Proposed Rule2023-12609
Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations
Primary source
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Published
July 21, 2023
Issuing agencies
Treasury DepartmentComptroller of the CurrencyFederal Reserve SystemFederal Deposit Insurance CorporationNational Credit Union AdministrationConsumer Financial Protection Bureau
Abstract
The Board, CFPB, FDIC, NCUA, and OCC (together, the agencies) are issuing proposed guidance that would highlight risks associated with deficient residential real estate valuations and describe how financial institutions may incorporate reconsiderations of value (ROV) processes and controls into established risk management functions. The proposed guidance would also highlight examples of policies and procedures that a financial institution may choose to establish to help identify, address, and mitigate the risk of discrimination impacting residential real estate valuations.
Full Text
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<title>Federal Register, Volume 88 Issue 139 (Friday, July 21, 2023)</title>
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[Federal Register Volume 88, Number 139 (Friday, July 21, 2023)]
[Proposed Rules]
[Pages 47071-47077]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-12609]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 34
[Docket ID OCC-2023-0007]
FEDERAL RESERVE SYSTEM
12 CFR Chapter II
[Docket No. OP-1809]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 323
RIN 3064-ZA36
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 722
[Docket ID NCUA-2023-0061]
CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Chapter X
[Docket No. CFPB-2023-0033]
Interagency Guidance on Reconsiderations of Value of Residential
Real Estate Valuations
AGENCY: Board of Governors of the Federal Reserve System (Board);
Consumer Financial Protection Bureau (CFPB); Federal Deposit Insurance
Corporation (FDIC); National Credit Union Administration (NCUA); and
Office of the Comptroller of the Currency (OCC), Treasury.
ACTION: Proposed interagency guidance with request for comment.
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SUMMARY: The Board, CFPB, FDIC, NCUA, and OCC (together, the agencies)
are issuing proposed guidance that would highlight risks associated
with deficient residential real estate valuations and describe how
financial institutions may incorporate reconsiderations of value (ROV)
processes and controls into established risk management functions. The
proposed guidance would also highlight examples of policies and
procedures that a financial institution may choose to establish to help
identify, address, and mitigate the risk of discrimination impacting
residential real estate valuations.
DATES: Comments must be submitted on or before September 19, 2023.
ADDRESSES: Interested parties are encouraged to submit written comments
to any and all agencies listed below. Comments submitted to the Federal
eRulemaking Portal will be shared with all agencies for consideration.
Comments should be directed to:
OCC: Commenters are encouraged to submit comments through the
Federal eRulemaking Portal. Please use the title ``Joint Guidance on
Reconsiderations of Value of Residential Real Estate Valuations'' to
facilitate the organization and distribution of the comments. You may
submit comments by any of the following methods:
<bullet> Federal eRulemaking Portal--<a href="http://Regulations.gov">Regulations.gov</a>: go to <a href="https://regulations.gov/">https://regulations.gov/</a>. Enter ``Docket ID OCC-2023-0007'' in the Search Box
and click ``Search.'' Public comments can be submitted via the
``Comment'' box below the displayed document information or by clicking
on the document title and then clicking the ``Comment'' box on the top-
left side of the screen. For help with submitting effective comments
please click on ``Commenter's Checklist.'' For assistance with the
<a href="http://Regulations.gov">Regulations.gov</a> site, please call 1-866-498-2945 (toll free) Monday-
Friday, 9 a.m.-5 p.m. ET, or email <a href="/cdn-cgi/l/email-protection#ea988f8d9f868b9e83858499828f869a8e8f9981aa8d998bc48d859c"><span class="__cf_email__" data-cfemail="cebcaba9bba2afbaa7a1a0bda6aba2beaaabbda58ea9bdafe0a9a1b8">[email protected]</span></a>.
<bullet> Mail: Chief Counsel's Office, Attention: Comment
Processing, Office of the Comptroller of the Currency, 400 7th Street
SW, Suite 3E-218, Washington, DC 20219.
<bullet> Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218,
Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2023-2007'' in your comment. In general, the OCC will
enter all comments received into the docket and publish the comments on
the <a href="http://Regulations.gov">Regulations.gov</a> website without change, including any business or
personal information provided such as name and address information,
email addresses, or phone numbers. Comments received, including
attachments and other supporting materials, are part of the public
record and subject to public disclosure. Do not include any information
in your comment or supporting materials that you consider confidential
or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this action by the following method:
<bullet> Viewing Comments Electronically--<a href="http://Regulations.gov">Regulations.gov</a>: Go to
<a href="https://regulations.gov/">https://regulations.gov/</a>. Enter ``Docket ID OCC-2023-0007'' in the
Search Box and click ``Search.'' Click on the ``Documents'' tab and
then the document's title. After clicking the document's title, click
the ``Browse Comments'' tab. Comments can be viewed and filtered by
clicking on the ``Sort By'' drop-down on the right side of the screen
or the ``Refine Results'' options on the left side of the screen.
