FDIC Issues Temporary Exceptions to Appraisal Requirements in Los Angeles County as Affected by California Wildfires and Straight-line Winds

Summary:

The FDIC is providing flexibility relative to appraisal requirements for real estate-related transactions in Los Angeles County due to the California wildfires and straight-line winds. The flexibilities may be exercised by any institution underwriting a real estate-related transaction in Los Angeles County.

Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-supervised financial institutions.

Highlights:

The FDIC is facilitating the recovery process in Los Angeles County, which was declared to be a major disaster, by temporarily easing appraisal requirements for real estate-related financial transactions under the Financial Institutions Reform, Recovery, and Enforcement Act.

• The exception expires three years after the date Los Angeles County was declared a major disaster.
• To qualify for the exception, an institution must determine that:

1. The transaction involves real property located in the area designated as adversely affected by the major disaster.
2. There is a binding commitment to fund the transaction¹ that was entered into on or after January 8, 2025, but no later than January 8, 2028.
3. The value of the real property supports the institution’s decision to enter into the transaction.

• Transactions for which the financial institution relies on the appraisal exception must continue to be subject to review by management.
• The FDIC will review an institution’s reliance on the appraisal exception during regularly scheduled examinations.