Thank you

Starting in August, we will be sending a separate ROV disclosure to the borrower with all the initial disclosures. We will also be sending it again with the appraisal copy, as well as sending a form for them to complete should they want to request an ROV. They have 3 business days after receipt to submit the request. We are planning on implementing this on all consumer purpose residential loans. We will not be doing this on any commercial loans for residential property.....anyone one else sending on commercial use residential properties?

The GSEs and I believe the FHA is going to require the disclosure at the time of application and not with the initial disclosures. For portfolio loans, until the agencies release something, I would think that would be fine.

I had the same question as Luv2run.... Does the ROV disclosure and form apply to commercial properties/transactions? What if a residential property is used as security on a commercial transaction?

Before the agencies required ROV procedures, I heard about it during a fair lending presentation. Is this process required under a particular regulation? I completely agree it's good customer service, just wondered if it falls under appraisal monitoring for fair lending purposes.

Well, hopefully when everyone submitted their comment letters they brought up that subject: https://files.consumerfinance.gov/f...e-of-residential-real-estate_2023-06.pdf

The GSEs or other investors usually do not purchase loans to businesses, but investment property would be covered under their rules.

Hoping the final rule will only apply to residential real estate transactions. Commercial folks are going to struggle with another disclosure.... ugh.

With the issuance of the final guidance by the agencies with regard to ROV, am I correct in thinking that a commercial loan that holds a 1-4 family investment property as collateral would fall under this guidance?

Why would it be a challenge for them? Your appraisal group that would deal with any of this should be totally separate from the commercial line.

Any change for CML can be challenging, especially when we would need to introduce a new disclosure to go to the borrower at application for only this exact scenario.

A disclosure at application will be a GSE requirement. The agency ROV guidelines only indicate the following and it seems to be limited to consumers, although I would expect that that even on a commercial loan, there should be a process for reviewing disputes on the valuation from commercial customers.

o Establish a process to inform consumers how to raise concerns about the valuation early enough in the underwriting process for any errors or issues to be resolved before a final credit decision is made. This may include educating consumers on the type of information they may provide when communicating with the financial institution about potential valuation deficiencies.

So, I quickly read this when someone asked me a question and I opined it does apply to a commercial purpose loan secured by a single 1-4 family residence. Do you agree?

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 estate-related financial transactions that are
secured by a single 1-to-4 family residential property. 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

Why do you not call one of the contact numbers in the FR for your regulatory agency and ask them as to applicability? When different sections of the guidance are unclear, our opinions will not matter.

Please report back.

This is on the topic of ROV's but might be a bit off compared to the conversation, I apologize if this belongs somewhere else. The GSE guidance on ROV's as well as the required disclosures focus on borrower-initiated requests. Is there anything in regulation, interagency guidance, or otherwise that provides property sellers with any rights to request a reconsideration? If not, is there any practical reason why a property seller would be allowed to dispute an appraisal and submit an ROV after the appraisal has already been evaluated and approved by the lender's inside appraisal team? It has always been our stance that ROV's that are not initiated by us (the lender) would have to come from the borrower. We are getting a lot of pushback from Realtors mainly stating that "any party" has the right to dispute an appraisal to ensure accuracy. Thank you for your input.

While I think the emphasis in mainly on the borrower, I am not sure that a seller is automatically shut out from the process. From the interagency release.

Deficient collateral valuations can keep individuals, families, and neighborhoods from building wealth through homeownership by potentially preventing homeowners from accessing accumulated equity, preventing prospective buyers from purchasing homes, making it harder for homeowners to sell or refinance their homes, and increasing the risk of default.

For example, if a neighborhood is being discriminated against, who is being harmed by the inadequate appraisal. Surely, that is not the buyer. But a consumer seller would be held to the same standards as far as what is a trigger for a reconsideration based on presented facts. . .

I should add that since you are under no obligation to share the appraisal with the seller, I don't think any sort of notification regarding the process would be warranted.

Thank you for your input and you make a good point. I would completely agree in the case of an allegation of discrimination. Discriminatory practices are exactly what the guidance in aimed at and any allegations made should be thoroughly reviewed. I did not have this specifically in mind when i posed by question and I should have been more clear.

We have never really had anyone directly allege discriminatory appraisal practices. What we do get is sellers and Realtors representing sellers who get very upset when an appraisal comes in below the purchase price. In these cases, we have typically only allowed for requests for revisions to be made by our borrower. A request from the seller in this case is obviously just an attempt to influence the value and secure a higher purchase price. We are struggling with what standards to put in place in this case. According to the typical purchase contract in our area there are two remedies for a low appraisal...termination of the agreement or renegotiation on the purchase price. There is no provision for a dispute by the seller. These remedies offer the borrower a certain amount of flexibility in that they can choose to terminate (without loss of earnest money) or they may stand to gain financially by renegotiating to a lower purchase price. For this reason we are hesitant to let seller's request revisions when our own internal review did not indicate a possible deficiency in the appraisal.

Trying to find reasonable middle ground between allowing anyone involved to request a reconsideration and allowing only the borrower to make the request.

Quick point...we are under no obligation to share the appraisal with the seller, but our buyers frequently are obligated when the appraised value is less than the purchase price per the terms of their purchase contract.

Eric - yes, I think a claim of discrimination by the seller would be an automatic review, but it would still have to be support by facts. A seller and realtor not happy with the value would be treated no different than a borrower being unhappy when looking for a refinance or home equity loan. Being unhappy is not a basis for reconsideration in any case.

But I think if they came back and said wait a minute, the appraiser said the house was 2,500 sq ft and it is really 3,100 sq ft or the acreage was off on the lot size or that they had more recent valid comparables than the appraiser used, I think you would be at least obligated to take a look. Again, they have to present facts and not opinions, no different than a ROV from the borrower.

Eric, one of the potential issues causing it is the market is slowing down.

Seller has expectations of selling at a higher rate, and when the market cools down, the original asking price is a field of dreams. I've seen homes at $400k 6 months ago selling for $340k. Again, depending on the area, if the home has been on the market for a while, the HOT RE market in many areas may be a thing of the past.