13388 Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Proposed Rules

1The Board of Governors of the Federal Reserve

System, the Federal Deposit Insurance Corporation,

the Office of the Comptroller of the Currency and

the Office of Thrift Supervision.

deciding how numerical risk estimates

are considered with respect to these

goals.’’ The NESHAPS standard for

emissions of radioactive material from

NRC licensed facilities is 10 mrem/yr

for the air effluent release pathway

alone. While the results of the 1993

reports to EPA have not been provided

to NRC, a survey of NRC licensed

facility air emissions performed by EPA

in 1992 revealed that no NRC licensed

facility surveyed exceeded that value.

Almost all of the facilities surveyed in

1992 had air effluents which resulted in

doses an order of magnitude lower for

the maximally exposed individuals.

Taking these considerations into

account, with respect to reducing the

radiation dose limit to members of the

public from 100 mrem/yr to 1 mrem/yr,

the petition fails to recognize the net

effect of the NRC’s system of dose

control and the role played by the dose

limit and ALARA programs.

When these are taken into account,

NRC’s judgment is that the public is

adequately protected, the health risks

from NRC licensed activities are low,

and no change in basic radiation

protection standards, as petitioner

suggests, is warranted.

Dated at Rockville, Maryland, this 2nd day

of March, 1995.

For the Nuclear Regulatory Commission.

James M. Taylor,

Executive Director for Operations.

[FR Doc. 95–6069 Filed 3–10–95; 8:45 am]

BILLING CODE 7590–01–P

NATIONAL CREDIT UNION

ADMINISTRATION

12 CFR Part 722

Appraisals

AGENCY: National Credit Union

Administration (NCUA).

ACTION: Proposed amendments.

SUMMARY: The NCUA Board is

proposing amendments to its regulation

regarding the appraisal of real estate,

adopted pursuant to Title XI of the

Financial Institutions Reform, Recovery

and Enforcement Act of 1989. The

proposed amendments simplify

compliance with regulatory

requirements for credit unions by

changing provisions of the appraisal

regulation that govern: the publication

of the Uniform Standards of

Professional Appraisal Practice;

minimum appraisal standards;

appraisals to address safety and

soundness concerns; unavailable

information; additional appraisal

standards developed by credit unions;

and appraiser independence. The

proposed amendments should reduce

costs without affecting the reliability of

appraisals used in connection with

federally related transactions.

DATES: Comments must be postmarked

or received by May 12, 1995.

ADDRESSES: Send comments to Becky

Baker, Secretary of the Board, National

Credit Union Administration, 1775

Duke Street, Alexandria, Virginia 22314

or via NCUA’s electronic bulletin board

to Becky Baker at 703–518–6480.

FOR FURTHER INFORMATION CONTACT: Kent

Buckham, Deputy Director, (703) 518–

6360, Herbert Yolles, Director,

Department of Risk Management, Office

of Examination and Insurance, (703)

518–6360 or Michael McKenna, Staff

Attorney, Office of General Counsel,

(703) 518–6540.

SUPPLEMENTARY INFORMATION:

A. Background

Title XI of the Financial Institutions

Reform, Recovery, and Enforcement Act

of 1989 (FIRREA), 12 U.S.C. 3331 et

seq., directed NCUA and the other

financial institution regulatory agencies

to publish appraisal rules for federally

related real estate transactions within

the jurisdiction of each agency. Section

1121(4) of FIRREA, 12 U.S.C 3350(4),

defines a federally related transaction as

a real estate-related financial transaction

that, among other things, requires the

services of an appraiser. A real estaterelated financial transaction is defined

as any transaction that involves (i) the

sale, lease, purchase, investment in or

exchange of real property, including

interests in property, or the financing

thereof; (ii) the refinancing of real

property or interests in real property;

and (iii) the use of real property or

interests in real property as security for

a loan or investment, including

mortgage-backed securities. See 12

U.S.C. 3350(5).

In July of 1990, the Board published

regulations to meet the requirements of

Title XI of FIRREA. See 55 FR 30199,

July 25, 1990. The Board recognized that

not all real estate-related financial

transactions would require an appraisal.

