A coalition of five federal agencies— Consumer Financial Protection Bureau (Consumer Protection Bureau) Federal Deposit Insurance Corporation (Federal Deposit Insurance Corporation) Fedthis National Credit Union Administration (NCUA) and office of the comptroller of the currency (OCC) — Final guidance was announced Thursday to address “reconsideration of value (ROV) in residential real estate transactions,” according to an announcement.
The agencies explained that the new guidance is intended to provide advice on “policies and procedures that financial institutions may implement” and allow consumers to provide institutions with information “that may not have been considered during the evaluation process, or when deficiencies are identified in the original evaluation.” ” message. .
The guidance follows the announcement in May of new assessment bias protections. U.S. Department of Housing and Urban Development (heads-up display) and federal housing administration (Federal Housing Administration). These allow mortgage borrowers to apply for an ROV “if they believe the assessment is inaccurate or biased,” HUD said in May of the protections that will take effect in September.
The new guidance “provides examples of ROV policies and procedures that financial institutions can implement to help institutions identify, address, and mitigate discrimination risks; describes the risk of residential real estate undervaluation; and explains how financial institutions can integrate ROV processes into the risk management function, ” said the joint announcement.
Since July 2023, the agencies have not made many changes to the original proposed guidance, “only editing for clarification based on public comments received on the proposed guidance released at that time.”
The document detailing the proposed changes said the new guidance “will include several clarifying edits in response to comments, including clarifying that the interagency guidance applies to financial transactions secured by one- to four-family residential real estate.”
The new guidance comes after receiving input from various stakeholders, including “banking organizations, real estate companies, industry associations, non-profit organizations, Assessment Foundation (TAF), automated valuation model (AVM) developers, loan officers, appraisers and other individuals.
Some comments suggested adding more “prescriptive guidance,” emphasizing that compliance with these guidance may be onerous for some organizations.
According to a summary document released by the agencies, “Agency staff has reviewed the comments received on the proposal and recommends that the interagency guidance be finalized essentially as proposed, with some clarifying edits added.” “Interagency The guidance is intended to provide a flexible, risk-based approach to the ROV process that can be tailored to each agency’s unique circumstances. Agencies can apply the considerations discussed in this guidance to their specific circumstances.
Earlier this month, FHA updated its FHA Connection (FHAC) portal to provide FHA-approved lenders and business partners with secure online access to HUD computer systems to accommodate the implementation of the new ROV assessment policy.
The Biden administration has been critical of instances of assessment bias and has prioritized developing ROV policies to address the issue.
“Appraisal bias harms homeowners of color at every stage of the home buying process and can result in entire neighborhoods being undervalued,” FHA Commissioner Julia Gordon said when announcing the FHA’s new policy in May. “Our new policy will provide Homeowners, lenders and the FHA provide clear processes to address biased or inaccurate appraisals.”
