Appraisal Reconsideration Guidance Released

WASHINGTON – Five federal agencies recently approved new guidance for Reconsiderations of Values (ROVs) in residential real estate transactions, allowing consumers to submit additional information that may have been overlooked or to address deficiencies identified in the original appraisal.

ROVs are requests from financial institutions to appraisers or other valuation-report preparers asking for a reassessment of the real estate value. The federal agencies say an ROV may be warranted if a consumer provides information about potential deficiencies or other items that may affect a property’s estimated value.

The guidance – issued by the Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corp. (FDIC), Federal Reserve Board (FRB), National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC) –  offers examples of ROV policies and procedures that a financial institution may implement to help institutions mitigate discrimination risk. The guidance also describes the risks of deficient residential real estate valuations and explains how financial institutions may incorporate ROV processes into risk management functions.

“Credible collateral valuations, including appraisals, are essential to the integrity of the residential real estate lending process,” the agencies said in the final report. “Deficient collateral valuations can keep individuals, families and neighborhoods from building wealth through homeownership by potentially preventing homeowners from accessing accumulated equity, preventing prospective buyers from purchasing homes, making it harder for homeowners to sell or refinance their homes and increasing the risk of default.”

In June 2023, the agencies requested public comment to answer a question: If information wasn’t considered during an original appraisal or if deficiencies are later identified, what should financial institutions do?

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