Supporting materials can be viewed by clicking on the ``Documents'' tab
and filtered by clicking on the ``Sort By'' drop-down on the right side
of the screen or the ``Refine Documents Results'' options on the left
side of the screen. For assistance with the <a href="http://Regulations.gov">Regulations.gov</a> site,
please call 1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. ET,
or email <a href="/cdn-cgi/l/email-protection#bcced9dbc9d0ddc8d5d3d2cfd4d9d0ccd8d9cfd7fcdbcfdd92dbd3ca"><span class="__cf_email__" data-cfemail="a3d1c6c4d6cfc2d7cacccdd0cbc6cfd3c7c6d0c8e3c4d0c28dc4ccd5">[email protected]</span></a>.
The docket may be viewed after the close of the comment period in
the same manner as during the comment period.
Board: You may submit comments, identified by Docket No. OP-1809,
by any of the following methods:
<bullet> Agency Website: <a href="https://www.federalreserve.gov">https://www.federalreserve.gov</a>. Follow the
instructions for submitting comments at <a href="https://www.federalreserve.gov/apps/foia/proposedregs.aspx">https://www.federalreserve.gov/apps/foia/proposedregs.aspx</a>.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#9ceef9fbefb2fff3f1f1f9f2e8efdcfaf9f8f9eefdf0eef9eff9eeeaf9b2fbf3ea"><span class="__cf_email__" data-cfemail="0b796e6c7825686466666e657f784b6d6e6f6e796a67796e786e797d6e256c647d">[email protected]</span></a>. Include the
docket number in the subject line of the message.
<bullet> Fax: (202) 452-3819 or (202) 452-3102.
<bullet> Mail: Ann Misback, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue NW,
Washington, DC 20551.
In general, all public comments will be made available on the
Board's website at <a href="http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm">www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm</a> as submitted, and will not be modified to
[[Page 47072]]
remove confidential, contact or any identifiable information. Public
comments may also be viewed electronically or in paper in Room M-4365A,
2001 C St. NW, Washington, DC 20551, between 9 a.m. and 5 p.m. during
Federal business weekdays. Please call (202) 452-3684 to make an
appointment to visit the Board and inspect comments.
FDIC: The FDIC encourages interested parties to submit written
comments. Please include your name, affiliation, address, email
address, and telephone number(s) in your comment. You may submit
comments to FDIC, identified by RIN 3064-ZA36, by any of the following
methods:
<bullet> FDIC Website: <a href="https://www.fdic.gov/resources/regulations/federal-register-publications/">https://www.fdic.gov/resources/regulations/federal-register-publications/</a>. Follow the instructions for submitting
comments on the FDIC's website.
<bullet> Mail: James P. Sheesley, Assistant Executive Secretary,
Attention: Comments/Legal OES (RIN 3064-ZA36), Federal Deposit
Insurance Corporation, 550 17th Street NW, Washington, DC 20429.
<bullet> Hand Delivery/Courier: Comments may be hand delivered to
the guard station at the rear of the 550 17th Street NW building
(located on F Street NW) on business days between 7:00 a.m. and 5:00
p.m.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#ccafa3a1a1a9a2b8bf8caaa8a5afe2aba3ba"><span class="__cf_email__" data-cfemail="abc8c4c6c6cec5dfd8ebcdcfc2c885ccc4dd">[email protected]</span></a>. Comments submitted must include
``RIN 3064-ZA36'' in the subject line of the message.
Public Inspection: Comments received, including any personal
information provided, may be posted without change to <a href="https://www.fdic.gov/resources/regulations/federal-register-publications/">https://www.fdic.gov/resources/regulations/federal-register-publications/</a>.
Commenters should submit only information that the commenter wishes to
make available publicly. The FDIC may review, redact, or refrain from
posting all or any portion of any comment that it may deem to be
inappropriate for publication, such as irrelevant or obscene material.
The FDIC may post only a single representative example of identical or
substantially identical comments, and in such cases will generally
identify the number of identical or substantially identical comments
represented by the posted example. All comments that have been
redacted, as well as those that have not been posted, that contain
comments on the merits of this notice will be retained in the public
comment file and will be considered as required under all applicable
laws. All comments may be accessible under the Freedom of Information
Act.
NCUA: You may submit written comments, identified by ``Docket No.
NCUA-2023-0061'' by any of the following methods (please send comments
by one method only):
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions for submitting comments for ``Docket No. NCUA-
2023-0061.''
<bullet> Email: <a href="/cdn-cgi/l/email-protection#b4e4e6f5d7dbd9d9d1dac0c7f4dad7c1d59ad3dbc2"><span class="__cf_email__" data-cfemail="d6868497b5b9bbbbb3b8a2a596b8b5a3b7f8b1b9a0">[email protected]</span></a>.
<bullet> Mail: Address to Melane Conyers-Ausbrooks, Secretary of
the Board, National Credit Union Administration, 1775 Duke Street
Alexandria, Virginia 22314-3428.
You may view all public comments on the Federal eRulemaking Portal
at <a href="https://www.regulations.gov">https://www.regulations.gov</a> as submitted, except for those we cannot
post for technical reasons. The NCUA will not edit or remove any
identifying or contact information from the public comments submitted.
If you are unable to access public comments on the internet, you may
contact NCUA for alternative access by calling (703) 518-6540 or
emailing <a href="/cdn-cgi/l/email-protection#87c8c0c4cae6eeebc7e9e4f2e6a9e0e8f1"><span class="__cf_email__" data-cfemail="743b333739151d18341a1701155a131b02">[email protected]</span></a>.
