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Financial Institution Letter

Notice of Proposed Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations

June 8, 2023  |  FIL-30-2023

Summary:

The Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the National Credit Union Administration, and the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau (collectively, the agencies), are issuing proposed Interagency Guidance on Reconsiderations of Value (ROV) of Residential Real Estate Valuations in the Federal Register for public comment. The proposal highlights the risks associated with deficient residential real estate valuations, particularly those that can contain errors, omissions, or discrimination that affect the value conclusion. Additionally, the proposal describes how financial institutions may incorporate effective ROV processes into established appraisal and evaluation programs, consistent with safety and soundness standards and all applicable laws and regulations, including those designed to protect consumers.

Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-supervised financial institutions.

Key Details:

Valuations are important to the integrity of the residential real estate lending process. Deficient valuations, including those that contain evidence of discrimination, can keep individuals, families, and neighborhoods from building wealth through homeownership, and may pose risks to an institution’s financial condition and operations.

The proposed guidance:

  • Describes the risks of deficient residential real estate collateral valuations that remain uncorrected.
  • Highlights how financial institutions may create or enhance existing ROV processes that are consistent with safety and soundness standards, comply with applicable laws and regulation (including nondiscrimination requirements), preserve appraiser independence, and remain responsive to consumers.
  • Provides examples of policies, procedures, control systems and complaint resolution processes that may help financial institutions identify, address, and mitigate risks of deficient valuations, including those that may have involved discrimination.
  • Describes actions that financial institutions may take to resolve valuation deficiencies, including resolving the deficiencies with the appraiser or preparer of the valuation report; requesting a review of the valuation by an independent, qualified, and competent state certified or licensed appraiser; or obtaining a second appraisal or evaluation.
  • Reminds financial institutions that the use of third parties in the appraisal review process does not diminish their responsibility to oversee those activities in the same manner as if they were conducted by the institution itself.

The agencies seek comments on the proposal from all interested parties. Comments will be accepted for 60 days after publication in the Federal Register.

Related Resources:

Part 323 - Appraisals

Part 364 - Standards for Safety and Soundness

Interagency Appraisal and Evaluation Guidelines

Related Topic:

Appraisals and Other Valuation Products