Align Your ROV processes and technology before the Aug. 29 , 2024 effective date
Historically, lenders managed their own appraisal processes to support borrowers when they request a Reconsideration of Value (ROV) on their property. New regulations announced in May 2024 are now defining and standardizing the ROV process that lenders must follow to help improve appraisal transparency, reduce property valuation risk and support borrower needs.
Fannie Mae, Freddie Mac, the Federal Housing Finance Agency (FHFA) and the U.S. Department of Housing and Urban Development (HUD) collaborated to deliver consistent, industry-wide ROV guidelines that become effective Aug. 29, 2024. HUD鈥檚 revised policies become effective Sept. 2, 2024. To prepare for these new guidelines, lenders should carefully review them to help ensure their operations and technologies are aligned by the effective dates.
What prompted the new ROV guidelines?
Credible collateral valuation is a critical part of the mortgage lending process. Inaccurate property values can negatively affect a consumer鈥檚 ability to sell, purchase or refinance a home. Incorrect property valuations can also impact the surrounding communities and neighborhoods and potentially expose lenders to fines and lawsuits.
In June 2021, President Biden created the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) to help address inequities in the property valuation process. As a result of the PAVE Action Plan, in June 2023, the GSEs and other stakeholders collaborated to propose a clearer and more transparent ROV process that resulted in the May announcements by Fannie Mae, Freddie Mac, FHFA and HUD.
What standard ROV guidelines must lenders follow?
Lenders play a big role in the ROV process and must collaborate with both the borrower and the appraiser during appeals to find resolution. The new guidelines help ensure there are controls in place to provide borrowers a voice and promote valuation accuracy. While many lenders already have established policies and procedures around ROVs, they must now comply with the new guidelines, which require the following:
First lender disclosure
- During loan application, provide the borrower with a disclosure about their right to appeal an appraisal.
- Provide guidance to the borrower with instructions and guidance on initiating an ROV request.
Second lender disclosure
- If an appraisal is ordered, send a second disclosure on ROV when the appraisal is delivered to the borrower.
Borrower requests ROV (must be submitted by the borrower prior to loan closing)
- The borrower completes the minimum requirements and sends the request for ROV to their lender.
Lender reviews request
- Verify the request has merit and contains all required information.
- Gain clarity from the borrower if needed.
Lender requests ROV from appraiser
- Send a standardized communication to the appraiser detailing the borrower鈥檚 ROV request.
Appraisal revision and confirmation
- The appraiser analyzes the new information and revises the original appraisal with a description of the points in dispute and the results of the appraiser鈥檚 consideration of the request.
Appraiser sends revised report to lender
- The appraiser delivers the revised report within the defined timeframe.
Final lender steps
- The lender communicates the results to the borrower.
- If material deficiencies were not corrected in appraisal report or if it contains suspected overt violations of anti-discrimination laws:
- The lender reports the results to the licensing and regulatory agencies.
In this case, the lender may obtain a second or subsequent appraisal report.
What technology is available to help manage the new ROV guidelines?
The GSEs have guardrails to help protect the lender against unnecessary borrower complaints about appraisals. For example, they require borrowers to provide factual information, such as data and comparables, as well as an explanation of their concerns and how they believe these could impact the property value.
There is technology available to help borrowers gather the property data and comparables information required for an appraisal appeal. For example, ValidateROV鈩� from ICE is an automated, cost-effective solution that guides the borrower through the ROV process on their mobile device. Borrowers can record and validate property information, answer questions and snap photos of their property when prompted to support their ROV request. This type of technology can help reduce the time and cost required to manage appraisal appeals, while supporting compliance with the new guidelines.
Preparing for the new GSE guidelines
While the new ROV guidelines will aim to provide a clear framework that supports valuation transparency and fairness for all stakeholders, lenders must prepare now by conducting a careful review of their existing processes and technology to align with the required framework.
To learn more about the new ROV guidelines published on May 1, * hosted by ICE with special guest speakers from Fannie Mae and Freddie Mac, as well as the ICE Valuation Analytics team.
*This information presented in the webinar is for informational purposes only. The information contained herein is subject to change and does not constitute any form of warranty, representation, or undertaking. Nothing herein should in any way be deemed to alter the legal rights and obligations contained in agreements between ICE and their respective clients relating to any of the products or services described herein. Nothing herein is intended to constitute legal, tax, accounting, investment or other professional advice. ICE makes no warranties whatsoever, either express or implied, as to merchantability, fitness for a particular purpose, or any other matter. Without limiting the foregoing, ICE makes no representation or warranty that any data or information (including but not limited to evaluations) supplied to or by it are complete or free from errors, omissions, or defects. Please check with your compliance or legal department for information on complying with applicable law.