CFPB: You may submit comments, identified by Docket No. CFPB-2023-
0033, by any of the following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions for submitting comments.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#8dbfbdbfbea0c4cccca0dfe8fee4e9e8e3f9e4ece1dfc2dbcdeeebfdefa3eae2fb"><span class="__cf_email__" data-cfemail="5c6e6c6e6f71151d1d710e392f3538393228353d300e130a1c3f3a2c3e723b332a">[email protected]</span></a>.
<bullet> Mail/Hand Delivery/Courier: Comment Intake--Interagency
ROV, Consumer Financial Protection Bureau, c/o Legal Division Docket
Manager, 1700 G Street NW, Washington, DC 20552.
Instructions: The CFPB encourages the early submission of comments.
All submissions should include the agency name and docket number for
this document. Because paper mail in the Washington, DC, area and at
the CFPB is subject to delay, commenters are encouraged to submit
comments electronically. In general, the CFPB will post all comments
received without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
The CFPB will make all comments, including attachments and other
supporting materials, part of the public record and subject to public
disclosure. You should not include proprietary information or sensitive
personal information, such as account numbers or Social Security
numbers, or names of other individuals. The CFPB will not edit comments
to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT:
OCC: Siddarth Rao, Fair Lending Compliance Policy Specialist, (732)
635-2070; Joanne Phillips, Counsel, or Marta Stewart-Bates, Counsel,
Chief Counsel's Office, (202) 649-5490; Office of the Comptroller of
the Currency, 400 7th Street SW, Washington, DC 20219. If you are deaf,
hard of hearing, or have a speech disability, please dial 7-1-1 to
access telecommunications relay services.
Board: Carmen Holly, Lead Financial Institutions Policy Analyst,
Division of Supervision and Regulation, (202) 973-6122; Keshia King,
Lead Supervisory Policy Analyst, Division of Consumer and Community
Affairs, (202) 452-2496; Trevor Feigleson, Senior Counsel, (202) 452-
3274, or Derald Seid, Senior Counsel, (202) 452-2246, Legal Division.
For users of telephone systems via text telephone (TTY) or any TTY-
based Telecommunications Relay Services, please call 711 from any
telephone, anywhere in the United States; Board of Governors of the
Federal Reserve System, 20th and C Streets NW, Washington, DC 20551.
FDIC: Patrick J. Mancoske, Senior Examination Specialist, Division
of Risk Management Supervision, (202) 898-7032; Stuart Hoff, Senior
Policy Analyst, Division of Depositor and Consumer Protection, (202)
898-3852; Legal Division: Navid Choudhury, Counsel, (202) 898-6526,
<a href="/cdn-cgi/l/email-protection#2a444942455f4e425f58536a4c4e4349044d455c"><span class="__cf_email__" data-cfemail="e28c818a8d97868a97909ba284868b81cc858d94">[email protected]</span></a>, or Mark Mellon, Counsel, (202) 898-3884,
<a href="/cdn-cgi/l/email-protection#2449494148484b4a6442404d470a434b52"><span class="__cf_email__" data-cfemail="9af7f7fff6f6f5f4dafcfef3f9b4fdf5ec">[email protected]</span></a>. Federal Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
NCUA: Naghi Khaled, Director of Credit Markets, or Walonda Hollins,
Senior Credit Specialist, Office of Examination and Insurance, (703)
216-5136; Ernestine Ward, Director, Division of Consumer Compliance
Policy & Outreach, Office of Consumer Financial Protection (703) 518-
6524; National Credit Union Administration, 1775 Duke Street,
Alexandria, VA 22314.
CFPB: Makalia Griffith, Counsel; Woody Anglade, Senior Counsel; Tim
Lambert, Fair Lending Programs Lead and Senior Counsel, Office of Fair
Lending and Equal Opportunity, at 202-435-7000. If you require this
document in an alternative electronic format, please contact
<a href="/cdn-cgi/l/email-protection#3c7f7a6c7e637d5f5f594f4f555e55505548457c5f5a4c5e125b534a"><span class="__cf_email__" data-cfemail="d7949187958896b4b4b2a4a4beb5bebbbea3ae97b4b1a7b5f9b0b8a1">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Board, the CFPB, the FDIC, the NCUA, and the OCC are proposing
interagency guidance (proposed guidance) on ROVs of residential real
estate valuations.\1\ Collateral valuations,
[[Page 47073]]
including appraisals,\2\ are important to the integrity of the
residential real estate lending process. Deficient collateral
valuations can contain inaccuracies due to errors, omissions, or
discrimination that affect the value conclusion and can result in
either overvaluing or undervaluing real estate collateral. The Board,
FDIC, NCUA, and the OCC have previously issued guidance that describes
actions a financial institution may take to correct deficiencies
identified in collateral valuations.\3\ These actions include ordering
a second appraisal or evaluation or resolving the deficiency through
the original appraiser or preparer of the evaluation.\4\
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\1\ If finalized, this guidance would be supervisory guidance
that does not have the force and effect of law and does not impose
any new requirements on supervised institutions. See 12 CFR 4,
subpart F, appendix A (OCC); 12 CFR 262, appendix A (Board); 12 CFR
302, appendix A (FDIC); 12 CFR 1074, appendix A (CFPB); 12 CFR 791,
subpart D, appendix A (NCUA). The agencies understand that the
Office of the Federal Register nevertheless has placed this proposed
guidance document in the ``Proposed Rules'' category pursuant to the
Office of the Federal Register regulation at 1 CFR 5.9(c).
