EDR PRISM Event

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© 2016 SunTrust Banks, Inc. SunTrust is a federally registered trademark of SunTrust Banks, Inc.
2 ROADS DIVERGED:
APPRAISAL IAG BUT NO ENV. IEG – WHY?
May 2, 2017
By: K.C. Conway, MAI, CRE

2. Disclaimer: Upfront and Not in fine print…
Neither EDR nor SunTrust Bank make any representations or warranties
about the accuracy or suitability of any information in this
presentation. Neither EDR nor SunTrust Bank guarantee, warrant, or
endorse the advice or services of K.C. Conway, MAI, CRE … but we do
hang out and pontificate over the economy & real estate trends
Nor is there any relationship between Conway Tweety, Tim Conway,
KellyAnne Conway & Trump Administration.
And I have not met with or spoken to any Russian authorities in
advance of this presentation.
This presentation consists of materials prepared exclusively by
K.C. Conway, MAI, CRE, and is provided during this meeting solely for
informational purposes of PRISM-2017 attendees. This presentation is not
intended to constitute legal, investment or financial advice or the rendering
of legal, consulting, or other professional services of any kind.
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IAG: Interagency Appraisal Guidelines – Why not IEG?
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4. Need for Interagency Environmental Guidelines
• Appraisal is regulatory and environmental is liability … yes, but … environmental impacts
“As-Is” value and banks are not connecting the dots and having “As-Is” values adjusted for
subsequent Env. reports that either ID or quantify a remediation. What about ‘Secured
Lender Exemption” and how is it breached in a lending transaction (Agent Vs Participant)
• Who is competent in a bank to be ordering and reviewing environmental reports? If
competency and independence are cornerstones for e reliable appraisal and USPAP, why
wouldn’t we insist on them for Environmental reports?
• Independence - Borrower Ordered environmental reports are common – why? CERCLA
• Who promulgates the standards for environmental reports today? ASTM
• Who is competent to review an environmental report in a bank? What is an EP
(Environmental Professional) and how is it different from a PE (Prof. Engineer)?
• What is the expiration date on a Ph I Env. report? It may shock regulators (6-12 months).
Do regulators know how many banks are lending on Env reports > 12 mos. Old?
• What is difference in the types Env reports? GRR, Transaction-Screen, Phase I, Phase II
• What are “High-Risk” property types? Is there an official list? How many banks know
which property types are “HR” and should require a Ph I Env. assessment?
• What about Env.-waivers by banks? There is an impact to FHLB collateral!
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5. 25 years overdue - Interagency Environmental Guidelines
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IAG: Understanding IAG & “Federally Related Transactions”
October 1994 in
response to FIRREA.
IEG could be achieved
within next IAG update.
The last one was 2010 –
now 7 years out of date!

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IAG & FIRREA: Understanding IAG & Who promulgates them?
Why not add an ESB –
Env. Stds Board? & EQB
Env EP Quals Board

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IAG: The USPAP structure for appraisals applies to Env.
We are long overdue
for USPEP:
Uniform Standards of
Professional Env.
Practice

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IAG: It’s all about: Safety & Soundness, Independence, Competence

10. Competency is a CORE concept in IAG – Use of an “EP”
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Implication for ”Borrower Ordered” environmental reports!
Transaction Screen:
Most “Transaction Screens” do not routinely use an “EP” to
perform the field work/inspection – hence the cheaper cost.
Make it clear to your borrower that if they are going to provide a
“Transaction Screen” Vs. a Phase I, it must be performed by an
“EP” or it will likely be rejected by REVAL.

11. Risk Stratification is another CORE Concept in IAG:
Env. List of “High-Risk” CRE
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12. Env. Reviews & Waivers: Environmental Risk Ratings
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IAG: When does appraisal need to be updated ? Env Updated?

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IAG: When in credit process should Appr/Env review be done?

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IAG: Can a bank change an appraiser’s/EP’s opinion/conclusion?

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IAG: Does Appr./Env. report need to be updated @ Loan Renewal?

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IAG: REATC and Appraisals – “Limited Application”

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K.C. Conway, MAI, CRE
Sr. VP Credit Risk: Sr. Valuation & Market Intel. Officer SunTrust
Kiernan.Conway@SunTrust.com (404) 813-2419
Conclusion:
The “Weak-Link” in the R.E.
Lending Process / “Ropes-Course” is no IEG