On July 18, 2024, the Consumer Financial Protection Bureau and 4 other government agencies issued guidance to financial institutions about Reconsiderations Of Value (ROVs) in the real estate lending process to avoid litigation for deficient valuations. 

ROVs are valuation reports, which includes reconsideration of appraisals, evaluations, and other means to determine the value of residential property. Specifically, ROVs are a response to a request for a follow-up valuation, after an initial valuation exists to gauge the value of real estate or loan collateral offered by a party seeking a loan. 

The guidance suggests policies and procedures for lenders to address information unconsidered in an initial valuation or identify flaws in an original valuation because accurate valuations of collateral are key to the lending process and avoiding litigation.  

A valuation may be deficient due to unlawful discrimination under both the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA). In fact, the guidance suggests that complaints of discrimination should be addressed by routing those complaints "to the appropriate compliance, legal, and appraisal review staff," in addition to processing the ROV. Such unlawful valuations can prevent the acquisition of loans lenders, blocking potential buyers from purchasing or refinancing homes. 

To read the entire guidance, click here.