30-Day Federal Register Notice

ZA36 ROV Final Guidance 89 FR 60549 July 26 2024.pdf

Recordkeeping Requirements Associated with Real Estate Appraisals and Evaluations

30-Day Federal Register Notice

OMB: 3064-0103

Document [pdf]

Download: pdf | pdf

60549

Rules and Regulations

Federal Register
Vol. 89, No. 144
Friday, July 26, 2024

This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 34
[Docket ID OCC–2023–0007]

FEDERAL RESERVE SYSTEM
12 CFR Part 225
[Docket No. OP–1809]

FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 323
RIN 3064–ZA36

NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 722
[Docket ID NCUA–2023–0061]

CONSUMER FINANCIAL PROTECTION
BUREAU
12 CFR Chapter X
[Docket No. CFPB–2023–0033]

Interagency Guidance on
Reconsiderations of Value of
Residential Real Estate Valuations
Board of Governors of the
Federal Reserve System (Board);
Consumer Financial Protection Bureau
(CFPB); Federal Deposit Insurance
Corporation (FDIC); National Credit
Union Administration (NCUA); and
Office of the Comptroller of the
Currency (OCC), Treasury.
ACTION: Final interagency guidance.

ddrumheller on DSK120RN23PROD with RULES1

AGENCY:

The Board, CFPB, FDIC,
NCUA, and OCC (together, the agencies)
are issuing final guidance that
highlights risks associated with
deficient residential real estate
valuations and describes how financial

SUMMARY:

VerDate Sep<11>2014

16:03 Jul 25, 2024

Jkt 262001

institutions may incorporate
reconsiderations of value (ROV)
processes and controls into established
risk management functions. The final
guidance also provides examples of
policies and procedures that a financial
institution may choose to implement to
help identify, address, and mitigate the
risk of discrimination impacting
residential real estate valuations.
DATES: The guidance is final as of July
26, 2024.
FOR FURTHER INFORMATION CONTACT:
OCC: Siddarth Rao, Fair Lending
Compliance Policy Specialist, (732)
635–2070; Olutoyin Falade, Fair
Lending Compliance Policy Specialist,
(972) 277–9551; James B. Rives, Retail
Credit Risk Specialist, (202) 649–6594;
Joanne Phillips, Counsel, or Marta
Stewart-Bates, Counsel, Chief Counsel’s
Office, (202) 649–5490; Office of the
Comptroller of the Currency, 400 7th
Street SW, Washington, DC 20219. If
you are deaf, hard of hearing, or have a
speech disability, please dial 7–1–1 to
access telecommunications relay
services.
Board: Devyn Jeffereis, Senior
Financial Institution Policy Analyst II,
Division of Supervision and Regulation,
(202) 452–2729; Keshia King, Lead
Supervisory Policy Analyst, Division of
Consumer and Community Affairs, (202)
452–2496; Trevor Feigleson, Senior
Counsel, (202) 452–3274, or Derald
Seid, Senior Counsel, (202) 452–2246,
Legal Division. For users of telephone
systems via text telephone (TTY) or any
TTY-based Telecommunications Relay
Services, please call 711 from any
telephone, anywhere in the United
States; Board of Governors of the
Federal Reserve System, 20th and C
Streets NW, Washington, DC 20551.
FDIC: Patrick J. Mancoske, Senior
Examination Specialist, Division of Risk
Management Supervision, (202) 898–
7032; Stuart Hoff, Senior Policy Analyst,
Division of Depositor and Consumer
Protection, (202) 898–3852; Legal
Division: Navid Choudhury, Counsel,
(202) 898–6526, nchoudhury@fdic.gov,
Lauren Whitaker, Counsel, (202) 898–
3872, lwhitaker@fdic.gov, or Mark
Mellon, Counsel, (202) 898–3884,
mmellon@fdic.gov. Federal Deposit
Insurance Corporation, 550 17th Street
NW, Washington, DC 20429.
NCUA: Naghi Khaled, Director of
Credit Markets, or Walonda Hollins,
Senior Credit Specialist, Office of

PO 00000

Frm 00001

Fmt 4700

Sfmt 4700

Examination and Insurance, (703) 216–
5136; Ernestine Ward, Director, Division
of Consumer Compliance Policy &
Outreach, Office of Consumer Financial
Protection, (703) 518–6524; National
Credit Union Administration, 1775
Duke Street, Alexandria, VA 22314.
CFPB: George Karithanom, Office of
Regulations, at (202) 435–7700 or
https://
reginquiries.consumerfinance.gov/. If
you require this document in an
alternative electronic format, please
contact CFPB_Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Discussion of Comments on the Proposed
Guidance
A. General Comments
B. Terminology & Scope
i. Description of the Term ‘‘ROV’’
ii. Description of the Terms ‘‘Comparable
Sale’’ and ‘‘Specific and Verifiable
Information’’
ii. Scope of Transactions Covered by the
Guidance
C. Comments on Prescriptive Versus
Principles-Based Approach
i. Specific Suggestions for Added
Prescriptiveness
ii. Uniformity & Standardization of ROV
Processes
iii. Model Forms, Checklists, & Policies
D. Comments on Burden on Institutions
E. Other Comments Submitted
III. Paperwork Reduction Act
IV. Text of Final Interagency Guidance on
Reconsiderations of Value of Residential
Real Estate Valuations

