Banking Agencies Set Comment Deadline for Proposed Guidance on "Reconsiderations of Value" in Real Estate Transactions

The Federal Reserve Board, CFPB, FDIC, National Credit Union Administration and OCC (collectively, the "Agencies") set a comment deadline of September 19, 2023 for proposed risk management guidance concerning "reconsiderations of value" ("ROV") in real estate transactions. The proposed guidance proposed guidance was published in the Federal Register.

As previously covered, the ROV process allows a financial institution to request that the preparer of a valuation report re-assess the report due to identified potential deficiencies, such as errors, omissions or discrimination. The Agencies stated that the proposed guidance would address uncertainty regarding ROVs in relation to appraisal independence requirements and compliance with consumer protection laws and regulations, including prohibitions against discrimination.

The proposed guidance clarifies that financial institutions:

• are (i) not exempt from compliance with applicable laws and regulations and (ii) expected to ensure the third parties’ compliance with federal consumer protection laws, when they use a third party in the valuation process;
• may initiate an ROV request following review of the valuation or after receiving a related complaint from a consumer;
• can resolve identified deficiencies in a valuation, including those related to potential discrimination, by communicating relevant information to the original preparer and requesting an ROV;
• can refer to consumer feedback on valuation deficiencies when reviewing existing complaint resolution processes; and
• should implement policies, procedures and control systems designed to "adequately address the monitoring, escalating, and resolving of complaints including a determination of the merits of the complaint" and whether to proceed with an ROV.

The proposed guidance addresses ROVs that may move the valuation up or down.