Accordingly, in the original appraisal

regulation, NCUA did not require a

state-certified or -licensed appraiser for

real estate-related transactions having a

transaction value less than or equal to

$50,000. In July of 1993, the Board

raised the de minimus amount for an

appraisal performed by a state-certified

or -licensed appraiser to $100,000 (See

58 F.R. 40040, July 27, 1993). The dollar

threshold was raised because NCUA had

not found any evidence indicating that

there had been a significant increase in

the defaults on real estate-related loans

of less than $50,000 and that the

increase would not represent a threat to

the safety and soundness of credit

unions but rather would reduce

unnecessary costs and paperwork

requirements.

Recently, the other federal financial

institution regulatory agencies 1 have

increased the threshold to $250,000. See

59 FR 29482, June 7, 1994. The Board

has considered whether the de minimus

level should be increased for federallyinsured credit unions. At this time, the

Board does not perceive a need to

increase the threshold. Many credit

unions do not have the on-staff

expertise to prepare appraisals. In

addition, although credit unions are

well capitalized, they are generally

much smaller than other financial

institutions. As a result, the relative size

of an average real estate loan to capital

is generally much higher for a credit

union, which translates to much greater

relative risk. A major portion of the

losses to the National Credit Union

Share Insurance Fund in the past ten

years has been associated with real

estate lending.

For credit unions that do engage in

real estate lending, the greatest single

risk protection they can obtain is a

licensed or certified appraisal to support

the loan-to-value ratio. The current

thresholds of $100,000 for residential

real estate and $50,000 for commercial

property are sufficiently high to

preclude most home equity or second

trust lending from the appraisal

requirement, but are low enough to

ensure that professional appraisals are

obtained for higher-dollar value real

estate lending. Therefore, the Board is

not proposing to increase either of these

dollar thresholds. However, the Board

believes that the appraisal regulation

can be revised to provide clarity and

ease the regulatory burden on credit

unions for some categories of

transactions.

B. Proposed Amendments

While in most cases an appraisal is an

essential part of a sound underwriting

decision, the Board believes that NCUA

should not require Title XI appraisals

where they impose costs without

significantly promoting the safety and

soundness of credit unions or furthering

the purposes of Title XI of FIRREA.

Accordingly, the Board is proposing to

amend its appraisal regulation to clarify
Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Proposed Rules 13389

and expand the circumstances in which

a Title XI appraisal is not required.

It is also NCUA’s experience that the

current minimum standards applicable

to federally related transactions and

requirements concerning the

independence of appraisers can be

simplified without significantly

affecting the reliability of Title XI

appraisals. Therefore, the Board is

proposing to amend the appraisal

regulation to eliminate standards that

parallel standards in the Uniform

Standards of Professional Appraisal

Practice (‘‘USPAP’’) promulgated by the

Appraisal Standards Board of the

Appraisal Foundation. In addition, the

Board is proposing to amend the

regulation concerning appraiser

independence to permit credit unions to

use appraisals prepared for other

financial service institutions. The Board

also proposes to simplify compliance

with regulatory requirements for both

credit unions and appraisers by

changing provisions of the appraisal

regulation that govern: (i) publication of

USPAP; (ii) unavailable information;

(iii) appraisals to address safety and

soundness concerns and (iv) additional

appraisal standards developed by credit

unions. The proposed changes should

reduce costs without affecting the

reliability of appraisals used in

connection with federally related

transactions.

1. Exemptions

The ‘‘Abundance of Caution’’ Provision

The Board proposes to amend the

regulation to clarify and expand the

scope of the exemption for real estate

liens taken in an ‘‘abundance of

caution.’’ NCUA’s appraisal regulation

currently provides that an appraisal is

not required when a lien on real estate

has been taken as collateral solely

through an abundance of caution and

where the terms of the transaction as a

consequence have not been made more

favorable than they would have been in

the absence of a lien. See 12 CFR

722.3(a)(2).

NCUA’s experience with

implementing the appraisal regulation

indicates that the existing abundance of

caution exemption has been interpreted

too narrowly. Therefore, to emphasize

the broader scope of the abundance of

caution exemption, the Board proposes

to delete the word ‘‘solely’’ from the

current exemption. However, this

amendment would still not allow a

credit union to use this exemption when

there is a change to the terms of the loan

because the credit union also received a

lien on real estate.