I. Introduction
The agencies are issuing final
interagency guidance (final guidance)
on ROVs of residential real estate
valuations.1 The agencies considered
the comments received on the proposed
guidance, and as a result, made several
edits to the final guidance, including
clarifying the guidance’s scope. The
agencies are finalizing the guidance
largely as proposed. This guidance is
intended to highlight risks associated
with deficient residential real estate
valuations, describe how financial
1 This final guidance is supervisory guidance that
does not have the force and effect of law or
regulation and does not impose any new
requirements on supervised institutions. See 12
CFR part 4, subpart F, appendix A (OCC); 12 CFR
part 262, appendix A (Board); 12 CFR part 302,
appendix A (FDIC); 12 CFR part 1074, appendix A
(CFPB); 12 CFR part 791, subpart D, appendix A
(NCUA).

E:\FR\FM\26JYR1.SGM

26JYR1

60550

Federal Register / Vol. 89, No. 144 / Friday, July 26, 2024 / Rules and Regulations

ddrumheller on DSK120RN23PROD with RULES1

institutions may incorporate ROV
processes and controls into risk
management functions, and provide
examples of ROV policies and
procedures that institutions may choose
to implement. Collateral valuations,
including appraisals,2 are important to
the integrity of the residential real estate
lending process. Deficient collateral
valuations can contain inaccuracies due
to errors, omissions, or discrimination 3
that affect the value conclusion and can
result in either overvaluing or
undervaluing real estate collateral. The
Board, FDIC, NCUA, and OCC have
previously issued guidance that
describes actions a financial institution
may take to correct deficiencies
identified in collateral valuations.4
These actions include ordering a second
appraisal or evaluation or resolving the
deficiency through the original
appraiser or preparer of the evaluation.5
Prior to the efforts to adopt this joint
guidance, the agencies had not,
collectively, issued guidance specific to
ROV processes. The agencies had
received questions and comments from
financial institutions and other industry
stakeholders on ROVs. Stakeholders
highlighted the uncertainty in the
industry on how ROVs intersect with
appraisal independence requirements
and compliance with Federal consumer
protection laws, including those related
to nondiscrimination. As such, the final
guidance addresses some of the
questions raised by stakeholders. For
purposes of the final guidance, an ROV
is a request from the financial
institution to the appraiser or other
preparer of the valuation report to
reassess the report based upon potential
deficiencies or other information that
may affect the value conclusion.6
2 Appraisal means ‘‘a written statement
independently and impartially prepared by a
qualified appraiser setting forth an opinion as to the
market value of an adequately described property
as of a specific date(s), supported by the
presentation and analysis of relevant market
information.’’ 12 CFR 34.42(a) (OCC); 12 CFR
323.2(a) (FDIC); 12 CFR 225.62(a) (Board); 12 CFR
722.2 (NCUA).
3 For the purposes of this guidance,
‘‘discrimination’’ is prohibited discrimination based
on protected characteristics in the residential
property valuation process. For these purposes,
‘‘valuation’’ includes appraisals, evaluations, and
other means to determine the value of residential
property.
4 See Interagency Appraisal and Evaluation
Guidelines, 75 FR 77450 (December 10, 2010).
5 The NCUA uses the term ‘‘written estimate of
market value’’ in place of the term ‘‘evaluation.’’
See 12 CFR 722.3.
6 ROVs may arise from a consumer requesting a
financial institution to reexamine a valuation.

VerDate Sep<11>2014

16:03 Jul 25, 2024

Jkt 262001

II. Discussion of Comments on the
Proposed Guidance
On July 21, 2023, the agencies
published for comment proposed
guidance on ROVs of residential real
estate valuations (proposal).7 The 60day comment period ended on
September 19, 2023. The agencies
invited comment on all aspects of the
proposed guidance from all interested
parties. In particular, the agencies
requested comment on the following: (1)
to what extent the proposed guidance
describes suitable considerations for a
financial institution to take into account
in assessing and potentially modifying
its current ROV policies and
procedures; (2) suggestions for ROV
model forms or model policies and
procedures, if any, that would be
helpful for the agencies to recommend;
(3) suggestions for other guidance that
may be helpful to financial institutions
concerning the development of ROV
processes; and (4) to what extent, if any,
the proposed ROV guidance conflicts
with, duplicates, or complements the
existing Interagency Appraisal and
Evaluation Guidelines (Guidelines) or a
financial institution’s policies and
procedures to implement those
Guidelines. The agencies collectively
received more than 45 unique comment
letters from banking organizations, real
estate companies, trade associations,
nonprofits, The Appraisal Foundation
(TAF),8 an automated valuation model
(AVM) developer, loan officers,
appraisers, and other individuals.
A. General Comments
In general, many commenters
supported the agencies’ issuance of
interagency guidance specific to ROV
processes. Some of these commenters
agreed with the proposal’s focus on the
importance of credible collateral
valuations, compliance with
nondiscrimination laws, and
safeguarding appraiser independence.
Other commenters asserted that
additional clarity in the guidance is
7 ‘‘Proposed Interagency Guidance on
Reconsiderations of Value of Residential Real Estate
Valuations,’’ 88 FR 47071 (July 21, 2023).
8 TAF is a not-for-profit corporation under the
laws of Illinois, which sets appraisal standards and
appraiser qualifications in connection with
federally related transactions. See 12 U.S.C. 3331 et
seq. and https://appraisalfoundation.org/imis. As
contemplated by title XI of the Financial
Institutions Reform, Recovery and Enforcement Act
of 1989 (FIRREA), the Board, FDIC, NCUA, and the
OCC have promulgated regulations requiring that
real estate appraisals be performed in accordance
with generally accepted appraisal standards as
evidenced by the appraisal standards promulgated
by the Appraisal Standards Board of TAF. See 12
U.S.C. 3339; 12 CFR part 225 (Board); 12 CFR part
323 (FDIC); 12 CFR part 722 (NCUA); 12 CFR part
34 (OCC).