\2\ Appraisal means ``a written statement independently and
impartially prepared by a qualified appraiser setting forth an
opinion as to the market value of an adequately described property
as of a specific date(s), supported by the presentation and analysis
of relevant market information.'' 12 CFR 34.42(a) (OCC); 12 CFR
323.2(a) (FDIC); 12 CFR 225.62(a) (Board); 12 CFR 722.2 (NCUA).
\3\ See Interagency Appraisal and Evaluation Guidelines, 75 FR
77450 (Dec. 10, 2010).
\4\ The NCUA uses the term ``written estimate of market value''
in place of the term ``evaluation.'' See 12 CFR 722.3.
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The agencies, collectively, do not have existing guidance specific
to ROV processes. For purposes of the proposed guidance, an ROV is a
request from the financial institution to the appraiser or other
preparer of the valuation report to re-assess the report based upon
potential deficiencies or other information that may affect the value
conclusion.\5\ The agencies have received questions and comments from
financial institutions and other industry stakeholders on ROVs,
highlighting the uncertainty in the industry on how ROVs intersect with
appraisal independence requirements and compliance with Federal
consumer protection laws, including those related to nondiscrimination.
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\5\ ROVs may arise from a consumer requesting a financial
institution to reexamine a valuation.
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II. Description of Proposed Joint ROV Guidance
The proposed guidance describes how financial institutions may
create or enhance ROV processes that are consistent with safety and
soundness standards, comply with applicable laws and regulations,
preserve appraiser independence, and remain responsive to consumers.
The proposed guidance (1) describes the risks of deficient collateral
valuations, (2) outlines applicable statutes, regulations, and existing
guidance that govern ROVs and collateral valuations, (3) explains how
ROV processes and controls can be incorporated into existing risk
management functions such as appraisal review and complaint management,
and (4) provides examples of ROV policies, procedures, and controls
that financial institutions may choose to adopt.
III. Request for Comment
The agencies seek comment, from all interested parties, on all
aspects of the proposed guidance, and in particular request comment on
the following:
(1) To what extent does the proposed guidance describe suitable
considerations for a financial institution to take into account in
assessing and potentially modifying its current policies and procedures
for addressing ROVs?
(a) What, if any, additional examples of policies and procedures
related to ROVs should be included in the guidance?
(b) Which, if any, of the policies and procedures described in the
proposed guidance could present challenges?
(2) What model forms, or model policies and procedures, if any,
related to ROVs would be helpful for the agencies to recommend?
(3) What other guidance may be helpful to financial institutions
regarding the development of ROV processes?
(4) To what extent, if any, does the proposed ROV guidance
conflict, duplicate, or complement the existing Interagency Appraisal
and Evaluation Guidelines or a financial institution's policies and
procedures to implement those Guidelines?
IV. Paperwork Reduction Act Analysis
In accordance with the Paperwork Reduction Act (PRA) of 1995,\6\
the OCC, Board, FDIC, and NCUA reviewed the proposed guidance. The
agencies may not conduct or sponsor, and an organization is not
required to respond to, an information collection unless the
information collection displays a currently valid OMB control number.
The agencies have determined that certain aspects of the proposed
guidance constitute a collection of information and are revising their
information collections related to real estate appraisals and
evaluations. The OMB control number for each agency is: OCC, 1557-0190;
Board, 7100-0250; FDIC, 3064-0103; and NCUA, 3133-0125. These
information collections will be extended for three years, with
revision. In addition to accounting for the PRA burden incurred as a
result of this proposed guidance, the OCC, Board, FDIC, and NCUA are
also updating and aligning their information collections with respect
to the hourly burden associated with the Interagency Appraisal and
Evaluation Guidelines.
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\6\ 44 U.S.C. 3506.
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Abstract: The proposed guidance encourages financial institutions
to implement ROV policies, procedures, and control systems to allow
consumers to provide the financial institution with relevant
information that may not have been considered during an appraisal or
evaluation. Such policies and procedures create a recordkeeping
requirement.
Frequency of Response: Annual.
Affected Public: Businesses, other for-profit institutions, and
other not-for-profit institutions.
Respondents
OCC: National banks, Federal savings associations.
Board: State member banks (SMBs), bank holding companies (BHCs) and
nonbank subsidiaries of BHCs.
FDIC: Insured state nonmember banks and state savings associations,
insured state branches of foreign banks.
NCUA: Private Sector: Not-for-profit institutions.
[[Page 47074]]
Burden
OCC
Table 1--Summary of Estimated Annual Burden
[OMB No. 1557-0190]
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Total number
Requirement Citations Number of Burden hours per of hours
respondents respondent annually
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Recordkeeping: Resolution stating Sec. 7.1024(d)..... 6 5.................... 30
plans for use of property.
Recordkeeping: ARM loan Sec. 34.22(a); Sec. 164 6.................... 984
documentation must specify 160.35(b).
indices to which changes in the
interest rate will be linked.
