Which type of loan is covered under NCUA's 701.31 appraisal delivery requirement?

The appraisal delivery requirement under NCUA's 701.31 specifically pertains to subordinate lien loans secured by a dwelling. This regulation mandates that certain loans must meet appraisal standards to ensure that the lending institution is protected, as the loan is secured by the value of an asset—in this case, a dwelling. Subordinate liens are often considered riskier compared to first lien loans because they are second in priority for repayment if a borrower defaults. As such, proper appraisal processes must be adhered to, ensuring that the institution has accurate and reliable assessments of property values before extending credit.

While first lien loans and fixed-rate loans may also involve appraisal requirements, the specific regulation under 701.31 focuses on the unique considerations of subordinate lien loans. Commercial loans, on the other hand, fall outside of this residential appraisal requirement, as they are governed by different standards and protocols altogether. Understanding the nuances of these regulations is crucial for adhering to compliance and ensuring effective risk management in mortgage lending.