse obligation of any such loan sold with recourse. Conversely, a loan should no longer be reported to the directors as part of aggregate totals when reduction in principal or senior liens, or additional contribution of collateral or equity (e.g., improvements to the real property securing the loan), bring the loan-to-value ratio into compliance with supervisory limits. Excluded Transactions The agencies also recognize that there are a number of lending situations in which other factors significantly outweigh the need to apply the supervisory loan-to-value limits. These include: • Loans guaranteed or insured by the U.S. government or its agencies, provided that the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit. • Loans backed by the full faith and credit of a State government, provided that the amount of the assurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit. • Loans guaranteed or insured by a State, municipal or local government, or an agency thereof, provided that the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the supervisory loan-to-value limit, and provided that the lender has determined that the guarantor or insurer has the financial capacity and willingness to perform under the terms of the guaranty or insurance agreement. • Loans that are to be sold promptly after origination, without recourse, to a financially responsible third party. • Loans that are renewed, refinanced, or restructured without the advancement of new funds or an increase in the line of credit (except for reasonable closing costs), or loans that are renewed, refinanced, or restructured in connection with a workout situation, either with or without the advancement of new funds, where consistent with safe and sound banking practices and part of a clearly defined and well-documented program to achieve orderly liquidation of the debt, reduce risk of loss, or maximize recovery on the loan. • Loans that facilitate the sale of real estate acquired by the lender in the ordinary course of collecting a debt previously contracted in good faith. • Loans for which a lien on or interest in real property is taken as additional collateral through an abundance of caution by the lender (e.g., the institution takes a blanket lien on all or substantially all of the assets of the borrower, and the value of the real property is low relative to the aggregate value of all other collateral). • Loans, such as working capital loans, where the lender does not rely principally on real estate as security and the extension of credit is not used to acquire, develop, or construct permanent improvements on real property. • Loans for the purpose of financing permanent improvements to real property, but not secured by the property, if such security interest is not required by prudent underwriting practice. Exceptions to the General Lending Policy Some provision should be made for the consideration of loan requests from creditworthy borrowers whose credit needs do not fit within the institution's general lending policy. An institution may provide for prudently underwritten exceptions to its lending policies, including loan-to-value limits, on a loan-by-loan basis. However, any exceptions from the supervisory loan-to-value limits should conform to the aggregate limits on such loans discussed above. The board of directors is responsible for establishing standards for the review and approval of exception loans. Each institution should establish an appropriate internal process for the review and approval of loans that do not conform to its own internal policy standards. The approval of any such loan should be supported by a written justification that clearly sets forth all of the relevant credit factors that support the underwriting decision. The justification and approval documents for such loans should be maintained as a part of the permanent loan file. Each institution should monitor compliance with its real estate lending policy and individually report exception loans of a significant size to its board of directors. Supervisory Review of Real Estate Lending Policies and Practices The real estate lending policies of institutions will be evaluated by examiners during the course of their examinations to determine if the policies are consistent with safe and sound lending practices, these guidelines, and the requirements of the regulation. In evaluating the adequacy of the institution's real estate lending policies and practices, examiners will take into consideration the following factors: • The nature and scope of the institution's real estate lending activities. • The size and financial condition of the institution. • The quality of the institution's management and internal controls. • The expertise and size of the lending and loan administration staff. • Market conditions. Lending policy exception reports will also be reviewed by examiners during the course of their examinations to determine whether the institutions' exceptions are adequately documented and appropriate in light of all of the relevant credit considerations. An excessive volume of exceptions to an institution's real estate lending policy may signal a weakening of its underwriting practices, or may suggest a need to revise the loan policy. Definitions For the purposes of these Guidelines: Construction loan Extension of credit loan (1) The total amount of any loan, line of credit, or other legally binding lending commitment with respect to real property; and (2) The total amount, based on the amount of consideration paid, of any loan, line of credit, or other legally binding lending commitment acquired by a lender by purchase, assignment, or otherwise. Improved property loan (1) Farmland, ranchland or timberland committed to ongoing management and agricultural production; (2) 1- to 4-family residential property that is not owner-occupied; (3) Residential property containing five or more