Agencies propose guidance to address reconsiderations of value for residential real estate transactions

The banking agencies are seeking comment on proposed guidance addressing the reconsiderations of value for residential real estate transactions. An ROV is a request that a financial institution may make to the appraiser or other entity that developed a valuation report for a property being used as collateral for a loan to re-assess the report based upon potential deficiencies or information that may affect the value conclusion.

Valuation deficiencies can be identified either through the institution’s valuation review process or through consumer-provided information for financial institutions to question the credibility of an appraisal or valuation report and request an ROV.

The proposed interagency guidance describes the risks of deficient collateral valuations and outlines applicable laws, regulations and existing guidance relating to ROVs and collateral valuations. It also explains how financial institutions may incorporate ROV processes into existing risk management functions such as appraisal review and complaint management, and provides examples of policies and procedures that financial institutions may choose to adopt when developing ROV policies, procedures, control systems and processes to better identify, address and mitigate risks relating to deficient valuations. Comments on the proposal will be due 60 days after publication in the Federal Register.