Liens for Purposes Other Than the Real

Estate’s Value

As defined in NCUA’s Regulations, an

appraisal is a written statement

independently and impartially prepared

by a qualified appraiser setting forth an

opinion as to the market value of real

estate. See 12 CFR 722.2(a). When the

market value of the real estate as an

individual asset is not part of the credit

union’s decision to take a lien against

real estate, no purpose is served by

requiring the institution to obtain an

appraisal. The Board is proposing a new

exemption for transactions in which a

credit union takes a lien on real estate

for a purpose other than the value of the

real estate. On occasion a credit union

takes a real estate lien to protect the

legal rights to other collateral and not

because of the value of the real estate as

an individual asset. For instance, where

the collateral for a loan is a small

business, a credit union may take a lien

against the land and improvements in

order to be able to sell the entire

business as a going concern if the

borrower defaults. Similarly, in lending

associated with agriculture, credit

unions may take a lien against the real

estate upon which the growing crops sit

to ensure their access to the agricultural

product.

Requirements for Renewals, Refinancing

and Other Subsequent Transactions

The Board is proposing to clarify the

exemption for renewals, refinancings,

and other transactions resulting from an

existing extension of credit to simplify

the conditions under which the

exemption applies. NCUA’s appraisal

regulation currently provides that an

appraisal is not required for a

subsequent transaction that results from

a maturing extension of credit if: (i) The

borrower has performed satisfactorily

according to the original terms; (ii) no

new monies are advanced other than as

previously agreed; (iii) the credit

standing of the borrower has not

deteriorated; and (iv) there has been no

obvious and material change in the

market conditions or physical aspects of

the property which would threaten the

credit union’s collateral protection. See

12 CFR 722.3(a)(4). It has been NCUA’s

experience that the current exemption

may not provide sufficient flexibility to

credit unions and borrowers when a

transaction is refinanced before its

maturity. This is especially true when

the member is seeking a more favorable

interest rate. The proposed amendment

would exempt a subsequent transaction

provided no new monies are advanced

other than funds necessary to cover

reasonable closing costs and there has

been no obvious and material change in

the market conditions or physical

aspects of the property which would

threaten the credit union’s collateral

protection. This exemption would not

be applicable if a member refinances a

mortgage with a new lender.

Transactions Involving Real Estate

Notes

The Board is proposing to amend the

exemption regarding the purchase of

real estate-secured loans, loan

participations, pooled loans, interests in

real property, and mortgage-backed

securities. The proposed amendment

would allow credit unions to purchase,

sell, invest in, exchange, or extend

credit secured by real estate notes or

interests in real estate without obtaining

a new Title XI appraisal if each note or

real estate interest is supported by an

appraisal that meets the regulatory

appraisal requirements for the

institution at the time the real estatesecured note was originated. (The

transaction would, of course, have to

meet other statutory and regulatory

requirements applicable to federallyinsured credit unions.) The current

exemption simply refers to the purchase

of these interests. In addition, the Board

is proposing to change the text of this

exemption to more clearly state the

appraisal requirements that the

underlying notes must meet.

The Board believes that the proposed

amendment would serve federal public

policy interests by helping to ensure

that the appraisal regulation does not

unnecessarily inhibit secondary

mortgage market transactions that

involve real estate-secured loans and

real estate interests. The proposed

amendment would make clear that a

credit union need not obtain a new Title

XI appraisal for loans originated before

the effective date of NCUA’s regulation

in order to buy or sell them in the

secondary mortgage market.

Transactions Insured or Guaranteed by

a United States Government Agency or

United States Government Sponsored

Agency

NCUA’s appraisal regulation currently

provides that loans insured or

guaranteed by an agency of the United

States government are exempt from

NCUA’s appraisal requirements. See 12

CFR 722.3(a)(6). The Board is proposing

to amend this provision in the

regulation by deleting the requirement

that the transaction be supported by an

appraisal that conforms to the

requirements of the insuring or

guaranteeing agency. In order to receive

the insurance or guarantee, the

transaction must meet all underwriting
13390 Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Proposed Rules

2NCUA coordinated with the Board of Governors

of the Federal Reserve System, the Federal Deposit

Insurance Corporation, the Office of the

Comptroller of the Currency and the Office of Thrift

Supervision when it drafted its original appraisal

regulation. All the federal financial institution

regulatory agencies adopted substantially similar

appraisal regulations in 1990.

requirements of the insurer or guarantor,

including real estate appraisal or

evaluation requirements. The Board

believes that the standards of these loan

programs are sufficient to protect the

safety and soundness of credit unions.