Recordkeeping: Appraisals must be Sec. 34.44......... 976 1,465 responses per 119,072
written and contain sufficient respondent @5
information and analysis to minutes per response.
support engaging in the
transaction.
Recordkeeping: Written policies Sec. 34.62; 1,413 30................... 42,390
(reviewed annually) for appendix A to
extensions of credit secured by subpart D to part
or used to improve real estate. 34; Sec. 160.101;
appendix A to Sec.
160.101.
Recordkeeping: Real estate Sec. 34.85......... 9 5.................... 45
evaluation policy to monitor OREO.
Recordkeeping: New IC 1--ROV N/A.................. 930 40................... 37,200
Guidance--Policies and Procedures
(Implementation: Applies to first
year only).
Recordkeeping: New IC 2--ROV N/A.................. 930 2.................... 1,860
Guidance--Policies and Procedures
(Ongoing).
Recordkeeping: New IC 3-- N/A.................. 976 10................... 9,760
Interagency Appraisal and
Evaluation Guidelines--Policies
and Procedures.
Reporting: Procedure to be Sec. 34.22(b); Sec. 249 6.................... 1,494
followed when seeking to use an 160.35(d)(3).
alternative index.
Reporting: Prior notification of Sec. 34.86......... 6 5.................... 30
making advances under development
or improvement plan for OREO.
Disclosure: Default notice to Sec. 190.4(h)...... 42 2.................... 84
debtor at least 30 days before
repossession, foreclosure, or
acceleration of payments.
Disclosure: New IC 4--Interagency N/A.................. 976 5.................... 4,880
Appraisal and Evaluation
Guidelines.
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Total Annual Burden Hours..... ..................... .............. ..................... 217,829
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Board
Table 2--Summary of Estimated Annual Burden
[OMB No. 7100-0250]
----------------------------------------------------------------------------------------------------------------
Estimated Estimated Estimated
FR Y-30 number of annual Estimated average hours per annual burden
respondents frequency response hours
----------------------------------------------------------------------------------------------------------------
Recordkeeping
----------------------------------------------------------------------------------------------------------------
Sections 225.61--225.67 for SMBs... 701 519 5 minutes.................. 30,318
Sections 225.61--225.67 for BHCs 4,714 25 5 minutes.................. 9,821
and nonbank subsidiaries of BHCs.
Guidelines......................... 5,415 1 10......................... 54,150
Policies and Procedures ROV 5,799 1 13.3....................... 77,127
guidance (Initial setup).
Policies and Procedures ROV 5,799 1 2.......................... 11,598
guidance (Ongoing).
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Disclosure
----------------------------------------------------------------------------------------------------------------
Guidelines......................... 5,415 1 5.......................... 27,075
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Total.......................... .............. .............. ........................... 210,089
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FDIC
Table 3--Summary of Estimated Annual Burden
[OMB No. 3064-0103]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average annual Number of Annual
Information collection (obligation to Type of burden (frequency of response) number of responses per Time per response (hours/ burden
respond) respondents respondent minutes) (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping Requirements Associated Recordkeeping (On Occasion).............. 3,038 250 5 minutes (0.083)........ 63,039
with Real Estate Appraisals and
Evaluations (Mandatory).
New IC 1--ROV Guidance--Policies and Recordkeeping (Annual)................... 2,976 1 5 hours (15 hours divided 14,880
Procedures--Implementation (Voluntary). by 3 years).
[[Page 47075]]
New IC 2--ROV Guidance--Policies and Recordkeeping (Annual)................... 2,976 1 1 hours.................. 2,976
Procedures--Ongoing (Voluntary).
New IC 3--2010 Guidelines--Policies and Recordkeeping (Annual)................... 3,038 1 10 hours................. 30,380
Procedures--Ongoing (Voluntary).
New IC 4--2010 Guidelines--Disclosure-- Disclosure (Annual)...................... 3,038 1 5 hours.................. 15,190
Ongoing (Voluntary).
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Total Annual Burden (Hours)........ ......................................... .............. .............. ......................... 126,465
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NCUA
Table 4--Summary of Estimated Annual Burden
[OMB No. 3133-0125]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average annual Number of Time per
Information collection Type of burden number of responses per response Annual burden
respondents respondent (hours) (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping Requirements Associated with Recordkeeping (On Occasion)................. 3,648 618 0.0825 185,993
Real Estate Appraisals and Evaluations.
New IC 1--ROV Guidance--Policies and Recordkeeping (Annual)...................... 3,237 1 5 16,185
Procedures--Implementation.
New IC 2--ROV Guidance--Policies and Recordkeeping (Annual)...................... 3,237 1 1 3,237
Procedures--Ongoing.
New IC 3--2010 Guidelines--Policies and Recordkeeping (Annual)...................... 3,648 1 10 36,480
Procedures--Ongoing.
New IC 4--2010 Guidelines--Disclosure-- Disclosure (Annual)......................... 3,648 1 5 18,240
Ongoing.
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Total Annual Burden Hours............. ............................................ .............. .............. .............. 260,135
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Comments are invited on:
(a) Whether the collections of information are necessary for the
proper performance of the agencies' functions, including whether the
information has practical utility;
(b) The accuracy of the estimate of the burden of the information
collections, including the validity of the methodology and assumptions
used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the information collections on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to provide information.
