Banks are under fire for allegedly engaging in shady real estate valuations, with five federal agencies proposing guidance to address the issue.
A joint release from the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency reveals that the agencies are requesting public comment on proposed guidance addressing reconsiderations of value (ROV) for residential real estate transactions.
The proposed guidance advises financial institutions on policies to implement ROV processes, which allow consumers to provide 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.
The proposed guidance shows how ROVs intersect with appraisal independence requirements and compliance with applicable laws and regulations. It describes how financial institutions may create or enhance their existing ROV processes while remaining consistent with safety and soundness standards, complying with applicable laws and regulations, preserving appraiser independence, and remaining responsive to consumers.
Additionally, the proposed guidance would describe the risks of deficient residential real estate valuations, which can contain inaccuracies due to errors, omissions, or discrimination that affect the value conclusion. It would also provide examples of ROV policies and procedures that a financial institution may establish to help identify, address, and mitigate valuation discrimination risk.
Comments must be received within 60 days of the proposed guidance’s publication in the Federal Register. The proposed guidance is a clear indication that the federal agencies are cracking down on banks that engage in shady real estate valuations and are working to protect consumers from potential financial harm.
As the proposed guidance makes clear, the risks of deficient residential real estate valuations are very real, and financial institutions must take steps to address these risks. By establishing ROV processes, financial institutions can help ensure that consumers receive accurate and unbiased valuations, and can help protect themselves from potential financial harm.
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Key Facts
- Agency: FDIC
- Category: Financial Crimes
- Source: Official Source â†â€â€ÂÂ
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