Transactions that Meet the

Qualifications for Sale to a United States

Government Agency or Government

Sponsored Agency

NCUA proposes to not require a Title

XI appraisal for any transaction that

meets the qualifications for sale to any

United States government agency or

government sponsored agency. The

Board believes that the appraisal

standards of U.S. government agencies

or government sponsored agencies

established to maintain a secondary

market in loans are sufficient to protect

federal financial and public policy

interest in the loans those government

or government sponsored agencies

purchase. The Board also believes that

compliance with these standards will

protect the safety and soundness of

credit unions. By referring to any U.S.

government agency or U.S. government

sponsored agency, the proposed

amendment would include not only

loans sold to federal agencies, but also

any transaction that meets the

qualifications for sale to agencies

established or chartered by the federal

government to serve public purposes

specified by the U.S. Congress. These

government sponsored agencies are:

* Banks for Cooperatives.

* Federal Agricultural Mortgage

Corporation (Farmer Mac).

* Federal Farm Credit Banks.

* Federal Home Loan Banks (FHLBs).

* Federal Home Loan Mortgage

Corporation (Freddie Mac).

* Federal National Mortgage

Association (Fannie Mae).

* Student Loan Marketing

Association (Sallie Mae).

* Tennessee Valley Authority (TVA).

If a federally insured credit union is

otherwise authorized to originate, hold,

buy or sell transactions that meet the

qualifications for sale to any U.S.

government agency and the above listed

government sponsored agencies, this

proposal would allow them to do so

without obtaining a separate appraisal

conforming to NCUA’s Regulations. The

Board believes that permitting credit

unions to follow these standardized

appraisal requirements, without the

necessity of obtaining an appraisal or

appraisal supplement, will increase a

credit union’s ability to buy and sell

these loans and also their liquidity if

necessary.

2. Appraisals to Address Safety and

Soundness Concerns

The Board is proposing to amend its

regulations to clarify that the agency

may require Title XI appraisals to

address safety and soundness concerns.

Under this provision, NCUA could

require appraisals where real estaterelated financial transactions present

greater-than-normal risk to individual

credit unions. For example, NCUA may

require a troubled credit union to obtain

an appraisal for transactions below the

threshold level. This amendment would

simply and explicitly clarify NCUA’s

current authority.

3. Minimum Appraisal Standards

The Board is proposing to reduce the

number of minimum appraisal

standards applicable to Title XI

appraisals for federally-related

transactions from the thirteen appraisal

standards found in § 722.4(a) of NCUA’s

Regulations (12 CFR 722.4(a)) to five

and eliminate the current prohibition on

the use of the USPAP Departure

Provision in connection with federallyrelated transactions.

Title XI of FIRREA states that each

federal financial institution regulatory

agency shall prescribe appropriate

standards for the performance of real

estate appraisals in connection with

federally-related transactions under the

jurisdiction of each such agency. These

rules require, at a minimum that: (i)

Real estate appraisals be performed in

accordance with generally accepted

appraisal standards as evidenced by the

Appraisal Standards Board of the

Appraisal Foundation; and (ii) that such

appraisals shall be written appraisals.

Under Title XI, each agency may require

compliance with additional standards if

it makes a determination in writing that

such additional standards are necessary

in order to properly carry out its

statutory responsibilities. See 12 U.S.C

3339.

At the time NCUA began drafting its

appraisal regulation,2 the Appraisal

Standards Board was in the process of

amending its appraisal standards.

Because of uncertainty about the

content of the standards and

interpretations that would be

promulgated by the Appraisal Standards

Board, the Board included within its

appraisal regulation thirteen minimum

standards that paralleled existing or

proposed USPAP standards, including

compliance with USPAP. NCUA also

prohibited the use of the USPAP

Departure Provision in connection with

federally-related transactions. The

Departure Provision permits an

appraiser to prepare an appraisal

without complying with certain

recommended provisions of the USPAP

if the appraisal report is not rendered

misleading.

Minimum Appraisal Standards and

USPAP

The Board has gained considerable

experience with the Appraisal

Standards Board and its appraisal

standards and believe that it is no longer

necessary to include all the additional

standards in its appraisal regulation.

