§3356 Exemption From Appraisals of Real Estate Located in Rural Areas

Summary

Lenders can skip a real-estate appraisal for a federally related loan if the property is in a rural area (as described in 12 C.F.R. 1026.35(b)(2)(iv)(A)) and four things are true: within 3 days after giving the Closing Disclosure, the lender or its agent has tried at least 3 state-certified or state-licensed appraisers on its approved list in the market and has written proof that none were available within 5 business days beyond normal pay and timing standards; the loan amount (transaction value) is under $400,000; and the lender is supervised by a federal bank regulator. Mortgage originator means the person the law at 15 U.S.C. 1602 calls a mortgage originator. Transaction value means the loan amount, including loans that are part of a pool. The no-appraisal rule does not apply when a federal regulator specifically requires an appraisal under certain rules (12 C.F.R. sections listed in the law) or when the loan is a high-cost mortgage (see 15 U.S.C. 1602). A lender that makes a loan without an appraisal generally may not sell or transfer the loan except in limited cases like bankruptcy, a sale to another federally regulated institution that keeps the loan in its portfolio, a merger or acquisition, or a transfer to a wholly owned subsidiary that remains the lender’s asset. Federal regulators must watch lenders that make many of these no-appraisal loans to make sure they follow the rules.