Banks Get Slapped with Guidance on Reconsidering Home Valuations

The FDIC, CFPB, and three other federal agencies have just dropped the hammer on financial institutions, finalizing guidance on reconsiderations of value for residential real estate transactions.

The guidance, issued on July 18, 2024, advises financial institutions on policies and procedures to allow consumers to provide information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal.

Reconsiderations of value (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 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; and explains how financial institutions may incorporate ROV processes into risk management functions.

The agencies finalized the guidance largely as proposed, with the addition of clarifying edits based on public comments received on the proposed guidance published in July 2023.

Financial institutions are now required to implement these new policies and procedures to avoid any potential risks and ensure compliance with the new guidance. The FDIC, CFPB, and other federal agencies will be closely monitoring financial institutions to ensure they are adhering to the new guidance.

The move is seen as a major step forward in protecting consumers from potential financial exploitation and ensuring that financial institutions are held accountable for their actions.