Final guidance addressing reconsiderations of value (ROVs) for residential real estate transactions were issued by all five federal financial institution regulators Thursday, the agencies announced in a joint release.
According to the release, the guidance advises on policies and procedures that financial institutions may implement to allow consumers to provide them with information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal.
The final guidance was issued by 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).
First proposed in June 2023, the guidance focuses on ROVs, which are requests 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 proposing the guidance, if a consumer provides information to a financial institution about potential deficiencies or other information that may affect the estimated value.
The agencies noted that deficiencies identified in valuations, either through an institution’s valuation review processes or through consumer-provided information, may be a basis for financial institutions to question the credibility of the appraisal or valuation report.
Examples provided by the regulators of ROV policies and procedures that a financial institution may implement include: help for institutions to identify, address, and mitigate discrimination risk; descriptions of the risks of deficient residential real estate valuations; and explanations of how financial institutions may incorporate ROV processes into risk management functions.
The agencies said the guidance was finalized largely as proposed, with the addition of clarifying edits based on public comments received on the proposal published last year.