WASHINGTON (Reuters) – U.S. bank regulators on Monday agreed to relax commercial real estate lending rules and allow more deals to go ahead without an independent appraisal of the property’s value.
Under the new rules, commercial real estate worth more than $500,000 must have an independent third-party check on the property value before a bank can lend against it.
The threshold had been $250,000. The new standards were agreed to by the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC).
“The increased threshold will not pose a threat to the safety and soundness of financial institutions,” the agencies wrote.
Regulators had proposed increasing the waiver threshold in line with inflation to $400,000 but later agreed to raise it to $500,000 after lenders and trade groups called for a larger exemption.
Consumer advocates have warned that inflated property values worsened the 2007-2009 financial crash and that appraisals are essential to preventing runaway property values.