U.S. SBA Introduces Bill to Adopt $500,000 Federal Appraisal Threshold

If you are a lender that participates in the U.S. Small Business Administration’s loan programs, be aware that Congress considering a bill introduced last week to bring the 7(a) program in line with the appraisal threshold adopted in April by the Federal banking regulators.

BACKGROUND

On April 9, 2018, the Office of the Comptroller of Currency, the Federal Reserve Board and the FDIC released a joint final rule that increased the appraisal threshold for commercial real estate transactions from $250,000 to $500,000. For commercial real estate transactions exempted from the appraisal requirement as the result of the revised threshold, regulated institutions must obtain an evaluation of the real property collateral.

NEW U.S. SBA BILL

It seems the U.S. Small Business Administration may not be far behind. On Capitol Hill this week, the House Committee on Small Business is scheduled to mark up the 7(a) Real Estate Appraisal Harmonization Act (H.R. 6347). If enacted, the current statutory appraisal threshold amount for an SBA 7(a) loan secured by commercial real estate would be raised from $250,000 to $500,000 to bring it in line with federal bank regulators’ threshold amount. Notably, the $250,000 threshold amount for 7(a) loans secured by commercial real estate has not been raised since 2000.

 “ENTHUSIASTIC SUPPORT” FROM NAGGL

Yesterday NAGGL submitted a letter to the Committee expressing “enthusiastic support” noting that “financial institutions large and small provided about $25.4 billion in approvals in FY17 to approximately 62,430 small businesses nationwide through the SBA 7(a) program.”

NAGGL also stressed that H.R. 6347 does not tie the SBA 7(a) loan appraisal threshold requirement to the federal regulators’ appraisal rules, consistent with current policy which requires SBA to comply with the appraisal threshold mandated by the Small Business Act without regard to the regulators’ appraisal rules.

“Updating the Small Business Act statutory appraisal threshold is critical to both SBA lending partners and small business borrowers…NAGGL believes that the legislative proposal will continue to protect safety and soundness within the 7(a) program, while reducing appraisal costs for small business borrowers and administrative burdens imposed on lenders.”

If H.R. 6347 is passed by the House Committee on Small Business, the bill will be considered and voted on by the full House of Representatives. Then, if passed by the House, it would proceed to the Senate for consideration.

ON THE RADAR

EDR Insight will be closely watching the status of the bill as it moves it way through Congress. It will be interesting to see if NCUA follows suit and adopts the federal regulators’ appraisal threshold.

FOR MORE INFORMATION

Joint rule by federal bank regulators, April 9, 2018 

EDR Insight brief: New Appraisal Threshold Effective April 9th 

H.R. 6347 – 7(a) Real Estate Appraisal Harmonization Act

NAGGL letter of support to the House Committee on Small Business