In response to the devastating wildfires that swept through Los Angeles County earlier this year, federal financial regulators have temporarily suspended certain real estate appraisal requirements to expedite recovery efforts for affected homeowners and businesses.
The Federal Reserve, FDIC, OCC, and NCUA announced that, effective immediately, banks and credit unions may proceed with real estate-related transactions without obtaining a traditional appraisal, provided they can determine that the value of the property supports the institution’s decision to enter into the transaction. This measure aims to alleviate delays in loan processing and modifications in areas where obtaining appraisals has become challenging due to disaster-related disruptions.
The temporary waiver is authorized under the Depository Institutions Disaster Relief Act of 1992 (DIDRA), which permits exceptions to standard appraisal requirements in federally declared disaster areas. This action will remain in effect until January 8, 2028, and applies specifically to transactions involving real property in Los Angeles County, where President Biden declared a major disaster following the wildfires.
The January wildfires, exacerbated by severe Santa Ana winds and drought conditions, led to the destruction or damage of over 18,000 structures and prompted the evacuation of more than 200,000 residents. The Palisades and Eaton fires were among the most destructive, with the Palisades Fire alone destroying 6,837 structures and becoming the most destructive wildfire in Los Angeles history.
Governor Gavin Newsom has also taken steps to facilitate rebuilding efforts by issuing executive orders to streamline permitting processes and suspend certain regulatory requirements, including aspects of the California Environmental Quality Act (CEQA) and the California Coastal Act. These measures aim to reduce bureaucratic hurdles and accelerate the reconstruction of homes and infrastructure in the affected areas.
Homeowners and businesses seeking to take advantage of the appraisal waiver should consult with their financial institutions to understand the specific criteria and ensure compliance with the temporary guidelines. Federal agencies will continue to monitor lending practices to ensure that transactions are conducted safely and soundly during the recovery period.