New Reconsideration of Value (ROV) Regulations: Key Changes for Mortgage Lenders

Major Update: Fannie Mae, Freddie Mac, and HUD Introducing a Unified ROV Policy.

The world of mortgage lending is transforming! In a collaborative effort, Fannie Mae, Freddie Mac, and HUD have revamped the Reconsideration of Value (ROV) policy. This update aims to empower borrowers by ensuring fair lending practices, establishing clear communication channels, and streamlining the appraisal review process for mortgage lenders.

What is the Reconsideration of Value (ROV) Process?

The ROV process empowers borrowers to challenge an appraisal they believe is inaccurate or unfair considering:

Unsupported valuation based on outdated data or unique property features.
Deficiencies in appraisal practices, like methodological errors or failing to follow standard practices in their appraisal of the property.
Suspected discriminatory practices in the valuation.

What Do Lenders Need to Do?

Educate the Borrowers

Clearly elaborate on the ROV process to borrowers throughout important stages of the appraisal process:

Initial Disclosure: Inform borrowers about their right to request an ROV during the loan application process.
Appraisal Delivery: Provide a copy of the appraisal report along with a detailed explanation of the ROV process and how to initiate a request.

Facilitate the ROV Request

Clearly elaborate on the ROV process to borrowers throughout important stages of the appraisal process:

Initial Disclosure: Inform borrowers about their right to request an ROV during the loan application process.
Appraisal Delivery: Provide a copy of the appraisal report along with a detailed explanation of the ROV process and how to initiate a request.

Review and Screen

Before forwarding the ROV request to the appraiser, complete your internal appraisal review. Additionally, screen the borrower’s ROV request to ensure it adheres to Appraiser Independence Requirements (AIR) and includes specific data points like borrower name, property address, and appraisal date.

Guide the Borrower

The borrower’s ROV request should clearly outline:

The specific areas in the appraisal they feel are inaccurate or deficient.
Supporting data like additional comparable properties (up to 5) and relevant data sources.
A clear explanation of why the new data justifies a revised appraisal value.

Manage Expectations

Clearly communicate expectations to both the borrowers and the appraisers. This includes:

One-Time Request: Inform the borrowers that they can only submit one ROV request per appraisal.
Turnaround Time: Lock a timeframe for the appraisers to respond to the ROV requests (and communicate this to both parties).
Revised Appraisal: The appraiser should address the borrower’s concerns in a revised appraisal report.

Maintain Documentation

Retain all ROV-related communication and documentation within the loan file for future reference.

Additional Key Points:

Fair Lending Takes Center Stage: The new ROV process emphasizes fair lending practices. Lenders are required to report suspected fair housing violations and ensure staff is trained to identify them.
Standardized Appraiser Communication: Develop clear protocols for communicating borrower concerns and ROV requirements to appraisers during the process.
Reporting Appraisal Deficiencies: Report appraisals replaced due to material deficiencies to the appropriate state agency.

Remember: These new guidelines come into effect on August 29, 2024. Proactive implementation will ensure a smooth transition for both you and your borrowers. By familiarizing yourself with these requirements and making necessary adjustments to your internal processes, you can effectively navigate the new ROV landscape.

Book a free consultation to navigate the new ROV regulations today!