Mortgage regulators have proposed that the threshold for residential real estate transactions requiring an appraisal be raised to $400,000.

The Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp. developed the proposal. They think the increase, from the $250,000 current level set in 1995, could provide relief from the time and cost associated with completing residential real-estate transactions, and without posing a threat to the safety and soundness of financial institutions.

This proposal responds, in part, to criticisms the current exemption level for residential transactions had not kept pace with price appreciation in the residential real estate market.

In lieu of an appraisal, the proposal would require that residential real estate transactions exempted by the threshold obtain an evaluation consistent with safe and sound banking practices. Evaluations provide an estimate of the market value of real estate but could be less burdensome than appraisals because the agencies’ appraisal regulations do not require evaluations to be prepared by state licensed or certified appraisers.

In addition, evaluations are typically less detailed and costly than appraisals. Evaluations have been required for transactions exempted from the appraisal requirement by the current $250,000 residential threshold since the 1990s.

The agencies received these comments during both the recent Economic Growth and Regulatory Paperwork Reduction Act review process and the commercial real estate transactions appraisal rule making process. That process resulted in a final rule, issued in April 2018, raising the appraisal threshold for commercial real estate transactions to $500,000, from $250,000.

Also, the proposal also would incorporate the rural residential appraisal exemption in the Economic Growth, Regulatory Relief and Consumer Protection Act into the list of exempt transactions and require evaluations for these exempt transactions. In addition, the proposal would require institutions to review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.