PO 00000

Frm 00002

Fmt 4700

Sfmt 4700

necessary and provided
recommendations. A few commenters,
including certain credit unions, trade
associations, and appraisers, opposed
the guidance or aspects of the guidance
on the grounds that it would be overly
burdensome for institutions or place
undue pressure on appraisers which
could lead to overvaluation.
Commenters expressed mixed views
on whether ROV processes should be
uniform across all institutions. Some
commenters recommended adding more
prescriptive elements to the guidance,
while others asserted that the guidance
should be broad and flexible, as
proposed. Some commenters believed
that many of the proposal’s policies and
procedures should be mandatory.
In response to comments received, the
agencies made several clarifying edits to
the final guidance, including clearly
stating the scope of transactions covered
by the guidance. The agencies
underscore that supervisory guidance
does not have the force and effect of law
or regulation and does not impose any
new requirements on supervised
institutions.9 The guidance is intended
to provide a flexible, risk-based
approach to ROV processes that
institutions can adjust to their unique
profile. The justification for and benefits
of the agencies’ approach, and the
agencies’ consideration of specific
comments, are discussed further below.
B. Terminology & Scope
Commenters offered views on certain
terms used in the proposal, including
the terms ‘‘ROV,’’ ‘‘comparable sale,’’
and ‘‘specific and verifiable
information.’’ Commenters also
expressed views on the scope of
transactions covered by the guidance.
i. Description of the Term ‘‘ROV’’
One commenter requested that the
agencies revise the definition of ‘‘ROV’’
to remove the language ‘‘that may affect
the value conclusion.’’ 10 This
commenter expressed concern that
including this language could result in
a lender exerting pressure on an
appraiser to change a value that does
not satisfy the lender. Another
commenter asserted that the proposal’s
use of the term ‘‘ROV’’ might be too
limiting as it focuses on ‘‘value’’ and
suggested the broader term ‘‘Appraisal
Reconsideration’’ instead. A commenter
9 See

authorities cited supra note 1.
proposal described the term ‘‘ROV’’ as a
‘‘request from the financial institution to the
appraiser or other preparer of the valuation report
to reassess the report based upon potential
deficiencies or other information that may affect the
value conclusion.’’ 88 FR 47071, 47073 (July 21,
2023).
10 The

E:\FR\FM\26JYR1.SGM

26JYR1

Federal Register / Vol. 89, No. 144 / Friday, July 26, 2024 / Rules and Regulations
suggested that the definition of ‘‘ROV’’
be amended to provide that an agent of
the institution, such as an appraisal
management company (AMC), could
initiate an ROV request.
Alternative descriptions suggested by
commenters could result in overly broad
or narrow descriptions and would not
capture the appropriate types of
requests. Therefore, the agencies believe
the description of the term ‘‘ROV’’ in
the proposed guidance captures the
intended scope and the final guidance
does not change that description. The
agencies decline to incorporate the term
‘‘Appraisal Reconsideration’’ into the
final guidance, as it implies that
appraisals are the sole type of valuation
subject to ROVs.

ddrumheller on DSK120RN23PROD with RULES1

ii. Description of the Terms
‘‘Comparable Sale’’ and ‘‘Specific and
Verifiable Information’’
One commenter requested that the
agencies clearly define the term
‘‘comparable sale’’ 11 in the context of
the content of an ROV request, which
may include comparable properties not
previously identified. A commenter
recommended that the agencies clarify
the term ‘‘specific and verifiable
information’’ in connection with a
consumer providing specific and
verifiable information that may not have
been available or considered when the
initial valuation and review were
performed. The same commenter
requested that the agencies provide
clear examples of both valid and invalid
data in the context of consumerprovided ‘‘specific and verifiable
information.’’
The agencies considered the
comments regarding ‘‘comparable sale’’
and ‘‘specific and verifiable
information.’’ Under the provisions of
title XI of the FIRREA, the Appraisal
Standards Board (ASB) of TAF sets
appraisal standards in connection with
federally related transactions, which it
does through the development and
publication of the Uniform Standards of
Professional Appraisal Practice
(USPAP).12 What constitutes a
‘‘comparable sale’’ and ‘‘specific and
verifiable information’’ fall within the
purview of the ASB and USPAP.
Therefore, the agencies decline to
provide definitions or examples related
to those terms in the final guidance.
11 The agencies note that the final guidance, like
the proposed guidance, references ‘‘comparable
properties’’ and ‘‘comparable properties not
previously identified,’’ instead of ‘‘comparable
sales.’’
12 See 12 U.S.C. 3331 et seq.