The Board believes that the Departure

Provision of the USPAP may

appropriately be used in connection

with federally-related transactions.

Therefore, the Board is proposing to

simply require all appraisals for

federally related transactions to: (i)

Conform to generally accepted appraisal

standards as evidenced by the USPAP;

(ii) be written and contain sufficient

information and analysis to support the

institution’s decision to engage in the

transaction; (iii) 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; (iv) be based upon

the definition of market value as set

forth in the regulation; and (v) be

performed by State licensed or certified

appraisers.

The Board believes these five

standards will simplify compliance with

the appraisal regulation without

affecting the usefulness of the Title XI

appraisals prepared for federally related

transactions. The proposed amendments

would allow credit unions to make use

of the USPAP’s Departure Provision and

eliminate several regulatory standards

that parallel existing USPAP standards.

Under these proposed standards, the

USPAP is referenced but would no

longer be part of NCUA’s Regulations.

This approach would no longer require

NCUA to republish changes to the

USPAP adopted by the Appraisal

Standards Board, and thus references to

USPAP in the regulation could be

assumed to always refer to the most

current edition. The Board believes this

approach minimizes potential conflicts

between an institution’s duty to follow

NCUA’s appraisal requirements and an

appraiser’s professional obligation to

follow the latest USPAP version. If the

Board adopts this approach in the final

rule, the USPAP provisions applicable
Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Proposed Rules 13391

to federally-related transactions will no

longer be published as Appendix A to

NCUA’s appraisal regulation. Therefore,

the Board is proposing to delete

Appendix A from its appraisal

regulation.

The Board would like to make clear

that if this amendment is adopted in

final, the principles of safe and sound

lending may require credit unions to

comply with stricter standards than the

USPAP. Although the credit union has

the primary responsibility for obtaining

a Title XI appraisal that meets its needs,

NCUA may by regulation or guidance

identify USPAP standards that are

inappropriate for federally related

transactions. For example, the USPAP

allows an appraiser to appraise property

even though the appraiser may have a

direct or indirect interest in the

property, if the interest is disclosed in

the appraisal report. However, the Board

believes that federal financial and

public policy interests are better served

by requiring that an appraiser for a

federally related transaction not have

any direct or indirect interest, financial

or otherwise, in the transaction or the

property. This requirement is discussed

further in the section addressing

appraiser independence.

Departure Provision

The proposed minimum standards

would also permit credit unions to use

appraisals prepared in accordance with

the USPAP Departure Provision for

federally related transactions. The

Departure Provision permits limited

exceptions to specific guidelines in the

USPAP. Appraisers preparing appraisals

using the Departure Provision still must

comply with all binding requirements of

the USPAP and must be sure that the

resulting appraisal is not misleading.

The Board believes that if this

amendment is adopted in final that

credit unions should be allowed to

determine, with the assistance of the

appraiser, whether an appraisal to be

prepared in accordance with the

Departure Provision is appropriate for a

particular transaction and consistent

with principles of safe and sound

lending. The proposed amendment

would make clear that the written

appraisal must contain sufficient

information and analysis to support the

credit union’s decision to engage in the

transaction. This would put credit

unions on notice of their responsibility

to have appraisals that are appropriate

for the particular federally related

transaction.

Deductions and Discounts

The Board is proposing to retain the

current standard in the appraisal

regulation regarding deductions and

discounts. See 12 CFR 722.4(a)(8). The

USPAP provision on this subject

requires the appraiser to include a

discussion of deductions and discounts

only when it is necessary to prevent an

appraisal from being misleading. The

Board believes it is appropriate to

emphasize the need to include an

appropriate discussion of deductions

and discounts applicable to the estimate

of value in Title XI appraisals for

federally related transactions. For

example, in order to properly

underwrite a loan, a credit union may

need to know a prospective value of a

property, in addition to the market

value as the date of the appraisal. A

prospective value of a property is based

upon events yet to occur, such as

completion of construction or

renovation, reaching a stabilized

occupancy level, or some other event to

be determined. Thus, more than one

value may be reported in an appraisal as

long as all values are clearly described

and reflect the projected dates when

future events could occur.

