Navigating the New Reconsideration of Value Requirements: A Compliance Guide
The Federal Housing Finance Agency announced today that Fannie Mae, Freddie Mac, and the U.S. Department of Housing and Urban Development (HUD) have introduced updated Reconsideration of Value (ROV) requirements. These updates, critical for lenders, appraisers, and borrowers, seek to streamline the reconsideration of value (ROV) process and ensure consistent application across different types of government-backed loans.
Overview of ROV Changes Across Entities
The ROV process enables borrowers to dispute an appraisal if they believe it does not reflect the true market value of their home. Recent guidelines issued by Fannie Mae, Freddie Mac, and HUD make this process more transparent and accessible.
Key Compliance Points
- Documentation and Evidence: All three entities emphasize the necessity of providing compelling evidence to support an ROV request. This includes new comparable sales, factual error corrections, and any other relevant data that might impact the property’s assessed value.
- Appraiser Independence: Maintaining the appraiser’s independence throughout the ROV process is paramount. All guidelines strictly prohibit efforts to influence the appraiser’s judgment.
- Timeliness: The entities specify timeframes for submitting and processing ROV requests, highlighting the need for efficient and timely communication.
- Record-Keeping: Comprehensive documentation of ROV requests and outcomes is mandatory, ensuring transparency and accountability in the appraisal process.
HUD Specific Guidelines
HUD’s latest Mortgagee Letter outlines additional specific requirements for FHA-insured mortgage transactions, which include:
- Borrower Notification: HUD mandates that borrowers be informed of their right to request an ROV in specific circumstances and outlines the methods for submitting such requests.
- Mortgagee Responsibilities: Lenders must provide the necessary support and guidance to borrowers initiating ROV requests, ensuring that they understand the process and requirements.
Practical Steps for Compliance
For lenders and appraisal management companies managing government-backed mortgages, the following steps are advised:
- Comprehensive Training: Update training programs to cover ROV procedures for Fannie Mae, Freddie Mac, and HUD.
- System Adjustments: Modify systems to manage and track ROV requests across different entities, ensuring easy access to records for compliance and audits.
- Quality Assurance: Implement robust quality control measures to regularly review compliance with ROV requirements and address discrepancies proactively.
Resources for Further Information
For more detailed information on ROV requirements and to view official announcements, please refer to the FHFA’s announcement, Fannie Mae’s Selling Guide Update, Freddie Mac’s Bulletin, and HUD’s Mortgagee Letter. Or learn more about our compliance appraisal team leader Nicholas D. Pilz, MAI, SRA, AI-RRS here.