Regulators Seek Standardized Home Appraisal Revaluations as Part of Push to Eliminate Appraisal Bias
Banks and realtors have just urged federal regulators to limit the number of times a potential homebuyer or seller can challenge an appraisal of the property’s value. Mortgage lenders ask independent appraisal firms to reevaluate a home value when a consumer complains that the value is too high or low.
In June, 2023, Five agencies - the Consumer Financial Protection Bureau, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the National Credit Union Administration - proposed regulations to make it easier for consumers to ask for "reconsiderations of value (ROV)," especially if they suspect racial biases negatively influenced the value first placed on a home.
In response, the National Association of Realtors (NAR) and the Independent Community Bankers of America (ICBA) wrote that permitting consumers to have an unlimited number of new appraisals could muck up the homebuying process. ICBA said that there are more effective ways to reduce bias. NAR urged the agencies to use a program ("the Tidewater process") established by the Veterans Affairs Department (VA) as a way to limit ROV requests by allowing three reconsideration requests on homes purchased with a VA-backed loan.
Consumer advocates - National Consumer Law Center, the National Community Reinvestment Coalition, the Consumer Federation of America, the National Fair Housing Alliance, the National Urban League, and others - mostly supported the proposal, but suggested that regulators should more clearly state that the guidance applies to both under-valuations and over-valuations. The Housing Policy Council, an industry group, said asking the same appraisal company to re-do ignores possible causes of alleged discrimination. Instead of using the original appraiser, regulators should tell banks to use other tools to reevaluate when disputes happen.
Both consumer and industry advocates urged the regulators to consult with the other mortgage agencies and entities that run government-backed housing programs - the Federal Housing Finance Agency, Fannie Mae, Freddie Mac, the VA, and the Department of Agriculture - regarding changes to the appraisal system.
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