The standard on deductions and

discounts is intended to make clear that

appraisers must analyze, apply and

report appropriate discounts and

deductions when providing values

based on future events. In financing the

purchase of an existing home, there

typically would be no need to apply any

discounts or deductions to arrive at the

market value of the property since the

credit union’s financing of the project

does not depend on events such as

further development of the property or

the sale of units in a tract development.

Remaining Standards

The Board is also proposing to retain

the current standard in the appraisal

regulation on market value that requires

the appraisal to be based on the

definition of market value in NCUA’s

Regulations. See 12 CFR 722.4(a)(2).

Finally, the Board is proposing a new

standard that makes clear that all

appraisals for federally related

transactions must be prepared by

licensed or certified appraisers. This

requirement is mandated by Title XI of

FIRREA and is repeated in other parts

of the appraisal regulation.

4. Elimination of the Provision on

Unavailable Information

The Board is proposing to delete the

current provision that requires

appraisers to disclose and explain when

information necessary to the completion

of an appraisal is unavailable. See 12

CFR 722.4(b). The USPAP currently

requires appraisers to disclose and

explain the absence of information

necessary to completion of an appraisal

that is not misleading. See USPAP

Standard Rule 2–2(k). Moreover, when

information that may materially affect

the estimate of the value is unavailable,

the Board believes that generally

accepted appraisal standards require

appraisers to explain the absence of that

information and its effect on the

reliability of the appraisal. Therefore,

the elimination of this provision would

not result in a substantive change in the

requirements applicable to appraisals

for federally related transactions since

the Board is proposing to require

appraisals to conform to the USPAP.

5. Elimination of the Provision on

Additional Appraisal Standards

The Board is proposing to delete the

current provision that merely confirms

the authority of credit unions to require

appraisers to comply with additional

standards. See 12 CFR 722.4(c). The

regulation’s minimum appraisal

standards for federally related

transactions do not prevent a credit

union from requiring an appraiser to

follow additional standards or provide

addition information to satisfy the credit

union’s business needs and thus it is

unnecessary to regulate this in the

appraisal regulation.

6. Appraiser Independence

The Board is proposing to amend and

clarify its appraisal regulation to permit

the use of appraisals prepared for

financial service institutions other than

institutions subject to Title XI of

FIRREA. NCUA’s current appraisal

regulation provides that fee appraisers

must be engaged by the credit union or

its agent. An exception to this

requirement is permitted if the appraiser

is directly engaged by another

institution that is subject to Title XI of

FIRREA. See 12 CFR 722.5(b).

The current provision was adopted to

help ensure that appraisers would not

be subject to conflicts of interest as a

result of having been engaged by

borrowers. However, the Board believes

that the current provision is too

restrictive. It requires a credit union to

obtain a new appraisal if the borrower

originally sought the loan from an

institution that is not subject to Title XI

of FIRREA and is not an agent of the

credit union. There also has been

uncertainty about the meaning of agent

in these cases.

The Board proposes to permit a credit

union to use an appraisal that was

prepared for any financial services

institution, including mortgage bankers.

The appraiser would not be allowed to

have a direct or indirect interest,

financial or otherwise, in the property
13392 Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Proposed Rules

or the transaction, and must have been

directly engaged by the non-regulated

institution. Further, the credit union

would be required to ensure that the

appraisal conforms to the requirements

of the regulation and is otherwise

acceptable. The prohibition on the

credit union using an appraisal

prepared for the borrower would remain

in effect.

Age of Appraisal

Some have suggested that NCUA’s

appraisal regulation contain a maximum

allowable age of an appraisal for use by

a credit union. They believe that there

should be a maximum age (time from

date of the appraisal to date of the

application of the loan) for an appraisal,

but that the age should not be so short

as to unnecessarily require another

appraisal be prepared in the uncommon

instance where a mortgage is refinanced

within a reasonably short time or a

credit union is using an appraisal

prepared for another financial service

institution. Hence, the Board realizes

that any specific time period will not be

appropriate in all situations. The Board

has specifically decided to permit each

institution to determine the allowable

period for an appraisal, but recommends

that any appraisal over six months old

not be used.

Regulatory Procedures

Regulatory Flexibility Act

The Regulatory Flexibility Act

requires NCUA to prepare an analysis to

describe any significant economic

impact a proposed regulation may have

on a substantial number of small credit

unions (primarily those under $1

million in assets). The proposed

amendments reduce regulatory burden

and are less restrictive than current

requirements. Overall, the Board

expects the changes to benefit members

and federally-insured credit unions

regardless of size by reducing costs

without substantially increasing the risk

of loss. In addition, most small credit

unions do not offer real estate loans.

