Federally Related Transaction: What Is It and Why Should You Care?

Federally Related Transactions (US and Texas) – Why We Need the Definition

Once upon a time, Savings and Loans (S&Ls) ran amok. FIRREA (Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (aka “Title XI”)) was passed in 1989 in response to the Savings and Loan Crisis after it bankrupted the Federal Savings and Loan Insurance Corporation (FSLIC).

American taxpayers footed the bill for over $75 billion (according to Mortgage News Daily).

Definition of “Federally Related Transaction”

FIRREA (Title XI)

and

The Texas Appraiser Licensing and Certification Act (Section 1103.001) of the Texas Occupations Code (Chapter 1103) define a Federally related transaction to be a real estate-related transaction that:

Requires the services of an appraiser; and

is engaged in, contracted for, or regulated by a federal financial institution regulatory agency.

What are Federal Financial Institution Regulatory Agencies?

According to Section 1103.003.6-b of the Texas Occupation Code, these are:

The Board of Governors of the Federal Reserve
System;

The Federal Deposit Insurance Corporation;

The Office of the Comptroller of the
Currency;

The Office of Thrift Supervision;

The National Credit Union Administration; or

The successors of any of those agencies.

Why Should You Care?

A real estate appraisal used in a federally related transaction must be performed by a state-licensed or state-certified appraiser to be considered valid.

Who Regulates Texas Appraisers?

The Texas Appraiser Licensing and Certification Board (TALCB) licenses, certifies and regulates real estate appraisers in Texas. Other states have similar licensing boards.

As A Homeowner, Do You Really Need to Know This?

The good news for you if you are a homeowner is this: you won’t be the one ordering the appraisal for a federally related transaction. The person ordering the appraisal is usually a mortgage broker or lending institution and the appraiser receiving the appraisal will need to certify that he or she is properly licensed by his or her state to perform the appraisal for the property in question.