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All in Appraisals
In this Compliance Clip (video), Adam breaks down the requirements in Regulation B as to when a borrower must get a copy of the appraisal used in their loan. Not only is the timeframe for delivering the appraisal discussed, Adam also covers when the appraisal delivery requirements of Regulation B apply. A transcript of this video is now available.
On August 2, 2023, the U.S. Department of Housing and Urban Development (HUD) and the National Association of Real Estate Brokers (NAREB) announced a partnership aimed at tackling appraisal bias and discrimination in the housing market. The said collaboration, which is set to launch in the coming months, will increase education, outreach, and efforts to combat racial appraisal bias in home property valuation.
On June 1, 2023, the Biden-Harris Administration’s PAVE Task Force announced a new set of actions to address appraisal bias in the housing market. The Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) was created in June 2021 by President Biden, with the aim of rooting out bias in the home appraisal process.
On June 1, 2023, the federal regulatory agencies requested public comment on a proposed rule designed to ensure the credibility and integrity of models used in real estate valuations. Specifically, the proposed rule would implement quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary market issuers in valuing real estate collateral securing mortgage loans.
On January 12, 2023, HUD Secretary Marcia L. Fudge announced that HUD, through the Federal Housing Administration, is creating a process that people seeking FHA financing can use to request a review of their appraisal if they believe the results may have been skewed by racial bias. The proposed change to FHA policy represents the first step to solidify the processes that lenders must follow when a borrower requests a Reconsideration of Value (ROV) review if concerns arise around unlawful discrimination in residential property valuation
The CFPB recently announced that it will host the Appraisal Subcommittee for a hearing on appraisal bias on January 24, 2023. Representatives from key stakeholder groups were invited to share their views with the ASC during the hearing.
On 9/29/2020, the Federal Reserve, FDIC, and OCC jointly finalized two interim final rules that are currently in effected and were issued in light of the COVID-19 pandemic. The rules include:
A final rule that temporarily defers appraisal and evaluation requirements for up to 120 days after the closing of certain residential and commercial real estate transactions; and
A final rule that neutralizes—due to the lack of credit and market risk—the regulatory capital and liquidity effects for banks that participate in certain Federal Reserve liquidity facilities.
On April 29, 2020, the CFPB released two fact sheets. The first fact sheet, titled “Transaction Coverage Under the ECOA Valuations Rule”, explains the coverage requirements under the Equal Credit Opportunity Act (ECOA) Valuations Rule (Rule) and addresses frequently asked questions the Bureau has received since it went into effect. The second fact sheet, titled "Delivery of Appraisals”, explains the delivery requirements for appraisals under the Equal Credit Opportunity Act (ECOA) Valuations Rule (Rule) and also addresses questions the Bureau has received since it went into effect.
On April 20, 2020, the NCUA issued a final rule to provide appraisal relief to credit unions. The final rule does two main things. First, the final rule increases the residential appraisal threshold from $250,000 to $400,000. The raised threshold provides long-term regulatory relief to credit unions and members and aligns with the appraisal threshold adjustment that banking regulators made during 2019. The rule also increases flexibility for credit unions struggling with mortgage pipeline delays due to appraisals during the COVID-19 pandemic. Secondly, the NCUA has issued an interim final rule to temporarily allow credit unions to defer appraisals and written estimates of market value for up to 120 days after the closing of a loan. This flexibility will expire on December 31, 2020 and this, too, aligns with action taken by banking regulators. The NCUA explains that this deferral is intended to provide liquidity and relief to property owners affected by disruptions to property valuations caused by COVID-19 mitigation efforts. Both rules become effective upon publication in the Federal Register.
On 4/14/20, the banking regulators (except the NCUA) issued an interim final rule to temporarily defer real estate-related appraisals and evaluations under the agencies' interagency appraisal regulations. The Federal Reserve, FDIC, and OCC are providing this temporary relief to allow regulated institutions to extend financing to creditworthy households and businesses quickly in the wake of the national emergency declared in connection with COVID-19. The agencies are deferring certain appraisals and evaluations for up to 120 days after closing of residential or commercial real estate loan transactions. Transactions involving acquisition, development, and construction of real estate are excluded from this interim rule. These temporary provisions will expire on December 31, 2020, unless extended by the regulators.
