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.