Reconsiderations of value (ROVs) for residential real estate valuations that 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, are offered in new guidance proposed Thursday by the federal financial institution regulators.
The proposal by the agencies (the Consumer Financial Protection Bureau [CFPB], Federal Deposit Insurance Corp. [FDIC], Federal Reserve Board, National Credit Union Administration [NCUA] and Office of the Comptroller of the Currency [OCC]) was issued with a 60-day public comment period.
According to the agencies, an ROV is a request from a financial institution to an appraiser or other preparer of a valuation report to reassess the value of residential real estate. An ROV may be warranted, the agencies said in a joint release, if a consumer provides information to a financial institution about potential deficiencies or other information that may affect the estimated value.
“The proposed guidance shows how ROVs intersect with appraisal independence requirements and compliance with applicable laws and regulations,” the agencies wrote. “The proposed guidance describes how financial institutions may create or enhance their existing ROV processes while remaining consistent with safety and soundness standards, complying with applicable laws and regulations, preserving appraiser independence, and remaining responsive to consumers.”
The proposal also describes risks of deficient residential real estate valuations and how financial institutions may incorporate ROV processes into established risk management functions, the agencies said.
“Deficient collateral valuations can contain inaccuracies due to errors, omissions, or discrimination that affect the value conclusion,” the agencies wrote. “The proposed guidance would also provide examples of ROV policies and procedures that a financial institution may establish to help identify, address, and mitigate valuation discrimination risk.”