Appraisals and ValuationsRegulatory

Federal agencies propose guidance for residential real estate ROVs

The guidance offers consumers a way to include more information in a valuation decision

Five federal agencies, including the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, the National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC), are collectively proposing new interagency guidance on the reconsiderations of value (ROVs) for residential real estate transactions.

“The proposed guidance advises on policies that financial institutions may implement to allow consumers to provide financial institutions with information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal,” the announcement states.

Situations in which an ROV request may be warranted by a financial institution include when a consumer provides information about “potential deficiencies or other information that may affect the estimated value,” the announcement states.

The guidance, to be published in the Federal Register with a 60-day public comment period thereafter, “shows how ROVs intersect with appraisal independence requirements and compliance with applicable laws and regulations,” according to the announcement.

The guidance outlines how financial institutions may either enhance their existing ROV processes or create new ones while maintaining safety and soundness requirements and complying with all applicable regulations and laws.

The guidance also prioritizes appraisers’ independence and responsiveness to consumers.

“Additionally, the proposed guidance would describe the risks of deficient residential real estate valuations and how financial institutions may incorporate ROV processes into established risk management functions,” the announcement notes. “Deficient collateral valuations can contain inaccuracies due to errors, omissions, or discrimination that affect the value conclusion.”

It includes examples of ROV procedures and policies that a financial institution can use to “help identify, address, and mitigate valuation discrimination risk,” per the announcement.

The proposed guidance is available on the CFPB’s website.

The announcement follows a statement made last week by the White House about expanding homeowners’ ability to pursue ROVs, which noted that federal banking agencies “are in the process of issuing proposed guidance on how financial institutions may integrate ROV policies and controls into their current appraisal processes.”

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