Federally Related Transaction

Definition

A federally related transaction is a category of real estate activity that involves the supervision and jurisdiction of a federal financial agency. These transactions include various forms of purchasing, selling, leasing, or financing real estate properties. One crucial regulatory requirement for such transactions is the necessity of a real estate appraisal performed by a state-licensed or state-certified appraiser to ensure accuracy and regulatory compliance.

Examples

Home Mortgage Loans: When a borrower seeks a mortgage loan supported by Fannie Mae or Freddie Mac, the transaction must adhere to federal guidelines.
VA Loans: Veterans obtaining loans through the Department of Veterans Affairs (VA) must undergo federally related appraisals.
Real Estate Owned (REO) Sales: Properties seized and sold by banks (REO properties) involving regulatory bodies like the FDIC.
Federal Housing Administration Loans: Real estate transactions financed through FHA require compliance with federally related transaction regulations.
Credit Union Mortgages: Mortgages issued by credit unions under NCUA regulation.

Frequently Asked Questions

Q1: Are all real estate transactions federally related?

No, not all real estate transactions qualify as federally related. Only those involving federal guidance or financial backing by institutions such as the FHA, VA, FDIC, or GSEs are considered federally related.

Q2: Who performs the appraisals for these transactions?

Appraisals must be performed by state-licensed or state-certified appraisers who adhere to the Uniform Standards of Professional Appraisal Practice (USPAP).

Q3: How does a federally related transaction differ from a private transaction?

Federally related transactions are regulated by federal agencies and must comply with stricter appraisal and reporting standards compared to private transactions which might be governed by state or local regulations.

Q4: What happens if an appraisal does not meet the required standards?

The transaction may be voided, require reevaluation, or postponed until compliance with federal standards is assured.

Q5: Are federally related transactions relevant for commercial real estate?

Yes, these regulations apply to both residential and commercial properties if federal institutions are involved in the transaction.

Appraisal: The process by which a state-licensed or certified appraiser evaluates the value of a real estate property.
Uniform Standards of Professional Appraisal Practice (USPAP): Set of standards guiding the appraisal profession in the United States.
Federal Housing Administration (FHA): A U.S. government agency responsible for providing mortgage insurance on loans made by FHA-approved lenders.
Fannie Mae (Federal National Mortgage Association): A federally sponsored enterprise designed to stimulate home-buying.
FDIC (Federal Deposit Insurance Corporation): An agency responsible for maintaining stability in and public confidence in the nation’s financial system.

Online Resources

Federal Financial Institutions Examination Council (FFIEC): Provides documentation and guidance related to federally related transactions.
Appraisal Subcommittee: Monitors the real estate appraisal industry in the U.S.
The Appraisal Foundation: Sets professional qualifications for appraisers.

References

Federal Financial Institutions Examination Council (FFIEC): Overview of Regulations and Guidelines.
Appraisal Subcommittee (ASC): Federal regulations governing state-certified and licensed appraisers.
The Appraisal Foundation (TAF): Professional standards and requirements for real estate appraisers.

Suggested Books

“Real Estate Appraisal: From A to Z” by Lisa Desjardins - A comprehensive guide to understanding real estate appraisals.
“The Appraisal of Real Estate” by Appraisal Institute - An in-depth look into the principles and practices of real estate appraisals.
“Essentials of Real Estate Finance” by David Sirota - Explains finance processes involved in real estate transactions.
“Fundamentals of Real Estate Appraisal” by William L. Ventolo - A detailed textbook on real estate appraisal fundamentals.

### Are appraisal standards for federally related transactions the same across all states? - [ ] No, they vary from state to state. - [x] Yes, they follow the Uniform Standards of Professional Appraisal Practice (USPAP). - [ ] No, they are dictated by local real estate boards. - [ ] Yes, but only for commercial properties. > **Explanation:** Appraisal standards for federally related transactions follow the Uniform Standards of Professional Appraisal Practice (USPAP) which provide a consistent set of guidelines across all states. ### Which federal agency backs VA Loans? - [ ] FDIC - [ ] Freddie Mac - [x] Department of Veterans Affairs (VA) - [ ] Fannie Mae > **Explanation:** The Department of Veterans Affairs (VA) backs VA Loans, ensuring compliance with federally related transaction guidelines. ### Can a federally related transaction be valid without a state-licensed appraiser? - [ ] Yes, if the transaction is personal and local. - [ ] Yes, but only in some states. - [ ] No, appraisals can be done by any real estate agent. - [x] No, a state-licensed or state-certified appraiser must conduct the appraisal. > **Explanation:** A federally related transaction requires an appraisal by a state-licensed or state-certified appraiser to be valid. ### Who primarily supervises credit union mortgages? - [ ] FHA - [ ] Fannie Mae - [ ] OCC - [x] NCUA > **Explanation:** The National Credit Union Administration (NCUA) primarily oversees credit union mortgages under federal guidelines. ### What does USPAP stand for? - [x] Uniform Standards of Professional Appraisal Practice - [ ] United States Property Appraisal Protocols - [ ] Uniform Standards for Property Appraisal - [ ] United Standards and Practice in Appraisal > **Explanation:** USPAP stands for Uniform Standards of Professional Appraisal Practice, providing the consistent standards for appraisers. ### Are federally related transactions applicable only to residential property? - [ ] Yes, only residential properties. - [x] No, it includes both residential and commercial properties. - [ ] Only high-value properties. - [ ] Only federally funded properties. > **Explanation:** Federally related transactions include both residential and commercial properties if federal financial institutions are involved. ### What is the role of the FDIC in federally related transactions? - [ ] Marketing real estate properties. - [x] Ensuring stability and public confidence in the financial system. - [ ] Setting mortgage rates. - [ ] Approving private real estate transactions. > **Explanation:** The FDIC's role is to ensure the system's stability and public confidence, including compliance with guidelines related to federally related transactions. ### Which organization monitors maintenance and adherence to appraisal standards? - [ ] USDA - [ ] IRS - [x] Appraisal Subcommittee (ASC) - [ ] Consumer Protection Bureau > **Explanation:** The Appraisal Subcommittee (ASC) monitors adherence to appraisal standards at the federal level. ### Name an institution that provides mortgage insurance on loans. - [ ] FDIC - [ ] Fannie Mae - [x] FHA - [ ] USDA > **Explanation:** The Federal Housing Administration (FHA) provides mortgage insurance on loans issued by approved lenders. ### Which bodies are involved in multipliers' federally related transactions? - [x] Federal Reserve, FDIC, OCC - [ ] State Real Estate Boards, Local Banks - [ ] Independent Brokers, Local Appraisers - [ ] Real Estate Publications, Marketing Agencies > **Explanation:** Regulatory bodies like the Federal Reserve, FDIC, and OCC are integral in federated-related transactions management and oversight.