individual dwelling units; (4) Completed commercial property; or (5) Other income-producing property that has been completed and is available for occupancy and use, except income-producing owner-occupied 1- to 4-family residential property. Land development loan Loan origination Loan-to-value loan-to-value ratio Other acceptable collateral Owner-occupied, 1- to 4-family residential property Readily marketable collateral Value 1- to 4-family residential property [57 FR 62896, Dec. 31, 1992; 58 FR 4460, Jan. 14, 1993, as amended at 79 FR 11312, Feb. 28, 2014; 84 FR 56374, Oct. 22, 2019] Subpart E—Other Real Estate Owned Source: 61 FR 11301, Mar. 20, 1996, unless otherwise noted. § 34.81 Definitions. Debts previously contracted (DPC) real estate Former banking premises Market value Other real estate owned (OREO) (1) DPC real estate; and (2) Former banking premises. Recorded investment amount (1) For loans, the recorded loan balance, as determined by generally accepted accounting principles; and (2) For former banking premises, the net book value. [61 FR 11301, Mar. 20, 1996, as amended at 79 FR 11313, Feb. 28, 2014; 84 FR 56374, Oct. 22, 2019] § 34.82 Holding period. (a) Holding period for OREO National bank. (2) Federal savings association. (b) Commencement of holding period. (1) Ownership of the property is originally transferred to a national bank or Federal savings association, including as a result of a merger with or acquisition of another organization holding OREO; (2) A national bank or Federal savings association completes relocation from former banking premises to new banking premises or ceases to use the former banking premises without relocating; (3) A national bank or Federal savings association decides not to use real estate acquired for future banking expansion; (4) An institution converts to a national bank or Federal savings association, unless the institution was a national bank or Federal savings association immediately prior to the conversion; or (5) Is January 1, 2020, for OREO obtained by a Federal savings association prior to that date. (c) Effect of statutory redemption period. (d) Effect of failed disposition. (e) Re-acquisition of former OREO. [61 FR 11301, Mar. 20, 1996, as amended at 84 FR 56375, Oct. 22, 2019; 84 FR 64193, Nov. 21, 2019] § 34.83 Disposition of OREO. (a) Disposition. (1) With respect to OREO in general: (i) By entering into a transaction that is a sale under generally accepted accounting principles; (ii) By entering into a transaction that involves a loan guaranteed or insured by the United States government or by an agency of the United States government or a loan eligible for purchase by a Federally-sponsored instrumentality that purchases loans; or (iii) By selling the property pursuant to a land contract or a contract for deed; (2) With respect to DPC real estate, by retaining the property for its own use as bank premises or by transferring it to a subsidiary or affiliate for use in the business of the subsidiary or affiliate; (3) With respect to a lease: (i) By obtaining an assignment or a coterminous sublease. If a national bank or Federal savings association enters into a sublease that is not coterminous, the period during which the master lease must be divested will be suspended for the duration of the sublease, and will begin running again upon termination of the sublease. A national bank or Federal savings association holding a lease as OREO may enter into an extension of the lease that would exceed the holding period referred to in § 34.82 if the extension meets the following criteria: (A) The extension is necessary in order to sublease the master lease; (B) The national bank or Federal savings association, prior to entering into the extension, has a firm commitment from a prospective subtenant to sublease the property; and (C) The term of the extension is reasonable and does not materially exceed the term of the sublease; (ii) Should the OCC determine that a national bank or Federal savings association has entered into a lease, extension of a lease, or a sublease for the purpose of real estate speculation, the OCC will take appropriate measures to address the violation, which may include requiring the bank or savings association to take immediate steps to divest the lease or sublease; and (4) With respect to a transaction that does not qualify as a disposition under paragraphs (a)(1) through (3) of this section, by receiving or accumulating from the purchaser an amount in a down payment, principal and interest payments, and private mortgage insurance totalling at least 10 percent of the sales price, as measured in accordance with generally accepted accounting principles; or (5) By any other method approved by the OCC. (b) Additional method for Federal savings associations. (1) As OREO, subject to the requirements otherwise applicable to the Federal savings association under this subpart E; or (2) As an investment in real estate under § 5.59. (c) Disposition efforts and documentation. [61 FR 11301, Mar. 20, 1996, as amended at 84 FR 56375, Oct. 22, 2019; 85 FR 43422, July 17, 2020] § 34.84 [Reserved] § 34.85 Appraisal requirements. (a) General. (i) An appraisal in accordance with subpart C of this part; or (ii) An appropriate evaluation when the recorded investment amount is equal to or less than the threshold amount in subpart C of this part. (2) A national bank or Federal savings association shall develop a prudent real estate collateral evaluation policy that allows the bank or savings association to monitor the value of each parcel of OREO in a manner consistent with prudent banking practice. (b) Exception. (c) Sales of OREO. [61 FR 11301, Mar. 20, 1996, as amended at 84 FR 56375, Oct. 22, 2019] § 34.86 OREO expenditures and notification. (a) Operating expenditures. (b) Business expenditures. (1) Reasonably calculated to reduce any shortfall between the