All comments will become a matter of public record. Comments on the
collections of information should be sent to the address listed for
each agency in the ADDRESSES section of this document. A copy of the
comments may also be submitted to OMB: by mail, to U.S. Office of
Management and Budget, 725 17th Street NW, #10235, Washington, DC
20503; by facsimile, to 202-395-6974; or by email, to
<a href="/cdn-cgi/l/email-protection#533c3a21320c2026313e3a20203a3c3d133c3e317d363c237d343c25"><span class="__cf_email__" data-cfemail="9ff0f6edfec0eceafdf2f6ececf6f0f1dff0f2fdb1faf0efb1f8f0e9">[email protected]</span></a>, Attention: Federal Banking Agency Desk
Officer.
V. Text of Proposed Interagency ROV Guidance
Background
Credible collateral valuations, including appraisals, are essential
to the integrity of the residential real estate lending process.
Deficiencies identified in valuations, either through an institution's
valuation review processes or through consumer provided information may
be a basis for financial institutions to question the credibility of
the appraisal or valuation report. Collateral valuations may be
deficient due to prohibited discrimination; \7\ errors or omissions; or
valuation methods, assumptions, data sources, or conclusions that are
otherwise unreasonable, unsupported, unrealistic, or inappropriate.
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. Valuations that are not credible may pose risks to the
financial condition and operations of a financial institution. Such
risks may include loan losses, violations of law, fines, civil money
penalties, payment of damages, and civil litigation.
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\7\ For the purposes of this guidance, ``discrimination'' is
prohibited discrimination based on protected characteristics in the
residential property valuation process. For these purposes,
``valuation'' includes appraisals, evaluations, and other means to
determine the value of residential property.
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Applicable Statutes, Regulations, and Guidance
The Equal Credit Opportunity Act (ECOA), and its implementing
regulation, Regulation B, prohibit discrimination in any aspect of a
credit transaction.\8\ The Fair Housing Act (FH Act) and its
implementing regulation prohibit discrimination in all aspects of
residential real estate-related transactions.\9\ ECOA and the FH Act
prohibit discrimination on the basis of race and certain other
characteristics in all aspects of residential real estate-related
transactions, including in
[[Page 47076]]
residential real estate valuations. In addition, section 5 of the
Federal Trade Commission Act prohibits unfair or deceptive acts or
practices \10\ and the Consumer Financial Protection Act prohibits any
covered person or service provider of a covered person from engaging in
any unfair, deceptive, or abusive act or practice.\11\
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\8\ See 15 U.S.C. 1691 et seq. and 12 CFR part 1002. Regulation
B requires creditors to (1) provide an applicant a copy of all
appraisals and other written evaluations developed in connection
with an application for credit that is to be secured by a first lien
on a dwelling; and (2) provide a copy of each such appraisal or
other written valuation promptly upon completion, or three business
days prior to consummation of the transaction (for closed-end
credit) or account opening (for open-end credit), whichever is
earlier. See 12 CFR 1002.14(a)(1).
\9\ See 42 U.S.C. 3601 et seq. and 24 CFR part 100.
\10\ See 15 U.S.C. 45(a)(1).
\11\ See 12 U.S.C. 5531, 5536.
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The Truth in Lending Act (TILA) and its implementing regulation,
Regulation Z, establish certain federal appraisal independence
requirements.\12\ Specifically, TILA and Regulation Z prohibit
compensation, coercion, extortion, bribery, or other efforts that may
impede upon the appraiser's independent valuation in connection with
any covered transaction.\13\ However, Regulation Z also explicitly
clarifies that it is permissible for covered persons \14\ to, among
other things, request the preparer of the valuation to consider
additional, appropriate property information, including information
about comparable properties, or to correct errors in the valuation.\15\
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\12\ See 15 U.S.C. 1601 et seq. and 12 CFR part 1026.
\13\ See 12 CFR 1026.42(c)(1).
\14\ ``Covered persons'' include creditors, mortgage brokers,
appraisers, appraisal management companies, real estate agents, and
other persons that provide ``settlement services'' as defined in
section 3(3) of the Real Estate Settlement Procedures Act (12 U.S.C.
2602(3)) and the implementing regulation. See 12 CFR 1026.42(b)(1).
\15\ See 12 CFR 1026.42(c)(3)(iii).
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The Board's, FDIC's, NCUA's, and OCC's appraisal regulations \16\
implementing Title XI of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 \17\ require all appraisals conducted in
connection with federally related transactions to conform with the
Uniform Standards of Professional Appraisal Practice (USPAP), which
requires compliance with all applicable laws and regulations including
nondiscrimination requirements.
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\16\ See 12 CFR part 34, subpart C (OCC); 12 CFR part 208,
subpart E and 12 CFR part 225, subpart G (Board); 12 CFR part 323
(FDIC); 12 CFR part 722 and 12 CFR part 701.31 (NCUA).
\17\ Public Law 101-73, title XI, 103 Stat. 511 (1989), codified
at 12 U.S.C. 3331 et seq.
