Treliant Takeaway…Real Estate Appraisals – OCC’s Request for Comment

Real Estate Appraisals: Notice and Request for Comment on Proposed Interagency Guidance on Reconsiderations of Value of Residential Real Estate

• Source: occ.gov

Treliant Takeaway:

Our team of experts specialize in assisting financial institutions with the adaptation of their fair lending compliance programs to address the risks associated with potential discrimination in residential real estate valuations. We offer comprehensive fair lending services that ensure our clients’ policies and practices do not have any unwarranted discriminatory impacts on protected classes. Leveraging our extensive expertise in conducting fair lending gap assessments and enhancing top-tier compliance management systems, we support financial institutions in maintaining compliance with relevant fair lending laws and regulations. Our ultimate goal is to foster a housing market that is free from discrimination and help financial institutions meet their compliance goals. You can trust Treliant to provide the necessary expertise to navigate the intricate landscape of fair lending compliance.

Highlights:

Financial institutions that operate in the residential real estate lending market will need to consider the impacts of how residential real estate valuations could change and the expanded focus on fair valuations. This proposed guidance has examples of policies, procedures, controls, and complaints management processes that are aimed at improving how a financial institution identifies, addresses, and mitigates deficient valuations.  While deficient valuations are not a singular conclusion of discrimination in appraisals or appraisal bias, it can significantly heighten the risk present or even act as an indicator of potential fairness issues.

Considerations:

Below are some areas of consideration when evaluating an institution’s fair and responsible banking practices with regard to the proposed guidance:

• Consider how your financial institution will handle Reconsiderations of Value (ROV) when a valuation review or consideration of other information (such as complaint data or a consumer request) may create the need to request one.
• Review processes that can inform consumers on how to raise concerns about valuations sufficiently early enough in the underwriting process for any errors or issues to be resolved before a final credit decision is made.
• Complaint systems may need a revised workflow to adequately classify and proactively escalate matters with criteria that may prompt an ROV. This includes the various methods of intake channels ranging from letters, phone calls, in person, regulatory, third-parties to social media.
  • The guidance mentions ROVs as a possible resolution for consumer complaints related to residential property valuations.
• Review the robustness of third-party management and understand how third parties may be used at your financial institution to perform appraisals. Regulators have indicated the use of third parties does not reduce an institution’s responsibility for proper oversight over appraisal processes.
• Review existing appraisal and valuations procedures to ensure standardized processes with clearly identified stakeholders and each business unit’s roles and responsibilities for processing an ROV.

Timing:  Comments must be received within 60 days of the proposed guidance’s publication in the Federal Register.

Additional Sources:

OCC Bulletin 2023-18 – Real Estate Appraisals Notice and Request for Comment

FDIC FIL-30-2023 – Notice of Proposed Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations

Proposed Interagency Guidance on reconsiderations of Value of Residential Real Estate