VerDate Sep<11>2014

16:03 Jul 25, 2024

Jkt 262001

iii. Scope of Transactions Covered by
the Final Guidance
Some commenters questioned the
scope of the term ‘‘residential real
estate’’ in connection with the types of
transactions that the guidance covers.
One commenter asserted that
‘‘residential real estate’’ likely
encompassed single-unit dwellings like
standalone homes, condos, co-ops, and
townhouses. Another commenter stated
that their interpretation of the
proposal’s scope was that it included
loans for properties that borrowers plan
to live in as their primary residence.
Commenters made specific
suggestions regarding the type of loans
the guidance should cover. In particular,
a commenter suggested that the
guidance should only extend to loans
secured by a single 1-to-4 family
residential property, excluding multifamily dwellings. Another commenter
recommended that loans to small
businesses, corporations, partnerships,
and trusts should be covered by the
guidance, because the Equal Credit
Opportunity Act (ECOA) applies to any
extension of credit to those entities.
Finally, a commenter asserted that the
guidance should cover all types of real
estate-related credit, including multifamily and commercial.
The agencies considered the
comments regarding the scope of
‘‘residential real estate,’’ as well as the
comments in favor of expansion of the
guidance’s scope. In response, the
agencies revised the guidance to clearly
state that the scope of the final guidance
is intended to be limited to real estaterelated financial transactions that are
secured by a single 1-to-4 family
residential property.13 The
considerations and principles included
in the guidance are targeted towards
single 1-to-4 family residential
transactions and thus are best suited for
those types of transactions. Other types
of transactions may involve different
considerations.
C. Comments on Prescriptive Versus
Principles-Based Approach
Some commenters recommended that
the final guidance take a more
prescriptive approach, suggesting
specific amendments to the guidance,
urging uniformity and standardization
of ROV processes across institutions,
and endorsing the development of
model forms, checklists, and policies.
Other commenters supported the
proposal’s more flexible and principlesbased approach to the guidance.
13 See 12 CFR 34.42(k) (OCC); 12 CFR 323.2(k)
(FDIC); 12 CFR 225.62(k) (Board); 12 CFR 722.2
(NCUA).

PO 00000

Frm 00003

Fmt 4700

Sfmt 4700

60551

i. Specific Suggestions for Added
Prescriptiveness
Many commenters made specific
suggestions that the agencies provide
more granularity and prescriptiveness in
the guidance in particular areas. With
regard to second appraisals, one
commenter recommended that the
guidance should outline the
circumstances under which a financial
institution must request a second
appraisal. One commenter asserted that
the guidance should provide examples
of when, if ever, it is reasonable to pass
on the cost of a second appraisal to the
consumer. A commenter recommended
that, if the agencies determined that it
was never acceptable to pass on the cost
of a second appraisal to the consumer,
the guidance should clearly state that,
and should also clarify to whom the fee
could be assessed. Another commenter
more generally requested clear
guidelines on handling second
appraisals.
With regard to data submitted with an
ROV request, commenters requested
that the guidance define what types of
data or items a consumer should or
should not include. For example, one
commenter suggested that alleged
appraiser remarks should not be
included. Another commenter requested
that the guidance specify that data
provided by consumers with the ROV
request should not include separate
valuations for the same property (e.g., a
separate appraisal or evaluation). A
commenter recommended that
information that was unavailable as of
the appraisal’s effective date should not
be included with the ROV request.
Finally, a commenter requested
specificity on which alternate market
data should be provided with an ROV
request and whether it should be
limited to sales that closed prior to the
date of the appraisal.
Other commenters focused on adding
detail to the guidance related to
consumer and appraiser education and
communication. One commenter
requested that the agencies provide
additional clarity on the process to
inform consumers about how to raise
valuation concerns early in the
underwriting process. Another
commenter suggested consumer
education should be incorporated as a
standard component in the ROV
process. A commenter emphasized the
importance of appraiser education and
training on how to recognize and avoid
bias. Another commenter requested
additional examples of ROV policies
and procedures to improve
communications with consumers.

E:\FR\FM\26JYR1.SGM

26JYR1

ddrumheller on DSK120RN23PROD with RULES1

60552

Federal Register / Vol. 89, No. 144 / Friday, July 26, 2024 / Rules and Regulations

