September 19, 2023
Consumer Financial Protection Bureau
c/o Legal Division Docket Manager
1700 G Street, NW
Washington, DC 20552
Re: Docket No. CFPB-2023-0033
Interagency Guidance on Reconsideration of Value of Residential Real Estate Valuations
Dear Director Chopra:
The National Association of State Credit Union Supervisors (NASCUS)1 submits the following in response to the Request for Comments on the Proposed Interagency Guidance on Reconsiderations of Value (ROV) of Residential Real Estate Valuations. NASCUS believes that fair, impartial and non-discriminatory residential real estate valuations are an integral part of ensuring that unnecessary barriers to the development of generational wealth are removed, and we appreciate the Agencies’2 efforts to provide relevant guidance to assist in this endeavor.
NASCUS believes the proposed ROV guidance will provide helpful direction to financial institutions, and we offer the following recommendations for your consideration.
Standardized ROV policies and procedures
The proposed guidance provides examples of ROV policies, procedures, and controls that financial institutions may choose to adopt. During our outreach, we learned that financial institutions welcomed additional guidance in this area. Despite having ROV processes in place, they were open to additional guidance that would assist in standardizing the process across the industry. Based on our discussions, policies may vary widely. For example, ROV triggers; which and how many comparable properties should be considered for the ROV; who assumes any related costs, etc., may differ between institutions. Standardization of these policies and procedures would help institutions determine what steps are/are not acceptable and provide clear expectations for consumers. However, while institutions welcomed this additional guidance, they made it clear that such policies/procedures had to strike the right balance and could not be too restrictive. Commenters noted the importance of institutions being able to exercise necessary discretion within their ROV process and NASCUS highly recommends that any guidance builds in flexibility for institutional discretion.
Providing ROV process information to consumers
The proposed guidance provides examples of ROV policies, procedures, and control systems, including a suggestion that institutions establish a process to inform consumers how to raise valuation concerns. NASCUS supports this suggestion and believes that consumer education is key to this process. We believe this includes not only the ability to identify and report potential valuation issues but also includes providing consumers with information about the specific entity’s ROV process. We believe it is imperative to set consumer expectations around this process. For example, making sure they are clear on any costs related to this process and realistic decisioning timelines for the process. We’ve been advised of instances where consumers have experienced significant displeasure with the ROV process due to the fact that they lack a clear understanding of the mechanics and possible outcomes of the process. We believe clear and comprehensive consumer education will alleviate (or at least minimize) consumer dissatisfaction.
Engaging relevant stakeholders on ROV guidance
Historically, the Bureau has engaged in extensive outreach on the more complicated consumer protection issues such as payday lending, small business lending, etc. In those instances, the Bureau has moved beyond the standard proposal/request for comment process and has often engaged the industry through additional discussions such as in-person meetings or the more formal SBREFA process.
This is the type of complex discussion that requires more engagement from stakeholders (such as state supervisory agencies, financial institutions, etc.). For example, there is significant concern about appraisers being able to maintain their “independence” under the ROV process. This may be an issue that requires additional discussion and engagement beyond the standard comment process to ensure the Bureau has a thorough understanding of this concern. In addition, there is apprehension as to how best to address detrimental appraiser actions. For example, the ROV process may address a particular consumer’s low valuation. However, it is also important to include guidance on how to address problematic appraisers where a low valuation may be indicative of a larger issue. Should this be the responsibility of the financial institution or the consumer? What is the mechanism for reporting problematic appraisers, and if the responsibility lies with the consumer, are they clear on the process? These are examples of questions that would likely require deeper, more intensive discussion with various stakeholders to enable the Agencies to get a full appreciation of the various moving pieces that must be considered and addressed.
In light of the complexities involved in this matter, NASCUS believes it would be worthwhile to offer the various stakeholders an opportunity to further engage the Agencies on the guidelines to identify/address any red flag recommendations or guideline blind spots early on.
NASCUS commends the Agencies for their efforts to tackle the important matter of real estate valuations and appreciates the opportunity to add our comments for consideration.
Vice President, Legislative and Regulatory Counsel
1 NASCUS is the professional association of the nation’s forty-six state and territorial credit union regulatory agencies that charter and supervise over 1900 state credit unions. NASCUS membership includes state regulatory agencies, state-chartered and federally-chartered credit unions, and other important stakeholders in the state system. State-chartered credit unions hold over half of the $2.2 trillion assets in the credit union system and are proud to represent nearly half of the 134 million members.
2 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) collectively identified as “The Agencies.”