property's market value and the recorded investment amount; and (2) Consistent with safe and sound banking practices. (c) Additional expenditures. (1) Reasonably calculated to reduce any shortfall between the property's market value and the recorded investment amount; (2) Not made for the purpose of speculation in real estate; and (3) Consistent with safe and sound banking practices. (d) Notification procedures for additional expenditures. (2) The required notification must demonstrate that the additional expenditure is consistent with the conditions and limitations in paragraph (c) of this section. (3) Unless informed otherwise, the national bank or Federal savings association may implement the proposed plan on the thirty-first day (or sooner, if notified by the OCC) following receipt by the OCC of the notification, subject to any conditions imposed by the OCC. [84 FR 56375, Oct. 22, 2019] Subpart F [Reserved] Subpart G—Appraisals for Higher-Priced Mortgage Loans Source: 78 FR 10432, Feb. 13, 2013, unless otherwise noted. § 34.201 Authority, purpose and scope. (a) Authority. (b) Purpose. (1) By 1.5 or more percentage points, for a loan secured by a first lien with a principal obligation at consummation that does not exceed the limit in effect as of the date the transaction's interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac; (2) By 2.5 or more percentage points, for a loan secured by a first lien with a principal obligation at consummation that exceeds the limit in effect as of the date the transaction's interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac; or (3) By 3.5 or more percentage points, for a loan secured by a subordinate lien. (c) Scope. (d) Official Interpretations. § 34.202 Definitions applicable to higher-priced mortgage loans. (a) Consummation has the same meaning as in 12 CFR 1026.2(a)(13). (b) Creditor has the same meaning as in 12 CFR 1026.2(a)(17). (c) Higher-priced mortgage loan has the same meaning as in 12 CFR 1026.35(a)(1). (d) Reverse mortgage has the same meaning as in 12 CFR 1026.33(a). [78 FR 10432, Feb. 13, 2013, as amended at 78 FR 78579, Dec. 26, 2013] § 34.203 Appraisals for higher-priced mortgage loans. (a) Definitions. (1) Certified or licensed appraiser et seq. (2) Credit risk (3) Manufactured home (4) Manufacturer's invoice (5) National Registry (6) New manufactured home (7) State agency (b) Exemptions. (1) A loan that satisfies the criteria of a qualified mortgage as defined pursuant to 15 U.S.C. 1639c. (2) An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in the OCC official interpretations to this paragraph (b)(2). (3) A transaction secured by a mobile home, boat, or trailer. (4) A transaction to finance the initial construction of a dwelling. (5) A loan with a maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling. (6) A reverse-mortgage transaction subject to 12 CFR 1026.33(a). (7) An extension of credit that is a refinancing secured by a first lien, with refinancing defined as in 12 CFR 1026.20(a) (except that the creditor need not be the original creditor or a holder or servicer of the original obligation), provided that the refinancing meets the following criteria: (i) Either— (A) The credit risk of the refinancing is retained by the person that held the credit risk of the existing obligation and there is no commitment, at consummation, to transfer the credit risk to another person; or (B) The refinancing is insured or guaranteed by the same Federal government agency that insured or guaranteed the existing obligation; (ii) The regular periodic payments under the refinance loan do not— (A) Cause the principal balance to increase; (B) Allow the consumer to defer repayment of principal; or (C) Result in a balloon payment, as defined in 12 CFR 1026.18(s)(5)(i); and (iii) The proceeds from the refinancing are used solely to satisfy the existing obligation and to pay amounts attributed solely to the costs of the refinancing; and (8) A transaction secured by: (i) A new manufactured home and land, but the exemption shall only apply to the requirement in paragraph (c)(1) of this section that the appraiser conduct a physical visit of the interior of the new manufactured home; or (ii) A manufactured home and not land, for which the creditor obtains one of the following and provides a copy to the consumer no later than three business days prior to consummation of the transaction— (A) For a new manufactured home, the manufacturer's invoice for the manufactured home securing the transaction, provided that the date of manufacture is no earlier than 18 months prior to the creditor's receipt of the consumer's application for credit; (B) A cost estimate of the value of the manufactured home securing the transaction obtained from an independent cost service provider; or (C) A valuation, as defined in 12 CFR 1026.42(b)(3), of the manufactured home performed by a person who has no direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is performed and has training in valuing manufactured homes. (c) Appraisals required In general. (2) Safe harbor. (i) Orders that the appraiser perform the appraisal in conformity with the Uniform Standards of Professional Appraisal Practice and title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (12 U.S.C. 3331 et seq. (ii) Verifies through the National Registry that the appraiser who signed the appraiser's certification was a certified or licensed appraiser in the State in which the appraised property is located as of the date the appraiser signed the appraiser's certification; (iii) Confirms that the elements set forth in appendix A to this subpart are addressed in the written appraisal; and (iv) Has no actual knowledge contrary to the facts or certifications contained in the written appraisal. (d) Additional appraisal for certain higher-priced mortgage loans In general. (i) The seller acquired the property 90 or fewer days