[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 [www.gpo.gov]
[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:
     Federal eRulemaking Portal--Regulations.gov: go to https://regulations.gov/. 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 
Regulations.gov site, please call 1-866-498-2945 (toll free) Monday-
Friday, 9 a.m.-5 p.m. ET, or email [email protected].
     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.
     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 Regulations.gov 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:
     Viewing Comments Electronically--Regulations.gov: Go to 
https://regulations.gov/. 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 Regulations.gov site, 
please call 1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. ET, 
or email [email protected].
    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:
     Agency Website: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Email: [email protected]. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     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 www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm 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:
     FDIC Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for submitting 
comments on the FDIC's website.
     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.
     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.
     Email: [email protected]. 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 https://www.fdic.gov/resources/regulations/federal-register-publications/. 
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):
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments for ``Docket No. NCUA-
2023-0061.''
     Email: [email protected].
     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 https://www.regulations.gov 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 [email protected].
    CFPB: You may submit comments, identified by Docket No. CFPB-2023-
0033, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected].
     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 https://www.regulations.gov.
    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, 
[email protected], or Mark Mellon, Counsel, (202) 898-3884, 
[email protected]. 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 
[email protected].

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]
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                                        Estimated       Estimated                                    Estimated
              FR Y-30                   number of        annual      Estimated average hours per   annual burden
                                       respondents      frequency              response                hours
----------------------------------------------------------------------------------------------------------------
                                                  Recordkeeping
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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
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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]
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                                                                                    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)
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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).
                                        ----------------------------------------------------------------------------------------------------------------
    Total Annual Burden (Hours)........  .........................................  ..............  ..............  .........................    126,465
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NCUA

                                                       Table 4--Summary of Estimated Annual Burden
                                                                   [OMB No. 3133-0125]
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                                                                                          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.
                                           -------------------------------------------------------------------------------------------------------------
    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 
[email protected], 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:
     Consider ROVs as a possible resolution for consumer 
complaints related to residential property valuations.
     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.
     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).
     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.
     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).
     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).
     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.
     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