The agencies received several
comments regarding timelines of ROV
processes. A commenter requested that
the agencies incorporate a set timeline
for an ROV process into the guidance.
Another commenter requested that the
agencies consider whether the guidance
should set forth a specific timeframe
after receipt of the original valuation
during which an ROV request must be
made. This commenter noted that
allowing ROV requests to be made
several days or more after receipt of the
original valuation can have
consequences on the rate lock and can
be a considerable burden on financial
institutions. Another commenter
believed that the guidance should state
that, if an institution requests data or
other information to support an ROV
request, and the required information is
not provided by the borrower in a
reasonable timeframe, the institution
should have no additional
responsibilities other than conducting
its own internal review to ensure there
were no evident omissions, errors, or
discriminatory actions involved in the
valuation.
The agencies considered the range of
comments aimed at adding
prescriptiveness to the guidance with
regard to second appraisals, the types of
information submitted with an ROV
request, consumer and appraiser
education and training, ROV timelines,
and communication with consumers.
The final guidance is intended for
institutions of many different sizes,
types, and business models. Institutions
implementing the guidance have
flexibility to tailor their ROV processes
based on their unique risk profile.14 The
agencies determined there is no onesize-fits-all approach and that it is
important to maintain a high-level,
principles-based approach to help
ensure the guidance will be useful and
relevant for a diverse range of
institutions and circumstances. In light
of their decision to retain the broad,
principles-based approach of this
guidance, the agencies have not made
revisions to address specific topics or
individual situations raised by
commenters in order to provide flexible
guidance for institutions designing their
ROV processes.
14 Accordingly, institutions have flexibility as to
the level of granularity to include in their own ROV
processes. For example, an institution’s ROV
policies and procedures could specify what types
of information the institution would accept with an
ROV request (e.g., comparable sales provided with
an ROV request must have closed by the effective
date of the appraisal).

VerDate Sep<11>2014

16:03 Jul 25, 2024

Jkt 262001

ii. Uniformity and Standardization of
ROV Processes
Some commenters asserted that ROV
processes should be uniform across all
institutions. Other commenters believed
that certain aspects of the ROV process
should not be uniform due to the wide
range of institutions that would be inscope for purposes of the guidance.
Another commenter recommended that
the agencies build in additional
flexibility to the guidance for financial
institutions to exercise discretion within
their own ROV processes. The agencies
also received comments related to
interagency coordination in developing
a uniform, industry-wide ROV process.
Several commenters recommended
the adoption of a standardized,
expedient appeals process that would
allow any party to the transaction to
appeal the valuation, similar to the
United States Department of Veterans
Affairs’ (VA) Tidewater Procedure. The
VA’s Tidewater Procedure allows VA
program participants to provide relevant
market data to VA fee-appraisers and
staff appraisers during the appraisal
process.15 One commenter suggested
that the guidance confirm that an ROV
process similar to the Tidewater
Procedure is acceptable. Another
commenter noted that the major benefit
of the Tidewater Procedure is that it
establishes a process for an interested
party to provide relevant data to the
appraiser. A commenter noted that the
Tidewater Procedure may help prevent
15 The VA’s Tidewater Procedure has been in
existence since 2003. Under this procedure,
appraisers are required to notify the requester (i.e.,
the person who orders the appraisal) when it
appears that the estimated market value will be
below the sale price during the appraisal process.
The requester, or any parties to the transaction
contacted by the requester, has two business days
to submit any additional sales data that they wish
to have considered. For each potential comparable
sale submitted, requesters are encouraged to
provide the following information: (1) street
address; (2) sales price; (3) date of sale; (4) gross
living area; (5) if the property was listed, a copy of
the listing with details about the property; and 6)
any other information to assist the appraiser in
determining whether the sale could be used as a
comparable property. If the requester submits
market data, the appraiser will note in the appraisal
report that the Tidewater Procedure was followed
and include: (1) the street address of each sale
submitted; (2) whether each sale was considered
and, if not, the reason; and (3) the effect of the data,
if any, on the opinion of value. If the market data
does not result in the value meeting or exceeding
the sale price, the next step is an ROV. After two
business days, if the requester does not submit
market data, the appraiser will note in the appraisal
report that the Tidewater Procedure was followed
and complete the appraisal report. See VA’s
Lenders Handbook, Chapter 10, Section 8, available
at https://benefits.va.gov/WARMS/docs/admin26/
m26-07/Chapter_10.pdf; see also VA’s presentation
entitled ‘‘Tidewater and Reconsiderations of Value’’
at the 2023 Loan Guaranty Conference, available at
https://benefits.va.gov/HOMELOANS/documents/
conf/2023-lender-d1-04-tidewater.pdf.

PO 00000

Frm 00004

Fmt 4700

Sfmt 4700

abuse of the ROV process. The
commenter raised a concern regarding
who would decide the number of
alternative sales to review and how it
would be decided which sales
transactions deserve consideration.
The agencies considered the
comments on uniformity and
standardization of ROV processes for all
institutions and recognize that
institutions may find existing
standardized processes, such as the
Tidewater Procedure, something to
consider while developing their own
ROV processes. However, a
standardized approach to ROV
processes ignores the differences in risk
profiles of institutions of varying size
and complexity. The final guidance
provides a principles-based approach
with flexibility for implementing
institutions to adopt ROV processes that
are responsive to the unique profile of
each institution. Thus, the agencies do
not believe it would be appropriate to
prescribe a rigid, one-size-fits-all ROV
process across institutions.
iii. Model Forms, Checklists, & Policies
In the proposal, the agencies
specifically requested comment on what
model forms, or model policies and
procedures, if any, related to ROVs
would be helpful for the agencies to
recommend. Several commenters
encouraged the agencies to develop a
standardized model form for ROV
requests and provide model disclosure
language for financial institutions to use
when educating consumers about ROVs.
One of these commenters also suggested
that the agencies create a list of common
documents needed for a consumer to
initiate an ROV request.
One commenter suggested that the
agencies work with TAF to develop
model forms based on TAF’s previous
efforts in this area. This commenter also
recommended that the agencies develop
model policies addressing the denial of
a consumer’s ROV request and
situations when consumer-provided
information should be forwarded to the
appraiser as part of an ROV. Another
commenter requested that the agencies
encourage the Federal Housing
Administration, VA, and United States
Department of Agriculture to develop
consistent or shared materials for
consumers to request ROVs and develop
a model borrower application or
checklist to standardize the process for
consumers to request ROVs.
The agencies considered the
comments recommending the
development of model forms, model
policies, checklists, and other
standardized documents. The agencies
agree that such documents may have

