Appraisal Standards for Federally Related Transactions
December 18, 1998
Circular No. 11119

Amendment to Subpart G of Regulation Y

To All Bank Holding Companies, and Others Concerned, in the Second Federal Reserve District:

The Board of Governors of the Federal Reserve System has adopted an amendment, effective December 28, 1998, to Subpart G (Appraisal Standards for Federally Related Transactions) of its Regulation Y, to exempt any transaction involving the underwriting or dealing of mortgage-backed securities from the Board's appraisal requirements. This amendment was originally proposed by the Board in December 1997 (see our Circular No. 11010).

The amendment permits bank holding company subsidiaries engaged in underwriting and dealing in securities (so-called section 20 subsidiaries) to underwrite and deal in mortgage-backed securities without demonstrating that the loans underlying the securities are supported by appraisals at origination that meet the Board's appraisal requirements.

The Board's official notice in this matter, as published in the Federal Register of November 27, is available as a file (pdf - 27kb). Questions may be directed, at this Bank, to Jim Keogh, Examining Officer, Advisory and Technical Services Department.