Newsroom

NAFCU Regulatory Affairs Counsel Omar Imtiaz sent a letter to the NCUA Tuesday flagging some concerns under the proposed joint agency guidance for reconsiderations of value (ROV) of residential real estate valuations. The letter emphasizes that any suggested future processes for ROVs should come in the form of guidance rather than rulemaking.

The proposed guidance identifies risks from inaccurate residential real estate valuations to both consumers and financial institutions. Additionally, the guidance would highlight best practices for ROV processes, compliance controls, and ways to incorporate them into existing risk management programs used to help identify and mitigate unlawful discrimination.

“While it is important to explore methods to improve ROV processes, it is important also to reflect on challenges that financial institutions face,” Imtiaz wrote. “For instance, the agencies should consider who bears the cost of seeking an appraisal. If the financial institution is always responsible for the cost of the new valuation, it poses a potential problem where some consumers may request ROVs without justification in an attempt to seek higher property valuations at no cost.

“Additionally, the agencies should consider if ROV requests should be made within a certain timeframe after receipt of the original valuation. 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 generally be a considerable burden on financial institutions,” he added.

Imtiaz noted that the proposed guidance includes examples of policies, procedures, and control systems that could help credit unions combat deficient valuations, if successfully implemented, related to:

• resolving consumer disputes;
• streamlining the process to initiate an ROV;
• identifying stakeholders and clearly outlining each business unit’s roles and responsibilities for processing an ROV request;
• establishing risk-based ROV systems;
• listing ROV related notices in plain language; and
• establishing internal guidelines for the type of information credit unions will need to initiate within the ROV process.

Imtiaz also warned of some policies and procedures within the proposed guidance that could present challenges for credit unions, impacted by staffing, training, and timeline requirements. He highlighted some issues that could use additional guidance and resources, including providing model forms, policies, and procedures to ensure consistency across financial institutions.

Read the full letter.