WASHINGTON–Two national credit union trade associations have joined 10 banking, mortgage lending, real estate and appraisal industry organizations in urging federal housing agencies to establish a uniform process for consumers seeking to challenge property appraisals, arguing that consistent standards would improve consumer protections, reduce regulatory complexity and strengthen the integrity of the home lending process.
In an Oct. 7 joint letter, America’s Credit Unions, the Defense Credit Union Council (DCUC) and 10 other organizations offered recommendations for implementing the Appraisal Modernization Act, which was enacted as part of the 21st Century ROAD to Housing Act.
The groups called on the Federal Housing Finance Agency, Department of Housing and Urban Development, Department of Agriculture and Department of Veterans Affairs to coordinate their implementation of the law rather than establish separate requirements for different mortgage programs.
At the center of the recommendations is a standardized reconsideration of value (ROV) process that would allow borrowers to request a review of an appraisal or a subsequent appraisal when they believe a property’s valuation is inaccurate.
Call for Consistent Standards
The organizations said a uniform process should include:
- Common forms borrowers can use to request an appraisal reconsideration.
- Standardized data fields for tracking reconsideration requests.
- Consistent procedural steps and requirements for lenders, appraisers and borrowers.
- Clearly defined roles and responsibilities for all participants.
- Quality control procedures to ensure compliance and identify appraisers who fail to meet professional standards.
The groups said a coordinated approach could also help prevent inappropriate pressure on appraisers to reach predetermined property values while providing regulators with better information about appraisal practices..
Existing Fannie Mae, Freddie Mac Standards Recommended
Rather than create an entirely new regulatory framework, the organizations recommended that federal agencies align their requirements with collateral valuation standards already established by Fannie Mae and Freddie Mac.
The letter said using the government-sponsored enterprises’ existing standards would simplify compliance by allowing mortgage lenders to follow the same reconsideration procedures across different loan products.
The groups also said uniform requirements would make it easier for lenders to implement consistent quality control measures.
If federal agencies determine that the existing standards need strengthening, the organizations urged them to develop additional requirements collaboratively and apply them consistently across all covered mortgage programs.
More Consumer Education Sought
The letter also called for standardized educational materials to help borrowers understand their rights and responsibilities when challenging an appraisal.
According to the organizations, those materials should explain the steps borrowers can take, the documentation needed to support a reconsideration request and the potential outcomes of the review process.
The groups suggested that federal agencies consider eliminating duplicative borrower disclosures by providing information about reconsideration rights when a property valuation has been completed and those rights can actually be exercised, rather than automatically providing the information at the beginning of every mortgage application.
They also recommended clearer guidance for borrowers who believe an appraisal may have been affected by discrimination.
Such guidance, the organizations said, could help distinguish potential appraisal bias from more general disagreements over property values, resulting in a more consistent and transparent review process.
12 Organizations Sign Letter
In addition to America’s Credit Unions and DCUC, the organizations signing the letter were:
- American Bankers Association
- Broker Action Coalition
- Collateral Risk Network
- Community Home Lenders of America
- Housing Policy Council
- Independent Community Bankers of America
- Mortgage Bankers Association
- National Association of Mortgage Brokers
- National Association of Realtors
- Real Estate Valuation Advocacy Association
The letter was addressed to officials overseeing housing and mortgage programs at the Federal Housing Administration, HUD, FHFA, USDA and VA.
The organizations said they believe coordinated implementation of the Appraisal Modernization Act would benefit consumers, mortgage lenders, appraisers and regulators while maintaining confidence in property valuations.
They also offered to work with federal officials as the agencies develop procedures to implement the law.
Statement from DCUC
In a statement, DCUC President and CEO Tony Hernandez said, “A fair, transparent, and consistent reconsideration of value process is essential to protecting borrowers and giving lenders, appraisers, and regulators a clear framework they can apply with confidence. By working together on a uniform approach, the covered agencies can strengthen the integrity of the appraisal process while helping credit unions better serve their members,” Hernandez added
