TO THE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE
SUPERVISORY STAFF AT EACH FEDERAL RESERVE BANK AND BANKING ORGANIZATIONS SUPERVISED
BY THE FEDERAL RESERVE
SUBJECT: Interagency FAQs on Residential Tract
Development Lending
The Federal Reserve and the other federal financial institutions regulatory
agencies are jointly issuing the attached Frequently Asked Questions (FAQ)
to assist regulated institutions in complying with the agencies' appraisal
regulations and real estate lending requirements when financing residential
construction in a tract development.1 The FAQ topics include
- Definition of residential tract development, including clarification on
a residential unit and pre-sold unit
- Appraisal requirements for residential tract development, raw land, residential
lots, and condominium buildings
- Clarification on loan amount and collateral value for purposes of calculating
the loan-to-value ratio for residential tract development loans
- Acceptable use of an appraisal of a model home
- Underwriting characteristics of a revolving line of credit in which a
borrowing base sets the availability of funds to the borrower
- Appraisal requirements for transactions financing the construction of
single-family homes in a residential tract development
Reserve Banks are asked to provide a copy of this letter and the FAQs to state
member banks and bank holding companies and to appropriate supervision staff.
Questions concerning this guidance should be directed to Ms. Virginia Gibbs,
Senior Supervisory Financial Analyst, at 202-452-2521.
Stephen M. Hoffman, Jr.
Deputy Director
- Attachment:
- Frequently Asked Questions on Residential
Tract Development Lending (404 KB PDF)