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The Board's, FDIC's, NCUA's, and OCC's appraisal regulations also
require appraisals to be subject to appropriate review for compliance
with USPAP.\18\ Financial institutions generally conduct an independent
review prior to providing the consumer a copy of the appraisal or
evaluation; however, additional review may be warranted if the consumer
provides information that could affect the value conclusion or if
deficiencies are identified in the original appraisal. An appraisal
does not comply with USPAP if it relies on a prohibited basis set forth
in either the ECOA or the FH Act or contains material errors including
errors \19\ of omission or commission. If a financial institution
determines through the appraisal review process, or after consideration
of information later provided by the consumer, that the appraisal does
not meet the minimum standards outlined in the agencies' appraisal
regulations and if the deficiencies remain uncorrected, the appraisal
cannot be used as part of the credit decision.\20\
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\18\ See 12 CFR 34.44(a) (OCC); 12 CFR 225.64(c) (Board); 12 CFR
722.4(c) (NCUA); and 12 CFR 323.4(c) (FDIC).
\19\ An error of omission is neglecting to do something that is
necessary, e.g., failing to identify the subject property's relevant
characteristics. An error of commission is doing something
incorrectly, e.g., incorrectly identifying the subject property's
relevant characteristics.
\20\ See 12 CFR 34.44 (OCC); 12 CFR 225.64 (Board); 12 CFR 323.4
(FDIC); and 12 CFR 722.4 (NCUA). In addition, under TILA, if at any
point during the lending process the financial institution
reasonably believes, through appraisal review or consumer-provided
information, that an appraiser has not complied with USPAP or
ethical or professional requirements for appraisers under applicable
State or Federal statutes or regulations, the financial institution
is required to refer the matter to the appropriate State appraisal
regulatory agency if the failure to comply is material. See 12 CFR
1026.42(g).
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The Board, FDIC, NCUA, and OCC have issued interagency guidance
describing actions that financial institutions may take to resolve
valuation deficiencies.\21\ These actions include resolving the
deficiencies with the appraiser or preparer of the valuation report;
requesting a review of the valuation by an independent, qualified, and
competent state certified or licensed appraiser; or obtaining a second
appraisal or evaluation. Deficiencies may be identified through the
financial institution's valuation review or through consumer provided
information. The regulatory framework permits financial institutions to
implement ROV policies, procedures, and control systems that allow
consumers to provide, and the financial institution to review, relevant
information that may not have been considered during the appraisal or
evaluation process.
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\21\ See Interagency Appraisal and Evaluation Guidelines, 75 FR
77450 (Dec. 10, 2010).
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Use of Third Parties
A financial institution's use of third parties in the valuation
review process does not diminish its responsibility to comply with
applicable laws and regulations.\22\ Moreover, whether valuation review
activities and resolving deficiencies are performed internally or via a
third party, financial institutions supervised by the Board, FDIC,
NCUA, and the OCC are required to operate in a safe and sound manner
and in compliance with applicable laws and regulations, including those
designed to protect consumers.\23\ In addition, the CFPB expects
financial institutions to oversee their business relationships with
service providers in a manner that ensures compliance with Federal
consumer protection laws, which are designed to protect the interests
of consumers and avoid consumer harm.\24\ A financial institution's
risk management practices include managing the risks arising from its
third-party valuations and valuation review functions.
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\22\ See OCC Bulletin 2013-29, ``Third-Party Relationships: Risk
Management Guidance;'' CFPB Compliance Bulletin and Policy Guidance;
2016-02, Service Providers (Oct. 2016); FDIC FIL-44-2008, ``Guidance
for Managing Third-Party Risk'' (June 6, 2008); SR Letter 13-19/CA
Letter 13-21, ``Guidance on Managing Outsourcing Risk'' (December 5,
2013, updated February 26, 2021). The NCUA does not currently have
supervisory or enforcement authority over third-party credit union
vendors and service providers. The NCUA issued LTR 07-CU-13
``Evaluating Third Party Relationships.'' to communicate guidance to
examiners on a standard framework for reviewing third party
relationships.
\23\ See Section 39 of the Federal Deposit Insurance Act (12
U.S.C. 1831p-1) (which requires each appropriate Federal banking
agency to prescribe safety and soundness standards for insured
depository institutions). The Federal banking agencies implemented
section 1831p-1 by rule through the ``Interagency Guidelines
Establishing Standards for Safety and Soundness.'' See 12 CFR part
30, appendix A (OCC); 12 CFR part 208, appendix D-1 (Board); and 12
CFR part 364, appendix A (FDIC). See also 12 U.S.C. 1786(b); 12
U.S.C. 1789; and 12 CFR 741.3 (NCUA).
\24\ CFPB Compliance Bulletin and Policy Guidance; 2016-02,
Service Providers (Oct. 2016).
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Reconsiderations of Value
An ROV request made by the financial institution to the appraiser
or other preparer of the valuation report encompasses a request to
reassess the report based upon deficiencies or information that may
affect the value conclusion. A financial institution may initiate a
request for an ROV because of the financial institution's valuation
review activities or after consideration of information received from a
consumer through a complaint, or request to the loan officer or other
lender representative.\25\
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\25\ See Interagency Appraisal and Evaluation Guidelines, 75 FR
77450, 77463 (Dec. 10, 2010). ``An institution should establish
policies and procedures for resolving any inaccuracies or weaknesses
in an appraisal or evaluation identified through the review process,
including procedures for: Communicating the noted deficiencies to
and requesting correction of such deficiencies by the appraiser or
person who prepared the evaluation. An institution should implement
adequate internal controls to ensure that such communications do not
result in any coercion or undue influence on the appraiser or person
who performed the evaluation. Addressing significant deficiencies in
the appraisal that could not be resolved with the original appraiser
by obtaining a second appraisal or relying on a review that complies
with Standards Rule 3 of USPAP and is performed by an appropriately
qualified and competent State certified or licensed appraiser prior
to the final credit decision. Replacing evaluations prior to the
credit decision that do not provide credible results or lack
sufficient information to support the final credit decision.''