prior to the date of the consumer's agreement to acquire the property and the price in the consumer's agreement to acquire the property exceeds the seller's acquisition price by more than 10 percent; or (ii) The seller acquired the property 91 to 180 days prior to the date of the consumer's agreement to acquire the property and the price in the consumer's agreement to acquire the property exceeds the seller's acquisition price by more than 20 percent. (2) Different certified or licensed appraisers. (3) Relationship to general appraisal requirements. (4) Required analysis in the additional appraisal. (i) The difference between the price at which the seller acquired the property and the price that the consumer is obligated to pay to acquire the property, as specified in the consumer's agreement to acquire the property from the seller; (ii) Changes in market conditions between the date the seller acquired the property and the date of the consumer's agreement to acquire the property; and (iii) Any improvements made to the property between the date the seller acquired the property and the date of the consumer's agreement to acquire the property. (5) No charge for the additional appraisal. (6) Creditor's determination of prior sale date and price Reasonable diligence. (ii) Inability to determine prior sale date or price—modified requirements for additional appraisal. (7) Exemptions from the additional appraisal requirement. (i) From a local, State or Federal government agency; (ii) From a person who acquired title to the property through foreclosure, deed-in-lieu of foreclosure, or other similar judicial or non-judicial procedure as a result of the person's exercise of rights as the holder of a defaulted mortgage loan; (iii) From a non-profit entity as part of a local, State, or Federal government program under which the non-profit entity is permitted to acquire title to single-family properties for resale from a seller who acquired title to the property through the process of foreclosure, deed-in-lieu of foreclosure, or other similar judicial or non-judicial procedure; (iv) From a person who acquired title to the property by inheritance or pursuant to a court order of dissolution of marriage, civil union, or domestic partnership, or of partition of joint or marital assets to which the seller was a party; (v) From an employer or relocation agency in connection with the relocation of an employee; (vi) From a servicemember, as defined in 50 U.S.C. App. 511(1), who received a deployment or permanent change of station order after the servicemember purchased the property; (vii) Located in an area designated by the President as a federal disaster area, if and for as long as the Federal financial institutions regulatory agencies, as defined in 12 U.S.C. 3350(6), waive the requirements in title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (12 U.S.C. 3331 et seq. (viii) Located in a rural county, as defined in 12 CFR 1026.35(b)(2)(iv)(A). (e) Required disclosure In general. (2) Timing of disclosure. (f) Copy of appraisals In general. (2) Timing. (i) No later than three business days prior to consummation of the loan; or (ii) In the case of a loan that is not consummated, no later than 30 days after the creditor determines that the loan will not be consummated. (3) Form of copy. et seq. (4) No charge for copy of appraisal. (g) Relation to other rules. [78 FR 10432, Feb. 13, 2013, as amended at 78 FR 78579, 78580, Dec. 26, 2013] Appendix A to Subpart G of Part 34—Higher-Priced Mortgage Loan Appraisal Safe Harbor Review To qualify for the safe harbor provided in § 34.203(c)(2), a creditor must confirm that the written appraisal: 1. Identifies the creditor who ordered the appraisal and the property and the interest being appraised. 2. Indicates whether the contract price was analyzed. 3. Addresses conditions in the property's neighborhood. 4. Addresses the condition of the property and any improvements to the property. 5. Indicates which valuation approaches were used, and includes a reconciliation if more than one valuation approach was used. 6. Provides an opinion of the property's market value and an effective date for the opinion. 7. Indicates that a physical property visit of the interior of the property was performed, as applicable.. 8. Includes a certification signed by the appraiser that the appraisal was prepared in accordance with the requirements of the Uniform Standards of Professional Appraisal Practice. 9. Includes a certification signed by the appraiser that the appraisal was prepared in accordance with the requirements of title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended (12 U.S.C. 3331 et seq. [78 FR 10432, Feb. 13, 2013, as amended at 78 FR 78580, Dec. 26, 2013] Appendix B to Subpart G of Part 34—Illustrative Written Source Documents for Higher-Priced Mortgage Loan Appraisal Rules A creditor acts with reasonable diligence under § 34.203(d)(6)(i) if the creditor bases its determination on information contained in written source documents, such as: 1. A copy of the recorded deed from the seller. 2. A copy of a property tax bill. 3. A copy of any owner's title insurance policy obtained by the seller. 4. A copy of the RESPA settlement statement from the seller's acquisition ( i.e., 5. A property sales history report or title report from a third-party reporting service. 6. Sales price data recorded in multiple listing services. 7. Tax assessment records or transfer tax records obtained from local governments. 8. A written appraisal performed in compliance with § 34.203(c)(1) for the same transaction. 9. A copy of a title commitment report detailing the seller's ownership of the property, the date it was acquired, or the price at which the seller acquired the property. 10. A property abstract. Appendix C to Subpart G of Part 34—OCC Interpretations Section 34.202—Definitions applicable to higher-priced mortgage loans 1. Staff Interpretations. Section 34.203—Appraisals for higher-priced mortgage loans 34.203(a) Definitions. 