In order to further assist recovery efforts from wildfires and straight-line wind damage in Los Angeles County, California this year, four federal financial institution regulatory agencies—the Federal Deposit Insurance Corporation (FDIC); Federal Reserve Board (FRB); National Credit Union Administration (NCUA); and Office of the Comptroller of the Currency (OCC)—temporarily paused certain appraisal requirements for real estate-related transactions.
These actions are expected to allow banks and credit unions to work with families and businesses without obtaining an appraisal. Banks and credit unions will still be required to determine that the value of the real estate supports the institution’s decision to enter into the transaction.
Fires erupted in the Palisades region of Los Angeles County the morning of January 7, a Los Angeles neighborhood east of Malibu, as a brush fire, spreading across 23,448 acres, according to the California Department of Forestry and Fire Protection (Cal Fire), causing damage to more than 6,800 structures. The Eaton Fire, igniting just hours after the Palisades Fire near a canyon north of downtown Los Angeles, spread across approximately 14,021 acres, damaging nearly 10,500 structures in its path.
The Depository Institutions Disaster Relief Act of 1992 (DIDRA) authorizes federal agencies to make exceptions to statutory and regulatory appraisal requirements under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) relating to transactions involving real property located within an area in a state or territory declared to be a major disaster by the President.
On January 8, 2025, President Joseph R. Biden declared that a major disaster exists in the state of California, and ordered federal aid to supplement state, tribal, and local recovery efforts in the areas impacted by wildfires and straight-line winds.
“Temporary Exceptions to FIRREA Appraisal Requirements in Los Angeles County as Affected by California Wildfires and Straight-line Winds” was drafted by the four agencies to assist financial institutions in lending or modifying loans in areas where wildfire and straight-line wind damage has made appraisals challenging to obtain. These action are also expected to reduce loan processing times and help facilitate recovery from the disaster.
This action will expire on January 8, 2028, and the FDIC, FRB, OCC and NCUA will monitor institutions’ real estate lending practices to ensure that transactions are being conducted in a safe and sound manner.
Click here for more on the new “Temporary Exceptions to FIRREA Appraisal Requirements in Los Angeles County as Affected by California Wildfires and Straight-line Winds” regulations.
