Appraisal Institute Opposes Effort to Reduce Risk Management for SBA Loans

The Appraisal Institute today announced its opposition to proposed federal legislation that would reduce the requirements for appraisals in major Small Business Administration loan programs.

The Appraisal Institute objects to the provisions of H.R. 6347, the 7(a) Real Estate Appraisal Harmonization Act, and H.R. 6348, the Small Business Access to Capital and Efficiency Act, both of which would adjust upward the real estate appraisal thresholds for SBA loan programs. An appraisal threshold is the amount of a real estate transaction above which an appraisal is required.

H.R. 6347 and H.R. 6348 would link the SBA appraisal threshold level to the threshold level established for commercial real estate by the federal bank regulatory agencies. Earlier this year, those agencies doubled the commercial real estate appraisal threshold level to $500,000. The SBA appraisal threshold level, which is set by statute, currently stands at $250,000. If the legislation were enacted, SBA loans for commercial transactions below $500,000 would no longer require an appraisal.

The Appraisal Institute expressed its “strong concerns” in a July 19 letter to Reps. Steve Chabot, R-Ohio, and Nydia Velazquez, D-New York, the chair and ranking member, respectively, of the House Committee on Small Business. The Appraisal Institute specifically noted the risk to taxpayers.

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