E:\FR\FM\26JYR1.SGM

26JYR1

Federal Register / Vol. 89, No. 144 / Friday, July 26, 2024 / Rules and Regulations
utility and will consider future
development of model forms.
D. Comments on Burden on Institutions

ddrumheller on DSK120RN23PROD with RULES1

Several commenters stated that the
proposal would add unnecessary and
burdensome requirements on top of an
existing ROV process that already
functions well. Certain commenters
noted that implementing parts of the
proposal’s policies and procedures may
present significant challenges for
smaller institutions, especially
institutions with limited resources. One
commenter requested an explanation of
how the guidance would specifically
affect small financial institutions that
perform internal valuations as an
alternative to formal appraisals. A
commenter also expressed concern that
smaller institutions do not have
sufficient financial resources to support
the necessary valuation staff and that
many institutions will be unable to
make timely and accurate ROV request
decisions due to their limited access to
nationwide data or analytical tools.
Several commenters expressed
concerns related to burden on credit
unions specifically. One commenter
pointed to the cost associated with
oversight and additional processes
related to ROVs, which the commenter
stated would be passed on to credit
union members without providing
additional value to their membership.
Another commenter noted that applying
rigid timelines for an ROV process
would be difficult for certain credit
unions to implement. One commenter
requested that the agencies exclude
from the guidance any policies and
procedures that require monitoring
multiple channels for ROV requests
because those would be challenging for
credit unions to implement. This
commenter stated that monitoring
multiple channels does not align with
the NCUA’s previous guidance on
handling consumer complaints.16
Another commenter suggested that
policies and procedures that require
credit unions to ensure that their
lending and valuation staff are trained
to identify prohibited discriminatory
practices through the appraisal review
process could be similarly challenging
to implement.
The agencies considered these
comments regarding burden on smaller
16 NCUA, Responding to Consumer Complaints
(June 2015), available at https://ncua.gov/
regulation-supervision/letters-credit-unions-otherguidance/improving-process-consumer-complaints
(recommending that credit unions ‘‘[e]stablish
channels to receive consumer complaints and
inquiries such as telephone numbers or email
addresses dedicated to receiving [consumer
complaints].’’).

VerDate Sep<11>2014

16:03 Jul 25, 2024

Jkt 262001

institutions, credit unions, and
institutions in general. The guidance is
intended to provide clarity to
institutions with respect to ROV
processes. The agencies reiterate that
the final guidance does not have the
force and effect of law or regulation and
does not impose any new requirements
on supervised institutions.17 The
examples of policies and procedures in
the final guidance are illustrative and
not requirements. The final guidance
clarifies that these examples may not be
applicable or material to each
institution or their ROV processes. Riskbased ROV-related policies, procedures,
control systems, and complaint
processes may vary according to the size
and complexity of the financial
institution. Smaller financial
institutions that choose to implement
the guidance may have policies and
procedures that differ from those at
larger and midsize institutions. Under
this guidance, institutions have
flexibility in their approach to their
internal ROV processes and deciding
the relevance of the considerations
discussed in the final guidance.
This ROV guidance does not conflict
with the NCUA’s previous guidance on
handling consumer complaints, because
financial institutions can use their
existing complaint resolution process to
manage complaints regarding potential
valuation deficiencies. ROV processes
work in congruence with the NCUA’s
current process for consumer
complaints.
E. Other Comments Submitted
Several commenters made
recommendations regarding the use of
automated valuation models (AVMs) in
ROV processes.18 A commenter advised
that the agencies should discourage
reliance solely on automatic review
tools in an ROV and should identify
features that AVMs should and should
not include for consideration in an
ROV. A few commenters encouraged the
use of AVMs in ROVs and suggested the
use of automated and interactive
appraisal review scoring tools that could
detect, correct, and minimize human
error. The agencies considered these
comments and neither promote nor
discourage the use of a particular
method or tool as part of an ROV
process.
One commenter recommended that
bias complaints should not be handled
by an ROV. This commenter asserted
that accusations of bias should trigger
authorities cited supra note 1.
is a separate notice of proposed
rulemaking on quality control standards for AVMs
that was published in the Federal Register for
comment on June 21, 2023. See 88 FR 40638.