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[[Page 47077]]
A consumer inquiry or complaint regarding a valuation would
generally occur after the financial institution has conducted its
initial appraisal or evaluation review and resolved any issues
identified. Given this timing, a consumer may provide specific and
verifiable information that may not have been available or considered
when the initial valuation and review were performed. Regardless of how
the request for an ROV is initiated, a request could be resolved
through a financial institution's independent valuation review or other
processes to ensure credible appraisals and evaluations.
An ROV request may include consideration of comparable properties
not previously identified, property characteristics, or other
information about the property that may have been incorrectly reported
or not previously considered, which may affect the value conclusion. To
resolve deficiencies, including those related to potential
discrimination, financial institutions can communicate relevant
information to the original preparer of the valuation and, when
appropriate, request an ROV.
Complaint Resolution Process
Financial institutions can capture consumer feedback regarding
potential valuation deficiencies through existing complaint resolution
processes. The complaint resolution process may capture complaints and
inquiries about the financial institution's products and services
offered across all lines of business, including those offered by third
parties, as well as complaints from various channels (such as letters,
phone calls, in person, transmittal from regulators, third-party
valuation service providers, emails, and social media). Depending on
the nature and volume, appraisal and other valuation-based complaints
and inquiries can be an important indicator of potential risks and risk
management weaknesses. Appropriate policies, procedures, and control
systems can adequately address the monitoring, escalating, and
resolving of complaints including a determination of the merits of the
complaint and whether a financial institution should initiate an ROV.
Examples of Policies, Procedures, and Control Systems
Financial institutions may consider developing risk-based ROV-
related policies, procedures, control systems, and complaint processes
that identify, address, and mitigate the risk of deficient valuations,
including valuations that involve prohibited discrimination, and that:
<bullet> Consider ROVs as a possible resolution for consumer
complaints related to residential property valuations.
<bullet> Consider whether any information or other process
requirements related to a consumer's request for a financial
institution to initiate an ROV create unreasonable barriers or
discourage consumers from requesting an ROV.
<bullet> Establish a process that provides for the identification,
management, analysis, escalation, and resolution of valuation related
complaints across all relevant lines of business, from various channels
and sources (such as letters, phone calls, in person, regulators,
third-party service providers, emails, and social media).
<bullet> Establish a process to inform consumers how to raise
concerns about the valuation sufficiently early enough in the
underwriting process for any errors or issues to be resolved before a
final credit decision is made. This may include suggesting to consumers
the type of information they may provide when communicating with the
financial institution about potential valuation deficiencies.
<bullet> Identify stakeholders and clearly outline each business
unit's roles and responsibilities for processing an ROV request (e.g.,
loan origination, processing, underwriting, collateral valuation,
compliance, customer experience or complaints).
<bullet> Establish risk-based ROV systems that route the request to
the appropriate business unit (e.g., ROV requests that allege
discrimination could be routed to the appropriate compliance, legal,
and appraisal review staff that have the requisite skills and authority
to research and resolve the request).
<bullet> Establish standardized processes to increase the
consistency of consideration of requests for ROVs:
[cir] Use clear, plain language in notices to consumers of how they
may request the ROV;
[cir] Use clear, plain language in ROV policies that provide a
consistent process for the consumer, appraiser, and internal
stakeholders;
[cir] Establish guidelines for the information the financial
institution may need to initiate the ROV process;
[cir] Establish timelines in the complaint or ROV process for when
milestones need to be achieved;
[cir] Establish guidelines for when a second appraisal could be
ordered and who assumes the cost; and
[cir] Establish protocols for communicating the status of the
complaint or ROV and results to consumers.
<bullet> Ensure relevant lending and valuation related staff,
inclusive of third parties (e.g., appraisal management companies, fee-
appraisers, mortgage brokers, and mortgage servicers) are trained to
identify deficiencies (inclusive of prohibited discriminatory
practices) through the valuation review process.
VI. CFPB Signing Authority
The Director of the Consumer Financial Protection Bureau, Rohit
Chopra, having reviewed and approved this document, is delegating the
authority to electronically sign this document to Laura Galban, CFPB
Federal Register Liaison, for purposes of publication in the Federal
Register.
Michael J. Hsu,
Acting Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System.
Ann E. Misback,
Secretary of the Board.
Dated at Washington, DC, on June 1, 2023.
James P. Sheesley,
Assistant Executive Secretary, Federal Deposit Insurance Corporation.
Melane Conyers-Ausbrooks,
Secretary of the Board, National Credit Union Administration.
Laura Galban,
Federal Register Liaison, Consumer Financial Protection Bureau.
[FR Doc. 2023-12609 Filed 7-20-23; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 7535-01-P; 4810-AM-P
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</html>Indexed from Federal Register on July 21, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.