34.203(a)(1) Certified or licensed appraiser. 1. USPAP. 2. Appraiser's certification. 3. FIRREA title XI and implementing regulations. 34.203(b) Exemptions. 1. Compliance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). 34.203(b)(1) Exemptions Paragraph 34.203(b)(1) 1. Qualified mortgage criteria. i. The loan is—(1) subject to the ability-to-repay requirements of the Consumer Financial Protection Bureau (Bureau) in 12 CFR 1026.43 as a “covered transaction” (defined in 12 CFR 1026.43(b)(1)) and (2) a qualified mortgage pursuant to the Bureau's rules or, for loans insured, guaranteed, or administered by the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA), or Rural Housing Service (RHS), a qualified mortgage pursuant to applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's definition of a qualified mortgage applies to those loans); or ii. The loan is—(1) not subject to the Bureau's ability-to-repay requirements in 12 CFR 1026.43 as a “covered transaction” (defined in 12 CFR 1026.43(b)(1)), but (2) meets the criteria for a qualified mortgage in the Bureau's rules or, for loans insured, guaranteed, or administered by HUD, VA, USDA, or RHS, meets the criteria for a qualified mortgage in the applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's criteria for a qualified mortgage applies to those loans). To explain further, loans enumerated in 12 CFR 1026.43(a) are not “covered transactions” under the Bureau's ability-to-repay requirements in 12 CFR 1026.43, and thus cannot be qualified mortgages (entitled to a rebuttable presumption or safe harbor of compliance with the ability-to-repay requirements of 12 CFR 1026.43, see, e.g., See See Paragraph 34.203(b)(2). Threshold amount. 2. No increase in the CPI-W. i. Net increases. ii. Net decreases. 3. Threshold. i. From January 18, 2014, through December 31, 2014, the threshold amount is $25,000. ii. From January 1, 2015, through December 31, 2015, the threshold amount is $25,500. iii. From January 1, 2016, through December 31, 2016, the threshold amount is $25,500. iv. From January 1, 2017, through December 31, 2017, the threshold amount is $25,500. v. From January 1, 2018, through December 31, 2018, the threshold amount is $26,000. vi. From January 1, 2019, through December 31, 2019, the threshold amount is $26,700. vii. From January 1, 2020, through December 31, 2020, the threshold amount is $27,200. viii. From January 1, 2021, through December 31, 2021, the threshold amount is $27,200. ix. From January 1, 2022, through December 31, 2022, the threshold amount is $28,500. x. From January 1, 2023, through December 31, 2023, the threshold amount is $31,000. xi. From January 1, 2024, through December 31, 2024, the threshold amount is $32,400. xii. From January 1, 2025, through December 31, 2025, the threshold amount is $33,500. xiii. From January 1, 2026, through December 31, 2026, the threshold amount is $34,200. 4. Qualifying for exemption—in general. 5. Qualifying for exemption—subsequent changes. See Paragraph 34.203(b)(3). 1. Secured by a mobile home. Paragraph 34.203(b)(4). 1. Construction-to-permanent loans. See See 2. Financing initial construction. See Paragraph 34.203(b)(7) Paragraph 34.203(b)(7)(i)(A) 1. Same credit risk holder. See 2. Same credit risk holder—illustrations. Illustrations of the credit risk holder of the existing obligation continuing to be the credit risk holder of the refinancing include, but are not limited to, the following: i. The existing obligation is held in the portfolio of a bank, thus the bank holds the credit risk. The bank arranges to refinance the loan and also will hold the refinancing in its portfolio. If the refinancing otherwise meets the requirements for an exemption under § 34.203(b)(7), the transaction will qualify for the exemption because the credit risk holder is the same for the existing obligation and the refinance transaction. In this case, the exemption would apply regardless of whether the bank arranged to refinance the loan directly or indirectly, such as through the servicer or subservicer on the existing obligation. ii. The existing obligation is held in the portfolio of a government-sponsored enterprise (GSE), thus the GSE holds the credit risk. The existing obligation is then refinanced by the servicer of the loan and immediately transferred to the GSE. The GSE pools the refinancing in a mortgage-backed security guaranteed by the GSE, thus the GSE holds the credit risk on the refinance loan. If the refinance transaction otherwise meets the requirements for an exemption under § 34.203(b)(7), the transaction will qualify for the exemption because the credit risk holder is the same for the existing obligation and the refinance transaction. In this case, the exemption would apply regardless of whether the existing obligation was refinanced by the servicer or subservicer on the existing obligation (acting as a “creditor” under 12 CFR 1026.2(a)(17)) or by a different creditor. 3. Forward commitments. Paragraph 34.203(b)(7)(ii) 1. Regular periodic payments. see see Paragraph 34.203(b)(7)(iii) 1. Permissible use of proceeds. see For applications received on or after July 18, 2015 Paragraph 34.203(b)(8) Paragraph 34.203(b)(8)(i) 1. Secured by new manufactured home and land—physical visit of the interior. Paragraph 34.203(b)(8)(ii) 1. Secured by a manufactured home and not land. Paragraph 34.203(b)(8)(ii)(B) 1. Independent. 2. Adjustments. Paragraph 34.203(b)(8)(ii)(C) 1. Interest in the property. 2. Interest in the transaction. 3. Training in valuing manufactured homes. 4. Manufactured home valuation—example. 34.203(c)(1) In general. 1. Written appraisal—electronic transmission. 34.203(c)(2) Safe harbor. 1. Safe harbor. 2. Appraiser's certification. See also Paragraph 34.203(c)(2)(iii). 