PO 00000

17 See

18 There

Frm 00005

Fmt 4700

Sfmt 4700

60553

an alternative complaint process, either
through an escalated ROV process or a
review entirely independent of the ROV
process. This commenter believed ROVs
should be used only for correction of
informational or methodological
deficiencies that do not relate to
discrimination.
The final guidance does not state that
ROVs are the sole tool to address bias
complaints, nor does the final guidance
direct institutions to use a specific tool
to address bias complaints. However, in
response to this comment, the agencies
have made a clarifying edit to the final
guidance to provide that, if an ROV
request includes allegations of
discrimination, an institution may
consider, in addition to processing the
ROV, referring the allegations through a
separate process that the institution may
have to respond to discrimination
complaints.
Other commenters requested that the
guidance address the potential liability
of parties who may rely on
discriminatory appraisals (e.g., third
parties, AMCs, fee-appraisers, mortgage
brokers, mortgage servicers, and
appraisal firms), and appraisers’ or
evaluators’ rights to dismiss non-factual
or unverified claims and be shielded
from any potential backlash or liability
for doing so. The assigning or absolving
of civil liability of future unknown
parties is outside of the scope of this
guidance.
The agencies received a few
comments regarding appraiser
independence in the context of ROVs. A
commenter asserted that the agencies
should provide suggestions in the
guidance for how to manage ROV
requests so that they do not affect
appraiser independence. Another
commenter recommended that the
agencies clarify and provide examples
of how appraiser independence can be
maintained during an ROV of an
internal evaluation when an institution
has only one or two individuals on staff
that are qualified to perform
evaluations. Another commenter
believed that the guidance, as proposed,
puts appraiser independence at risk.
The agencies considered the
comments received on appraiser
independence and reiterate that
institutions are responsible for
maintaining standards of independence
for all real estate lending activity,
including ROVs, as required by the
agencies’ appraisal regulations and, as
applicable, USPAP. For small
institutions or branches, an institution
may be able to demonstrate clearly that
it has prudent safeguards in place when
absolute lines of independence cannot

E:\FR\FM\26JYR1.SGM

26JYR1

60554

Federal Register / Vol. 89, No. 144 / Friday, July 26, 2024 / Rules and Regulations

be achieved, due to, for example,
limited staff.19
Commenters also made suggestions
for further actions the agencies could
take, such as developing data-sharing
arrangements to collect ROV data. The
agencies may take such suggestions
under advisement when considering
future agency initiatives on this topic. A
few commenters encouraged the
agencies to hold roundtables and
hearings to gather stakeholder input in
the development of the final guidance.
The agencies note that the proposed
guidance was published for notice and
comment in the Federal Register for the
purpose of gathering stakeholder input.
Lastly, one commenter asserted that
the interpretation of the adequacy of an
ROV process will vary and will be
defined by each exam, opening banking
organizations up to unnecessary
criticism. Examiners will continue to
review institutions’ residential real
estate collateral valuation programs
within the framework of established
safety and soundness and consumer
compliance examination procedures.
This examination scope includes
consideration of whether institutions’
risk management practices for
valuations are appropriate to identify
and address valuation discrimination or
bias and promote credible valuations.20
III. Paperwork Reduction Act Analysis
In accordance with the Paperwork
Reduction Act (PRA) of 1995,21 the

Board, FDIC, NCUA, and OCC reviewed
the final guidance. The agencies may
not conduct or sponsor, and an
organization is not required to respond
to, an information collection unless the
information collection displays a
currently valid OMB control number.
The agencies have determined that
certain aspects of the final guidance
constitute a collection of information
and are revising their information
collections related to real estate
appraisals and evaluations. The OMB
control number for each agency is: OCC,
1557–0190; Board, 7100–0250; FDIC,
3064–0103; and NCUA, 3133–0125.
These information collections will be
extended for three years, with revision.
In addition to accounting for the PRA
burden incurred as a result of this final
guidance, the Board, FDIC, NCUA, and
OCC are also updating and aligning
their information collections with
respect to the hourly burden associated
with the Guidelines. Accordingly, the
tables below provide data on both the
final guidance addressed in this
document and the Guidelines.
The agencies did not receive any
PRA-related comments. The agencies
have a continuing interest in the
public’s opinions of information
collections. At any time, commenters
may submit comments regarding the
burden estimate, or any other aspect of
this collection of information, including
suggestions for reducing the burden, to
the addresses listed in the ADDRESSES

caption in the Notice of Proposed
Guidance. All comments will become a
matter of public record. Written
comments and recommendations for the
proposed information collection should
be sent within 30 days of publication of
this document to www.reginfo.gov/
public/do/PRAMain. Find this
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or using the
search function.
Abstract: The final guidance describes
principles for financial institutions to
implement ROV policies, procedures,
and control systems that identify,
address, and mitigate the risk of
deficient valuations. Such policies and
procedures create a recordkeeping
requirement.
Frequency of Response: Annual.
Affected Public: Businesses, other forprofit institutions, and other not-forprofit institutions.
Respondents:
OCC: National banks, Federal savings
associations.
Board: State member banks (SMBs),
bank holding companies (BHCs) and
nonbank subsidiaries of BHCs.
FDIC: Insured state nonmember banks
and state savings associations, insured
state branches of foreign banks.
NCUA: Private Sector: Not-for-profit
institutions.
Burden
OCC:

TABLE 1—SUMMARY OF ESTIMATED ANNUAL BURDEN

ddrumheller on DSK120RN23PROD with RULES1

[OMB No. 1557–0190]
Number of
respondents

Citations

Recordkeeping: Resolution stating plans for use of property.
Recordkeeping: ARM loan documentation must specify
indices to which changes in the interest rate will be
linked.
Recordkeeping: Appraisals must be written and contain
sufficient information and analysis to support engaging
in the transaction.
Recordkeeping: Written policies (reviewed annually) for
extensions of credit secured by or used to improve real
estate.
Recordkeeping: Real estate evaluation policy to monitor
OREO.
Recordkeeping: New Information Collection (‘‘IC’’) 1—
ROV Guidance—Policies and Procedures (Implementation: Applies to first year only).
Recordkeeping: New IC 2—ROV Guidance—Policies and
Procedures (Ongoing).
Recordkeeping: New IC 3—Interagency Appraisal and
Evaluation Guidelines—Policies and Procedures.

