# New Guidance on Reconsiderations of Value: What Credit Unions Need to Know
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In a move to enhance the integrity of residential real estate lending, federal financial regulators have issued new guidance on Reconsiderations of Value (ROV) for residential real estate valuations. This blog post breaks down the key points of this guidance and what it means for credit unions.
## What is a Reconsideration of Value (ROV)?
An ROV is a request from a financial institution to an appraiser or valuation preparer to reassess their report based on potential deficiencies or new information. This process can be initiated by the institution's review process or after considering consumer-provided information.
## Key Aspects of the Guidance
1. **Purpose and Scope**: The guidance aims to highlight risks associated with deficient residential real estate valuations and describe how credit unions can incorporate ROV processes into their risk management functions. It applies to real estate-related financial transactions secured by single 1-4 family residential properties.
2. **Regulatory Context**: The guidance references several relevant laws and regulations, including the Equal Credit Opportunity Act, Fair Housing Act, and Truth in Lending Act. Credit unions must comply with these laws while implementing ROV processes.
3. **Flexibility in Implementation**: The guidance is principles-based, allowing credit unions flexibility based on their size, complexity, and risk profile.
4. **Use of Third Parties**: While third parties can be used in the valuation review process, credit unions remain responsible for compliance with applicable laws and regulations.
5. **Complaint Resolution Process**: Credit unions are encouraged to capture consumer feedback on potential valuation deficiencies through existing complaint resolution processes.
## Recommendations for Credit Unions
The guidance suggests several practices for credit unions to consider:
- Establish processes for identifying, managing, analyzing, escalating, and resolving valuation-related complaints
- Inform and educate consumers on how to raise valuation concerns early in the underwriting process
- Identify stakeholders and outline roles and responsibilities for processing ROV requests
- Use standardized processes to increase consistency in handling ROV requests
- Ensure relevant staff, including third parties, are trained to identify valuation deficiencies, including practices that may result in discrimination
## Why This Matters
Credible collateral valuations are essential to the integrity of residential real estate lending. Deficient valuations can prevent individuals and families from building wealth through homeownership and pose risks to credit unions. By implementing robust ROV processes, credit unions can help ensure fair and accurate property valuations, mitigate risks, and better serve their members.
## Next Steps for Credit Unions
While this guidance doesn't have the force of law, it outlines supervisory expectations for how credit unions should handle ROVs and valuation-related complaints. Credit unions should review their current practices and consider how to incorporate these recommendations into their risk management strategies.
Remember, the goal is to improve the integrity of the residential real estate lending process and address potential deficiencies in valuations. By doing so, credit unions can help ensure fair lending practices and protect both their institution and their members.
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