Fed agencies push for change to reconsiderations of value for property appraisals

Proposed guidance sheds light on risks associated with inaccurate home valuations

After proposing a rule regarding automated valuation models (AVMs), six federal regulatory agencies have opened the floor for public feedback on proposed guidance concerning the reconsideration of property values (ROVs) in residential real estate transactions.

In a joint release, the agencies (Federal Housing Finance Agency, Department of Treasury, Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Consumer Financial Protection Bureau) requested public comment on proposed guidance that aims to assist financial institutions in allowing consumers to provide additional information that may impact property valuations.

ROVs are requests from a financial institution to an appraiser, or other preparers of a valuation report to reassess the property value if there’s information that may not have been considered during an appraisal or deficiencies are identified in the original appraisal.

“The proposed guidance shows how ROVs intersect with appraisal independence requirements and compliance with applicable laws and regulations,” the news release read. “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 agencies said the proposed guidance highlights the risks associated with inaccurate property valuations and provides examples of ROV policies and procedures that financial institutions can adopt to identify and address potential valuation discrimination risks. The public has a 60-day period to submit comments on the proposed guidance.

This initiative comes days after the agencies announced a proposed rule to implement quality control standards for AVMs to address racial bias in home appraisals. The FHFA said the proposed measures are “designed to ensure a high level of confidence in the estimates produced by AVMs; help protect against the manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and promote compliance with applicable non-discrimination laws.”

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