WASHINGTON—NAFCU and CUNA have each sent letters to NCUA identifying concerns under the proposed joint agency guidance for reconsiderations of value (ROV) of residential real estate valuations.
In its letter, NAFCU said 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,” stated NAFCU. “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.”
‘Reflect on Challenges’
“While it is important to explore methods to improve ROV processes, it is important also to reflect on challenges that financial institutions face,” continued the letter, which was signed by Regulatory Affairs Counsel Omar Imtiaz. “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.
Additional Considerations
“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
- Establishing internal guidelines for the type of information credit unions will need to initiate within the ROV process
Warning Shared
Imtiaz also warned of areas where NAFCU believes some policies and procedures within the proposed guidance could present challenges for credit unions, impacted by staffing, training, and timeline requirements.
Issues that could use additional guidance and resources, according to NAFCU, include providing model forms, policies, and procedures to ensure consistency across financial institutions.
CUNA: 2 Challenges Seen
In its letter, CUNA stated, “Credit unions oppose discrimination in the appraisal process, and ROVs can benefit both credit unions and their members by addressing any potential errors in an appraisal. Accurate appraisal values are necessary to ensure that credit unions are making lending decisions in a safe and sound manner, and accurate appraisal values can affect members’ ability to build wealth through homeownership.”
CUNA said it believes two parts of the proposal could be challenging for credit unions to implement, policies and procedures to require:
- Monitoring multiple channels for ROV requests
- Ensuring credit unions’ lending and valuation staff are trained to identify prohibited discriminatory practices through the appraisal review
Exclusion Urged for Training Staff
“CUNA respectfully requests that NCUA and the agencies exclude training staff to identify prohibited discriminatory practices through the appraisal review process as a proposed policy or procedure in the final guidance, or in the alternative to clarify that training to identify prohibited discriminatory practices is expressly limited to the language contained in an appraisal or other explicit statements made by an appraiser, because it goes beyond NCUA’s appraisal requirements and is unworkable,” the letter reads.
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