Gregsmith a real estate lending officer at XYZ bank is planning to make a $500,000 loan to Milton Womack a good customer to purchase a piece of commercial real estate from a local real estate broker. The loan will have an LTV of 75%. Mr. Womack has offered Greg an appraisal given to him by the seller of the property. The appraisal is very complete and is approximately 3 months old. Greg would like to waive the normal appraisal requirement and simply have the original appraiser update the seller's appraisal because this would save Mr. Womack the money a new appraisal would cost. Can Greg legally use the updated appraisal? Why or why not?

A. Yes Greg may use the appraisal provided it goes through the banks established appraisal review process

B. No Greg may not use the appraisal because the appraiser was not engaged by another financial institution

C. No Greg may not use the appraisal because it is too old

D. Yes Greg may use the appraisal because it was done so completely provided he knows the appraiser and has confidence in his work

B. No Greg may not use the appraisal because the appraiser was not engaged by another financial institution

Under the appraisal regulation an appraisal prepared for another financial services institution that otherwise meets the requirements of the regulation is acceptable. In this case, the bank needs to own, new appraisal because the real estate broker is not a financial services institution. Therefore, answer a is incorrect. Answer C and D are also wrong because regardless of the date of the appraisal, or the bank's confidence in the appraiser, the appraisal may not be used.

In which of the following cases would ABC Bank have to obtain an appraisal performed by a state certified appraiser?

A. On a $200,000 loan made by Mr. and Mrs. Middlefield to purchase their home which will be secured by their home

B. On a $75,000 loan to be secured by two-story commercial office building

C. On a $150,000 working capital loan fully secured by a bank certificate of deposit on which the loan officer has also taken a lien on a vacant lot owned by the borrower

D. On a $300,000 loan to Mr. Birch secured by his life estate in his home. The home was left to Mr. Birch on the death of his father. The father's will states that the home will belong to Mr. Birch during his life but will revert to Mr. Birch's son on his death

D. On a $300,000 loan to Mr. Birch secured by his life estate in his home. The home was left to Mr. Birch on the death of his father. The father's will states that the home will belong to Mr. Birch during his life but will revert to Mr. Birch's son on his death

An appraisal by a certified appraiser is required on loans over $1 million, on nonresidential loans over $250,000, and on complex residential loans over $250,000. In this case answer D is the correct answer because the title to the home owned by Mr. Birch is a life estate interest, which is atypical; therefore, the transaction is complex. Answers A and B are not correct because the loan amounts are below the regulatory limits for an appraisal by a certified appraiser. Answer C is not correct because if the loan is fully secured by a bank certificate of deposit, the loan officer has taken the real estate simply as an abundance of caution and, therefore, an appraisal is not required.

First National Bank would like to establish a policy regarding the evaluation of loans that are not subject to the appraisal requirement. Which of the following is acceptable in this policy?

A. All loans under $250,000 secured by real estate must have an evaluation in the file

B. All loans that do not require an appraisal by a State certified appraiser must have an evaluation

C. The evaluations generally will be performed by the loan officer responsible for the transaction

D. Evaluations may be performed by any loan officer in either commercial or consumer lending as well as any credit analyst

A. All loans under $250,000 secured by real estate must have an evaluation in the file

Various regulatory issuances

According to the appraisal regulation, evaluations are required if the loan is exempt from the requirement to obtain an appraisal under either the business loan exemption, the renewal exemption, Or the $250,000 threshold rule. Therefore, although the policy is more expansive than it needs to be, answer a is correct. An appropriate category for requiring evaluation is real estate loans under $250,000. Answer B is incorrect because, while a loan may not require an appraisal by a State certified appraiser, it may need an appraisal by State licensed appraiser. The last two answers are also incorrect because the regulatory issuances clearly defined the persons eligible to perform evaluations for the bank. A loan officer responsible for the loan would not meet the independence criteria. Also, a person performing an evaluation must have real estate training or experience. It is unlikely that all loan officers and credit analyst would have necessary training or experience.

If the bank uses a staff appraiser to appraise property that secures loans at the bank, in which case would the appraiser most likely NOT be considered to be independent?

A. The appraiser is an employee of the banks affiliated holding company

B. The appraiser is an employee of the banks affiliated financial institution

C. The appraiser is an employee in the commercial loan department

D. The appraiser is employed by the bank but reports to the audit

C. The appraiser is an employee in the commercial loan department

The appraiser may work for the bank or one of its affiliates, but he or she cannot report to the lending department responsible for approving loans related to the appraisals.