Accordingly, the Board determines and

certifies that the proposed rule is not

expected to have a significant economic

impact on a substantial number of small

credit unions and that a Regulatory

Flexibility Analysis is not required.

Executive Order 12612

Executive Order 12612 requires

NCUA to consider the effect of its

actions on state interests. The proposed

rule will apply to all federally-insured

credit unions. The proposed rule will

reduce regulatory requirements for all

federally-insured credit unions. The

Board has determined that the proposed

amendments would not have a

substantial direct effect on the states, on

the relationship between the national

government and the states, or on the

distribution of power and

responsibilities among the various

levels of government.

Paperwork Reduction Act

The proposed rule, if adopted, will

decrease paperwork requirements for a

credit union. The paperwork

requirements will be submitted to the

Office of Management and Budget

(OMB) for review under the Paperwork

Reduction Act. Written comments on

the paperwork requirements should be

forwarded directly to the OMB Desk

Officer indicated below at the following

address: OMB Reports Management

Branch, New Executive Office Building,

Room 10202, Washington, DC 20530.

Attn: Milo Sunderhauf. NCUA will

publish a notice in the Federal Register

once OMB action is taken on the

submitted requirement.

List of Subjects in 12 CFR Part 722

Appraisals, Credit unions, Statecertified and State-licensed appraisers

By the National Credit Union

Administration Board on March 1, 1995.

Becky Baker,

Secretary to the Board.

Accordingly, NCUA proposes to

amend 12 CFR part 722 as follows:

PART 722—APPRAISALS

1. The authority citation for Part 722

continues to read as follows:

Authority: 12 U.S.C. 1766, 1789 and Pub.

L. No. 101–73.

2. Section 722.3 is amended by

revising the section heading, revising

paragraphs (a) and (d) and adding a new

paragraph (e) to read as follows:

§ 722.3 Appraisals required; transactions

requiring a State certified or licensed

appraiser.

(a) Appraisals required. An appraisal

performed by a State certified or

licensed appraiser is required for all real

estate-related financial transactions

except those in which:

(1) The transaction value is $100,000

or less except if it is a business loan and

then the transaction value must be

$50,000 or less;

(2) A lien on real property has been

taken as collateral through an

abundance of caution and where the

terms of the transaction as a

consequence have not been made more

favorable than they would have been in

the absence of a lien;

(3) A lien on real estate has been

taken for purposes other than the real

estate’s value;

(4) 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;

(5) The transaction involves an

existing extension of credit at the credit

union, provided that:

(i) There is no advancement of new

monies, other than funds necessary to

cover reasonable closing costs and

(ii) There has been no obvious and

material change in market conditions or

physical aspects of the property that

threatens the adequacy of the credit

union’s real estate collateral protection

after the transaction;

(6) 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

mortgage-backed securities, and each

loan or interest in a loan, pooled loan,

or real property interest met the

requirements of this paragraph, if

applicable, at the time of origination;

(7) The transaction is wholly or

partially insured or guaranteed by a

United States government agency or

United States government sponsored

agency; or

(8) 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.

* * * * *

(d) Valuation Requirement. Secured

transactions exempted from appraisal

requirements pursuant to paragraphs

(a)(1) and (a)(5) of this section and not

otherwise exempted shall be supported

by a written estimate of market value, as

defined in this part, performed by an

individual having no direct or indirect

interest in the property, and qualified

and experienced to perform such

estimates of value for the type and

amount of credit being considered.

(e) Appraisals to address safety and

soundness concerns. NCUA reserves the

right to require an appraisal under this

part whenever the agency believes it is

necessary to address safety and

soundness concerns.

3. Section 722.4 is revised to read as

follows:
Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Proposed Rules 13393

§ 722.4 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,

1029 Vermont Ave., NW., Washington,

DC 20005;

(b) Be written and contain sufficient

information and analysis to support the

institution’s decision to engage in the

transaction;

(c) 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;

(d) Be based upon the definition of

market value as set forth in § 722.2(f);

and

(e) Be performed by State licensed or

certified appraisers in accordance with

requirements set forth in this part.

