§ 614.4250 Collateral evaluation standards.

(a) When real, personal, or intangible property is taken as security for a loan or is the subject of a lease, an evaluation of such property shall be performed in accordance with § 614.4260 and the institutions' policies and procedures. Such a collateral evaluation shall be identified as either a collateral valuation or a collateral appraisal. Specifically, all collateral evaluations must: (1) Value the subject property based upon market value as defined in § 614.4240(l); (2) Be presented in a written format; (3) Consider the purpose for which the property will be used and the property's highest and best use, if different from the intended use; (4) Be sufficiently descriptive to enable the reader to ascertain the reasonableness of the estimated market value and the rationale for the estimate; (5) Provide sufficient detail (including an identification and description of the property) and depth of analysis to reflect the relevant characteristics and complexity of the subject property; (6) Analyze and report, as appropriate, for real, intangible, and/or personal property, on: (i) The current income producing capacity of the property; (ii) A reasonable marketing period for the property; (iii) The current market conditions and trends that will affect projected income, to the extent such conditions will affect the value of the property; (iv) The appropriate deductions and discounts as they would apply to the property, including but not limited to, those based on the condition of the property, as well as the specialization of the operation and property; and (v) Potential liabilities, including those associated with any hazardous waste or other environmental concerns; and (7) Include in the evaluation report a certification that the evaluation was not based on a requested minimum valuation or specific valuation or approval of a loan. (b) For purposes of determining appraisal value as required in section 1.10(a) of the Act, the definition of market value and the requirements of this subpart shall apply.