1. Confirming elements in the appraisal. 34.203(d) Additional appraisal for certain higher-priced mortgage loans. 1. Acquisition. 34.203(d)(1) In general. 1. Appraisal from a previous transaction. 2. 90-day, 180-day calculation. 3. Date seller acquired the property. 4. Date of the consumer's agreement to acquire the property. 5. Price at which the seller acquired the property. 6. Price the consumer is obligated to pay to acquire the property. See also 34.203(d)(2) Different certified or licensed appraisers. 1. Independent appraisers. 34.203(d)(3) Relationship to general appraisal requirements. 1. Safe harbor. 34.203(d)(4) Required analysis in the additional appraisal. 1. Determining acquisition dates and prices used in the analysis of the additional appraisal. 34.203(d)(5) No charge for additional appraisal. 1. Fees and mark-ups. 34.203(d)(6) Creditor's determination of prior sale date and price. 34.203(d)(6)(i) In general. 1. Estimated sales price. 2. Reasonable diligence—oral statements insufficient. 3. Lack of information and conflicting information—two appraisals required. See also i. Assume a creditor orders and reviews the results of a title search, which shows that a prior sale occurred between 91 and 180 days ago, but not the price paid in that sale. Thus, based on the title search, the creditor would not be able to determine whether the price the consumer is obligated to pay under the consumer's acquisition agreement is more than 20 percent higher than the seller's acquisition price, pursuant to § 34.203(d)(1)(ii). Before extending a higher-priced mortgage loan subject to the appraisal requirements of § 34.203, the creditor must either: perform additional diligence to ascertain the seller's acquisition price and, based on this information, determine whether two written appraisals are required; or obtain two written appraisals in compliance with § 34.203(d)(6). See also ii. Assume a creditor reviews the results of a title search indicating that the last recorded purchase was more than 180 days before the consumer's agreement to acquire the property. Assume also that the creditor subsequently receives a written appraisal indicating that the seller acquired the property between 91 and 180 days before the consumer's agreement to acquire the property. In this case, unless one of these sources is clearly wrong on its face, the creditor would not be able to determine whether the seller acquired the property within 180 days of the date of the consumer's agreement to acquire the property from the seller, pursuant to § 34.203(d)(1)(ii). Before extending a higher-priced mortgage loan subject to the appraisal requirements of § 34.203, the creditor must either: perform additional diligence to ascertain the seller's acquisition date and, based on this information, determine whether two written appraisals are required; or obtain two written appraisals in compliance with § 34.203(d)(6). See also 34.203(d)(6)(ii) Inability to determine prior sales date or price—modified requirements for additional appraisal. 1. Required analysis. 34.203(d)(7) Exemptions from the additional appraisal requirement. Paragraph 34.203(d)(7)(iii). 1. Non-profit entity. Paragraph 34.203(d)(7)(viii). 1. Bureau table of rural counties. See 34.203(e) Required disclosure. 34.203(e)(1) In general. 1. Multiple applicants. 2. Appraisal independence requirements not affected. 34.203(f) Copy of appraisals. 34.203(f)(1) In general. 1. Multiple applicants. 34.203(f)(2) Timing. 1. “Provide.” 2. No waiver. 34.203(f)(4) No charge for copy of appraisal. 1. Fees and mark-ups. Appendix B—Illustrative Written Source Documents for Higher-Priced Mortgage Loan Appraisal Rules 1. Title commitment report. [78 FR 10432, Feb. 13, 2013, as amended at 78 FR 78580, Dec. 26, 2013; 79 FR 78298, Dec. 30, 2014; 80 FR 73945, Nov. 27, 2015; 81 FR 86254, Nov. 30, 2016; 82 FR 51974, Nov. 9, 2017; 83 FR 59274, Nov. 23, 2018; 84 FR 58015, Oct. 30, 2019; 85 FR 79387, Dec. 10, 2020; 86 FR 67845, Nov. 30, 2021; 87 FR 63665, Oct. 20, 2022; 88 FR 83313, Nov. 29, 2023; 89 FR 82932, Oct. 15, 2024; 90 FR 58143, Dec. 16, 2025] Subpart H—Appraisal Management Company Minimum Requirements Source: 80 FR 32679, June 9, 2015, unless otherwise noted. § 34.210 Authority, purpose, and scope. (a) Authority. et seq. (b) Purpose. (c) Scope. (d) Rule of construction. 3 3 See http://www.occ.gov/news-issuances/bulletins/2010/bulletin-2010-42.html § 34.211 Definitions. For purposes of this subpart: (a) Affiliate (b) AMC National Registry (c)(1) Appraisal management company (i) Provides appraisal management services to creditors or to secondary mortgage market participants, including affiliates; (ii) Provides such services in connection with valuing a consumer's principal dwelling as security for a consumer credit transaction or incorporating such transactions into securitizations; and (iii) Within a given 12-month period, as defined in § 34.212(d), oversees an appraiser panel of more than 15 State-certified or State-licensed appraisers in a State or 25 or more State-certified or State-licensed appraisers in two or more States, as described in § 34.212; (2) An AMC does not include a department or division of an entity that provides appraisal management services only to that entity. (d) Appraisal management services (1) Recruiting, selecting, and retaining appraisers; (2) Contracting with State-certified or State-licensed appraisers to perform appraisal assignments; (3) Managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided, and paying appraisers for services performed; and (4) Reviewing and verifying the work of appraisers. (e) Appraiser panel (f) Appraisal Subcommittee (g) Consumer credit (h) Covered transaction (i) Creditor (1) A person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. (2) A person regularly extends consumer credit if the person extended credit (other than credit subject to