4. Section 722.5 is amended by

revising paragraph (b) to read as follows:

§ 722.5 Appraiser Independence.

* * * * *

(b) Fee appraisers. (1) If an appraisal

is prepared by a fee appraiser, the

appraiser shall be engaged directly by

the credit union or its agent, and have

no direct or indirect interest, financial

or otherwise in the property or the

transaction.

(2) A credit union 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 transaction; and

(ii) The credit union determines that

the appraisal conforms to the

requirement of this part and is

otherwise acceptable.

Appendix A [Removed]

5. Appendix A to part 722 is removed.

[FR Doc. 95–5592 Filed 3–10–95; 8:45 am]

BILLING CODE 7535–01–U

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[FI–59–91]

RIN 1545–AQ86

Debt Instruments With Original Issue

Discount; Contingent Payments;

Correction

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Correction to notice of proposed

rulemaking.

SUMMARY: This document contains a

correction to the notice of proposed

rulemaking (FI–59–91), which was

published in the Federal Register for

Friday, December 16, 1994 (59 FR

64884). The proposed regulations relate

to the tax treatment of debt instruments

that provide for one or more contingent

payments.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations (other than

§ 1.1275–6), Andrew C. Kittler,

(202)622–3940, or William E.

Blanchard, (202) 622–3950; concerning

§ 1.1275–6, Michael S. Novey, (202)

622–3900; concerning submissions and

the hearing, Michael Slaughter, (202)

622–7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

The proposed regulations that are the

subject of this correction are under

section 1275 of the Internal Revenue

Code.

Need for Correction

As published, the proposed

rulemaking contains a typographical

error that is in need of correction.

Correction of Publication

Accordingly, the publication of

proposed regulations (FI–59–91), which

was the subject of FR Doc. 94–30728, is

corrected as follows:

On page 64885, column 1, in the

preamble under the heading

‘‘Background’’, paragraph 2, line 6, the

language ‘‘February 4, 1994, the IRS

published in’’ is corrected to read

‘‘February 2, 1994, the IRS published

in’’.

Cynthia E. Grigsby,

Chief, Regulations Unit, Assistant Chief

Counsel (Corporate).

[FR Doc. 95–6028 Filed 3–10–95; 8:45 am]

BILLING CODE 4830–01–P

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 117

[CGD05–94–118]

Drawbridge Operation Regulations;

Atlantic Intracoastal Waterway—

Alternate Route, Elizabeth City, NC

AGENCY: Coast Guard, DOT.

ACTION: Notice of Proposed Rulemaking.

SUMMARY: At the request of the

Albemarle and Chesapeake Railroad

Company, the Coast Guard is proposing

to change the regulations that govern the

operation of the drawbridge across the

Pasquotank River, Atlantic Intracoastal

Waterway—Alternate Route, mile 47.7,

at Elizabeth City, North Carolina, by

leaving the draw in the open position

except for the passage of trains. The

proposed change to these regulations

are, to the extent practical and feasible,

intended to relieve the bridgeowners of

the burden of having a person

constantly available to open the draw

bridge while still providing for the

reasonable needs of navigation.

DATES: Comments must be received on

or before May 12, 1995.

ADDRESSES: Comments may be mailed to

Commander (ob), Fifth Coast Guard

District, 431 Crawford Street,

Portsmouth, Virginia 23704–5004, or

may be delivered to Room 109 at the

same address between 8 a.m. and 4

p.m., Monday through Friday, except

Federal holidays. The telephone number

is (804) 398–6222. Comments will

become part of this docket and will be

available for inspection at Room 109,

Fifth Coast Guard District.

FOR FURTHER INFORMATION CONTACT:

Ann B. Deaton, Bridge Administrator,

Fifth Coast Guard District, at (804) 398–

6222.

SUPPLEMENTARY INFORMATION:

Request for Comments

The Coast Guard encourages

interested persons to participate in this

rulemaking by submitting written data,

views, or arguments. Persons submitting

comments should include their names

and addresses, identify this rulemaking

(CGD05–94–118) and the specific

section of this proposal of which each

comment applies, and give the reason

for each comment. The Coast Guard

requests that all comments and

attachments be submitted in an

unbound format suitable for copying

and electronic filing. If not practical, a

second copy of any bound material is

requested. Persons wanting