Federal regulatory agencies issue final guidance for residential real estate transactions

Final guidance was issued last week by federal regulatory agencies that addresses reconsiderations of value (ROVs) for residential real estate transactions.

The guidance advises on policies and procedures that financial institutions may implement to allow consumers. Specifically, the guidance provides financial institutions with information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal.

ROVs are requests from a financial institution to an appraiser or other preparer of a valuation report to reassess the value of residential real estate. Deficiencies that are 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.

The guidance offers examples of ROV policies and procedures that a financial institution may implement to help institutions identify, address, and mitigate discrimination risk; describes the risks of deficient residential real estate valuations.

It also explains how financial institutions may incorporate ROV processes into risk management functions.

The guidance was finalized by five regulatory agencies including the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, and the Office of the Comptroller of the Currency (OCC).

The agencies finalized the guidance largely as proposed, with the addition of clarifying edits based on public comments.

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