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FSA rule would decrease appraisal assignments.

The Farm Service Agency of the Rural Housing Service has proposed revisions to appraisal regulations governing real estate and chattel appraisals under its Direct Farm Loan Programs. The revisions include raising the dollar threshold for real estate appraisals in partial release situations, and allowing the Agency to release real estate security without appraising the retained real estate in some cases.

FSA proposes to remove the requirement for obtaining a real estate or chattel appraisal as part of the application process. Under existing regulations, when real estate is to be taken as security, FSA usually obtains the appraisal by contracting with a qualified appraiser, prior to approval of a loan. Chattel appraisals are completed by FSA employees who have been adequately trained and delegated chattel appraisal authority. The proposed rule will allow FSA to approve loans with the condition that an acceptable appraisal, which reflects at least adequate collateral for the loan, will be obtained before the loan is closed. Currently, the FSA requires an appraisal prior to funding, which can take over a year to obtain, at which point another appraisal is required anyway. The costs savings from avoiding multiple appraisals on a single project was cited as a major reason for the proposal.

Other cost-saving changes include the proposal that the Agency not require a real estate appraisal completed by a certified general appraiser when real estate is used to secure an operating loan (OL) of less than $50,000. This action will affect less than 5 percent of the OLs processed per year, or approximately 720 applicants. In loan servicing, the Agency will increase the dollar threshold for requiring a certified real estate appraisal from $10,000 to $25,000 when considering partial releases, subordinations, exchanges, or other real estate servicing actions.

The FSA is requesting comments on this rule through October 20. Comments may be sent to the Farm Service Agency, U.S. Department of Agriculture, Farm Loan Programs, Loan Servicing and Property Management Division, Attention: Director, 1400 Independence Avenue, SW., STOP 0523, Washington, DC 20250-0523; or by visiting www.regulations.gov.

For more information, contact Michael Cumpton at mike-cumpton@wdc.usda.gov.
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Title Annotation:Industry And Institute News
Publication:Valuation Insights & Perspectives
Date:Jun 22, 2003
Words:356
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