What is AgValuation?
AgValuation is a web-based collateral valuation application that uses mass data and statistical analysis to complete timely and accurate collateral valuations.
When is an appraisal not required? When can I use a collateral valuation?
These real estate-related financial transactions do not require an appraisal, but do require a valuation:
1. Transaction value is $500,000 or less,
a. On April 9, 2018, the final rule increases the appraisal threshold for CRE transactions from $250,000 to $500,000. https://www.fdic.gov/news/board/2018/2018-03-20-notice-sum-c-fr.pdf
b. This threshold increase means that transactions at or below this level do not require appraisals that conform to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and the interagency appraisal rules.
c. The OCC adopted the final rule jointly with the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (collectively, the agencies).
d. It is noted that the Farm Credit Administration has not yet adopted the final rule. http://ww3.fca.gov/readingrm/handbook/FCA%20Regulation/614.4260.docx
2. Business loan of $1 million or less and not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment,
3. Subsequent transaction (if at least one of these two conditions is met)
a. No obvious or material change in market conditions or the property that threatens real estate collateral protection (even with new monies), or
b. No advancement of new monies, except reasonable closing costs
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What is a business loan?
A business loan is a loan or other extension of credit to any corporation, general or limited partnership, business trust, joint venture, sole proprietorship, or other business entity (including entities and individuals engaged in farming enterprises). This definition is similar to the definition used by other Federal financial institution regulatory agencies.
Who can perform a collateral valuation??
A valuation may be performed by loan officers, accountants, auctioneers, grain and livestock buyers, equipment dealers, or other qualified individuals, provided they have the experience and education that the institution’s collateral evaluation policy requires. State law varies; however, in some states certified appraisers can complete valuations. The qualified evaluator must be independent of the transaction.
What are the independence requirements for an institution’s officer or employee conducting collateral evaluations (Farm Credit)?
FCA’s Section 614.4255(b) allows loan officers to perform collateral evaluation and complete the credit decision on a loan package as long as an institution's internal controls provide for either a prior approval or post review of the credit decision. The post review should, at a minimum, be completed in connection with an institution's internal credit review of a representative sample of a loan officer's credit decisions and related collateral evaluations. A more detailed review may be required if, on examination, FCA finds that such a sampling is not sufficient to adequately review a loan officer's credit decisions and related collateral evaluations.
What is the definition of a loan transaction value?
A loan transaction value is the amount of a loan, loan commitment, or other extension of credit.
May computer-based models be used in conducting collateral evaluations?
Yes. Both valuations and appraisals may be accomplished through the use of computer-based models. When used with homogenous data, a collateral value can be statistically determined. However, with the diversity of commodities in certain districts and developmental influences on property values, institutions need to ensure that sufficient data are available to statistically determine accurate collateral values. An independent validation process should be used to determine the appropriate application of computer-based models.