§ 7.1024(d) ....................................

5 ....................................................

§ 34.22(a); § 160.35(b) ..................

164

6 ....................................................

984

§ 34.44 ..........................................

976

1,465 responses per respondent
@5 minutes per response.

§ 34.62; appendix A to subpart D
to part 34; § 160.101; appendix
A to § 160.101.
§ 34.85 ..........................................

1,413

30 ..................................................

42,390

5 ....................................................

N/A ................................................

907

13.3 ...............................................

12,093

N/A ................................................

907

2 ....................................................

1,814

N/A ................................................

976

10 ..................................................

9,760

19 See Interagency Appraisal and Evaluation
Guidelines, 75 FR 77457, 77462 (December 10,
2010).
20 See the Federal Financial Institutions
Examination Council’s (FFIEC) Statement on
Examination Principles Related to Valuation
Discrimination and Bias in Residential Lending,

VerDate Sep<11>2014

16:03 Jul 25, 2024

Jkt 262001

Attachment B (February 12, 2024), available at
https://files.consumerfinance.gov/f/documents/
cfpb_ffiec-statement-on-exam-principles_202402.pdf. In some situations, examiners may reference
(including in writing) supervisory guidance to
provide examples of safe and sound conduct,
appropriate consumer protection and risk
management practices, and other actions for

PO 00000

Frm 00006

Fmt 4700

Sfmt 4700

Burden hours per respondent

Total number
of hours
annually

Requirement

119,072

addressing compliance with laws or regulations.
See 12 CFR part 4, subpart F, appendix A (OCC);
12 CFR part 262, appendix A (Board); 12 CFR part
302, appendix A (FDIC); 12 CFR part 1074,
appendix A (CFPB); 12 CFR part 791, subpart D,
appendix A (NCUA).
21 44 U.S.C. 3506.

E:\FR\FM\26JYR1.SGM

26JYR1

60555

Federal Register / Vol. 89, No. 144 / Friday, July 26, 2024 / Rules and Regulations
TABLE 1—SUMMARY OF ESTIMATED ANNUAL BURDEN—Continued
[OMB No. 1557–0190]
Number of
respondents

Burden hours per respondent

Total number
of hours
annually

Requirement

Citations

Reporting: Procedure to be followed when seeking to use
an alternative index.
Reporting: Prior notification of making advances under
development or improvement plan for OREO.
Disclosure: Default notice to debtor at least 30 days before repossession, foreclosure, or acceleration of payments.
Disclosure: New IC 4—Interagency Appraisal and Evaluation Guidelines.

§ 34.22(b); § 160.35(d)(3) .............

249

6 ....................................................

1,494

§ 34.86 ..........................................

5 ....................................................

§ 190.4(h) ......................................

2 ....................................................

N/A ................................................

976

5 ....................................................

4,880

Total Annual Burden Hours ........................................

.......................................................

........................

.......................................................

192,676

Board:

TABLE 2—SUMMARY OF ESTIMATED ANNUAL BURDEN
[OMB No. 7100–0250]
Estimated
number of
respondents

FR Y-30

Estimated
annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

Recordkeeping
Sections 225.61—225.67 for SMBs ...........................................................................................
Sections 225.61—225.67 for BHCs and nonbank subsidiaries of BHCs ..................................
Guidelines ...................................................................................................................................
Policies and Procedures ROV guidance (Initial setup) ..............................................................
Policies and Procedures ROV guidance (Ongoing) ..................................................................

706
4,516
5,222
5,591
5,591

498
25
1
1
1

5 minutes ..............
5 minutes ..............
10 .........................
13.3 ......................
2 ...........................

29,299
9,408
52,220
74,547
11,182

Disclosure
Guidelines ...................................................................................................................................

5,222

5 ...........................

26,110

Total ....................................................................................................................................

........................

...............................

202,766

FDIC:

TABLE 3—SUMMARY OF ESTIMATED ANNUAL BURDEN
[OMB No. 3064–0103]
Number of
respondents

Number of
responses per
respondent

Time per
response
(HH:MM)

Annual
burden
(hours)

Information collection (IC)
(obligation to respond)

Type of burden
(frequency of response)

Recordkeeping Requirements Associated with Real Estate
Appraisals and Evaluations (Mandatory).
New IC 1—ROV Guidance—Policies and Procedures—Implementation (Voluntary).
New IC 2—ROV Guidance—Policies and Procedures—Ongoing (Voluntary).
New IC 3—2010 Guidelines—Policies and Procedures—Ongoing.
New IC 4—2010 Guidelines—Disclosure—Ongoing (Voluntary).

Recordkeeping (On Occasion) ..........

2,936

259