On May 1, 2024, Fannie Mae, Freddie Mac, and HUD announced new policies for appraisal reconsiderations of value (ROV). These policies were the result of a collaborative effort between the GSEs, the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA).
These policies are intended to create a consistent framework for lenders to respond to a borrower-initiated reconsideration of value. Within this framework, the lender must include steps for the borrower to appeal an appraisal when they believe the value opinion:
- is unsupported;
- is deficient due to unacceptable appraisal practices; or
- reflects discriminatory practices.
Freddie Mac’s Bulletin, announcing the new policy, states:
“Freddie Mac, in collaboration with Fannie Mae and HUD, is implementing requirements related to reconsideration of value (ROV) that promote consistency when a perceived appraisal issue and/or appraisal deficiency exists. These requirements also recognize the importance of the Borrower having the knowledge and opportunity to request an ROV.”
An overview of changes to reconsideration of value policies
The ROV requirements are too numerous to include in their entirety here. Points that are important for appraisers to know include:
- The lender must disclose the ROV process to the borrower at the time of the application and upon delivery of the appraisal report to the borrower.
- The lender must complete its appraisal review before initiating the ROV process.
- The lender must provide a standardized format for providing the rationale, requirements, and documentation supporting the ROV request to be communicated to the appraiser, including:
- The borrower’s name, property address, effective date of the appraisal, appraiser’s name, and the date of the ROV submission;
- Identification of specific issues and deficiencies in the appraisal report; and
- Detailed information, data, or alternative comparable properties (maximum of five) including the source of the data, and the rationale for the inclusion of the alternative comparables, information, or data, as applicable.
- The lender must define turn-time expectations for communicating the ROV results to the borrower. (NOTE: This does not specify a turn time period; that is up to the lender to determine. Also, the appraiser is not expected to communicate the ROV results to the borrower; that is the lender’s responsibility.)
- The appraiser must deliver a revised appraisal report that includes specific commentary explaining their conclusions to the ROV request, regardless of whether the appraiser determines that changes are not needed to address the issues identified in the ROV.
- Only one borrower-initiated ROV is permitted per appraisal.
- After the loan is closed, an ROV is no longer permitted.
- The ROV process must not conflict with Appraiser Independence Requirements.
The GSEs are requiring their new policies to be implemented on or before August 29, 2024.
Amendments to HUD Handbook 4000.1
Several sections of HUD Handbook 4000.1 have been amended to reflect HUD’s new ROV policy. For appraisers, Section II.D.2. of the Handbook creates new general requirements for appraisers. This section states, in part:
“In the event that the underwriter requests a Reconsideration of Value (ROV) and provides additional information material to the value of the Property, the Appraiser must:
- review all information and market data received from the underwriter; and
- summarize the analysis of all information provided by the underwriter within a revised version of the appraisal report regardless of whether the Appraiser determines that changes are not needed to address the issues identified in the ROV.”
Furthermore, the GSEs and HUD plan to track ROV activity going forward, e.g., how many ROVs are handled by lenders and what the outcomes are. It remains to be seen if individual appraisers will be tracked in this manner, but that possibility exists.
- Fannie Mae’s Selling Guide Announcement may be accessed here.
- Freddie Mac’s Bulletin may be accessed here.
- HUD’s ROV Mortgagee Letter may be accessed here.
Take a closer look with Appraisal CE courses
On the receiving end of a reconsideration of value request and not sure how to respond? Register for McKissock Learning’s 3-hour livestream course titled “Responding to a Reconsideration of Value (ROV).” Our Appraisal CE courses are taught by experienced appraisers to give you the information you need while meeting your state’s requirements.