the requirements of 12 CFR 1026.32) more than 5 times for transactions secured by a dwelling in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is subject to the requirements of 12 CFR 1026.32 or one or more such credit extensions through a mortgage broker. (j) Dwelling (1) A residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence. (2) A consumer can have only one “principal” dwelling at a time. Thus, a vacation or other second home would not be a principal dwelling. However, if a consumer buys or builds a new dwelling that will become the consumer's principal dwelling within a year or upon the completion of construction, the new dwelling is considered the principal dwelling for purposes of this section. (k) Federally regulated AMC (l) Federally related transaction regulations (m) Person (n) Secondary mortgage market participant (o) States (p) Uniform Standards of Professional Appraisal Practice § 34.212 Appraiser panel—annual size calculation. For purposes of determining whether, within a 12-month period, an AMC oversees an appraiser panel of more than 15 State-certified or State-licensed appraisers in a State or 25 or more State-certified or State-licensed appraisers in two or more States pursuant to § 34.211(c)(1)(iii)— (a) An appraiser is deemed part of the AMC's appraiser panel as of the earliest date on which the AMC: (1) Accepts the appraiser for the AMC's consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions; or (2) Engages the appraiser to perform one or more appraisals on behalf of a creditor for a covered transaction or secondary mortgage market participant in connection with covered transactions. (b) An appraiser who is deemed part of the AMC's appraiser panel pursuant to paragraph (a) of this section is deemed to remain on the panel until the date on which the AMC: (1) Sends written notice to the appraiser removing the appraiser from the appraiser panel, with an explanation of its action; or (2) Receives written notice from the appraiser asking to be removed from the appraiser panel or notice of the death or incapacity of the appraiser. (c) If an appraiser is removed from an AMC's appraiser panel pursuant to paragraph (b) of this section, but the AMC subsequently accepts the appraiser for consideration for future assignments or engages the appraiser at any time during the twelve months after the AMC's removal, the removal will be deemed not to have occurred, and the appraiser will be deemed to have been part of the AMC's appraiser panel without interruption. (d) The period for purposes of counting appraisers on an AMC's appraiser panel may be the calendar year or a 12-month period established by law or rule of each State with which the AMC is required to register. § 34.213 Appraisal management company registration. Each State electing to register AMCs pursuant to paragraph (b)(1) of this section must: (a) Establish and maintain within the State appraiser certifying and licensing agency a licensing program that is subject to the limitations set forth in § 34.214 and with the legal authority and mechanisms to: (1) Review and approve or deny an AMC's application for initial registration; (2) Review and renew or review and deny an AMC's registration periodically; (3) Examine the books and records of an AMC operating in the State and require the AMC to submit reports, information, and documents; (4) Verify that the appraisers on the AMC's appraiser panel hold valid State certifications or licenses, as applicable; (5) Conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations, or orders; (6) Discipline, suspend, terminate, or deny renewal of the registration of an AMC that violates applicable appraisal-related laws, regulations, or orders; and (7) Report an AMC's violation of applicable appraisal-related laws, regulations, or orders, as well as disciplinary and enforcement actions and other relevant information about an AMC's operations, to the Appraisal Subcommittee. (b) Impose requirements on AMCs that are not owned and controlled by an insured depository institution and not regulated by a Federal financial institutions regulatory agency to: (1) Register with and be subject to supervision by the State appraiser certifying and licensing agency; (2) Engage only State-certified or State-licensed appraisers for Federally related transactions in conformity with any Federally related transaction regulations; (3) Establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type; (4) Direct the appraiser to perform the assignment in accordance with USPAP; and (5) Establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with the requirements of section 129E(a) through (i) of the Truth in Lending Act, 15 U.S.C. 1639e(a) through (i), and regulations thereunder. § 34.214 Ownership limitations for State-registered appraisal management companies. (a) Appraiser certification or licensing of owners. (2) An AMC subject to State registration pursuant to § 34.213 is not barred by paragraph (a)(1) of this section from being registered by a State or included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (b) Good moral character of owners. (1) Is determined by the State appraiser certifying and licensing agency not to have good moral character; or (2) Fails to submit to a background investigation carried out by the State appraiser certifying and licensing agency. § 34.215 Requirements for Federally regulated appraisal management companies. (a) Requirements in providing services. (b) Ownership limitations. (2) A Federally regulated AMC is not barred by this paragraph (b) from being included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (c) Reporting information for the AMC National Registry. § 34.216 Information to be presented to the Appraisal Subcommittee by participating States. Each State electing to register AMCs for purposes of permitting AMCs to provide appraisal management services