Final Interagency Guidance on Reconsideration of Value (ROV) for Residential Real Estate Valuations
Samantha: Hello, this is Samantha Shares.
This episode is a high level summary
of the final interagency guidance on
reconsiderations of value (R O V) for
residential real estate valuations
This podcast is educational
and is not legal advice.
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And now the summary.
1.
Purpose and Scope:
- The guidance is issued by the Board of
Governors of the Federal Reserve System,
Consumer Financial Protection Bureau,
Federal Deposit Insurance Corporation,
National Credit Union Administration, and
Office of the Comptroller of the Currency.
- It aims to highlight risks associated
with deficient residential real estate
valuations and describe how credit
unions can incorporate R O V processes
into their risk management functions.
- The scope is limited to real
estate-related financial
transactions secured by single
1-4 family residential properties.
2.
Background and Importance:
- Credible collateral valuations, including
appraisals, are essential to the integrity
of residential real estate lending.
- Deficient valuations can result
from prohibited discrimination,
errors, omissions, or
inappropriate valuation methods.
- Such deficiencies can prevent
individuals and families from
building wealth through homeownership
and pose risks to credit unions.
3.
Regulatory Context:
- The guidance references several relevant
laws and regulations, including:
- Equal Credit Opportunity
Act (ECOA) and Regulation B
- Fair Housing Act (FH Act)
- Truth in Lending Act
(TILA) and Regulation Z
- Uniform Standards of Professional
Appraisal Practice (USPAP)
- It emphasizes that credit unions
must comply with these laws and
operate in a safe and sound manner.
4.
Reconsideration of Value (R O V) Process:
- An R O V is a request from the financial
institution to the appraiser or valuation
preparer to reassess the report based on
potential deficiencies or new information.
- R O Vs can be initiated by the
institution's review process
or after consideration of
consumer-provided information.
- The guidance allows credit unions to
implement R O V policies and procedures
to review relevant information not
considered in the original valuation.
5.
Use of Third Parties:
- The use of third parties in the valuation
review process does not diminish an
institution's responsibility to comply
with applicable laws and regulations.
- Credit unions are expected to manage
risks arising from third-party valuations
and valuation review functions.
6.
Complaint Resolution Process:
- Credit unions can capture consumer
feedback on potential valuation
deficiencies through existing
complaint resolution processes.
- The process should cover complaints
from various channels and sources.
- Complaints can be an important
indicator of potential risks
and risk management weaknesses.
7.
Recommendations for Policies,
Procedures, and Control Systems:
- Consider R O Vs as a possible
resolution for valuation complaints
- Establish processes for identifying,
managing, analyzing, escalating, and
resolving valuation-related complaints
- Inform and educate consumers on
how to raise valuation concerns
early in the underwriting process
- Identify stakeholders and outline
roles and responsibilities
for processing R O V requests
- Establish risk-based R O V
systems to route requests to
appropriate business units
- Use standardized processes to increase
consistency in handling R O V requests
- Ensure relevant staff, including third
parties, are trained to identify valuation
deficiencies, including practices
that may result in discrimination
8.
Flexibility in Implementation:
- The guidance is principles-based and
does not mandate specific requirements.
- It allows credit unions flexibility
in implementation based on their
size, complexity, and risk profile.
- Smaller credit unions may have
policies and procedures that
differ from larger credit unions.
9.
Regulatory Expectations:
- While the guidance does not have
the force of law or regulation, it
outlines supervisory expectations for
how credit unions should handle R O
Vs and valuation-related complaints.
- Credit unions are expected to
incorporate these considerations
into their risk management practices.
10.
Potential Impact:
- The guidance aims to improve the
integrity of the residential real
estate lending process by addressing
potential deficiencies in valuations.
- It may help mitigate risks associated
with discrimination in property
valuations and improve consumer
protection in the lending process.
This guidance provides a framework
for credit unions to develop and
implement R O V processes that align
with regulatory expectations and help
ensure the credibility and fairness
of residential real estate valuations.
This concludes the final interagency
guidance on reconsiderations of
value (R O Vs) for residential
real estate valuations.
If your Credit union could use assistance
with your exam, reach out to Mark Treichel
on LinkedIn, or at mark Treichel dot com.
This is Samantha Shares and
we Thank you for listening.
