A quintet of federal agencies has come together to seek public input on proposed guidance regarding residential real estate reconsiderations of value (ROVs).
An ROVs is a request from a financial institution to an appraiser to reconsider their valuation of a residential property. Financial institutions may initiate a request for an ROV if a consumer reports a potential deficiency in the appraisal or provides new information that may alter the property’s estimated value. ROVs and ROV processes are receiving increased attention recently, with President Joe Biden’s administration implying last week that government agencies have been exploring ways to make them easier and more accessible.
The proposed guidance describes how financial institutions may create or enhance ROV processes while preserving the autonomy of independent appraisers and staying responsive to potential borrowers and homebuyers. It also describes the risks of deficient residential real estate valuations, whether through omissions, errors, discrimination or lack of information.
Notably, there’s no explicit rulemaking within the text of the guidance, which is being proposed by the Consumer Financial Protection Bureau (CFPB), the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration (NCUA). Rather, the guidance merely gives a framework of policies agreed upon by the five agencies that financial institutions may implement to make the ROV process more efficient, streamlined and fruitful.
Such policies include the establishment of guidelines for when a second appraisal could be considered and who assumes the cost, as well as implementing a means to inform consumers early enough in the underwriting process for any issues to be resolved before a final credit decision is made.
The guidance, which is posted on the CFPB’s website, is set to be published in the Federal Register, to be followed by a 60-day comment period for public input. Feedback is encouraged through the Federal eRulemaking Portal and the ID number of the proposed guidance is OCC-2023-0007. The agencies are requesting that commenters use the title “Joint Guidance on Reconsiderations of Value of Residential Real Estate Valuations” to facilitate the organization and distribution of feedback.