relating to covered transactions in the State must submit to the Appraisal Subcommittee the information required to be submitted by Appraisal Subcommittee regulations or guidance concerning AMCs that operate in the State. Subpart I—Quality Control Standards for Automated Valuation Models Used for Mortgage Lending Purposes Source: 89 FR 64571, Aug. 7, 2024, unless otherwise noted. § 34.220 Authority, purpose, and scope. (a) Authority. (b) Purpose and scope. (2) This subpart does not apply to the use of automated valuation models in: (i) Monitoring of the quality or performance of mortgages or mortgage-backed securities; (ii) Reviews of the quality of already completed determinations of the value of collateral; or (iii) The development of an appraisal by a certified or licensed appraiser. § 34.221 Definitions. As used in this subpart: Automated valuation model Control systems Covered securitization determination (1) Whether to waive an appraisal requirement for a mortgage origination in connection with its potential sale or transfer to a secondary market issuer; or (2) Structuring, preparing disclosures for, or marketing initial offerings of mortgage-backed securitizations. Credit decision Dwelling Mortgage Mortgage originator (1) Any person who, for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain— (i) Takes a mortgage application; (ii) Assists a consumer in obtaining or applying to obtain a mortgage; or (iii) Offers or negotiates terms of a mortgage; (2) Includes any person who represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such person can or will provide any of the services or perform any of the activities described in paragraph (1) of this definition; (3) Does not include any person who is— (i) Not otherwise described in paragraph (1) or (2) of this definition and who performs purely administrative or clerical tasks on behalf of a person who is described in any such paragraph; or (ii) A retailer of manufactured or modular homes or an employee of the retailer if the retailer or employee, as applicable— (A) Does not receive compensation or gain for engaging in activities described in paragraph (1) of this definition that is in excess of any compensation or gain received in a comparable cash transaction; (B) Discloses to the consumer— ( 1 ( 2 (C) Does not directly negotiate with the consumer or lender on loan terms (including rates, fees, and other costs); (4) Does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable State law, unless such person or entity is compensated by a lender, a mortgage broker, or other mortgage originator or by any agent of such lender, mortgage broker, or other mortgage originator; (5) Does not include a person that meets all of the following criteria: (i) The person provides seller financing for the sale of three or fewer properties in any 12-month period to purchasers of such properties, each of which is owned by the person and serves as security for the financing; (ii) The person has not constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of the person; (iii) The person provides seller financing that meets the following requirements: (A) The financing is fully amortizing; (B) The financing is one that the person determines in good faith the consumer has a reasonable ability to repay; (C) The financing has a fixed rate or an adjustable rate that is adjustable after five or more years, subject to reasonable annual and lifetime limitations on interest rate increases. If the financing agreement has an adjustable rate, the rate is determined by the addition of a margin to an index rate and is subject to reasonable rate adjustment limitations. The index the adjustable rate is based on is a widely available index such as indices for U.S. Treasury securities or SOFR. (6) Does not include a natural person, estate, or trust that meets all of the following criteria: (i) The natural person, estate, or trust provides seller financing for the sale of only one property in any 12-month period to purchasers of such property, which is owned by the natural person, estate, or trust and serves as security for the financing; (ii) The natural person, estate, or trust has not constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of the person; (iii) The natural person, estate, or trust provides seller financing that meets the following requirements: (A) The financing has a repayment schedule that does not result in negative amortization; (B) The financing has a fixed rate or an adjustable rate that is adjustable after five or more years, subject to reasonable annual and lifetime limitations on interest rate increases. If the financing agreement has an adjustable rate, the rate is determined by the addition of a margin to an index rate and is subject to reasonable rate adjustment limitations. The index the adjustable rate is based on is a widely available index such as indices for U.S. Treasury securities or SOFR. (7) Does not include a servicer or servicer employees, agents and contractors, including but not limited to those who offer or negotiate terms of a mortgage for purposes of renegotiating, modifying, replacing and subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind. Person Secondary market issuer § 34.222 Quality control standards. Mortgage originators and secondary market issuers that engage in credit decisions or covered securitization determinations themselves, or through or in cooperation with a third-party or affiliate, must adopt and maintain policies, practices, procedures, and control systems to ensure that automated valuation models used in these transactions adhere to quality control standards designed to: (a) Ensure a high level of confidence in the estimates produced; (b) Protect against the manipulation of data; (c) Seek to avoid conflicts of interest; (d) Require random sample testing and reviews; and (e) Comply with applicable nondiscrimination laws.