New standards aim to strengthen reconsideration process, borrower protections
The Federal Housing Administration (FHA) has published new standards aimed at strengthening safeguards against unlawful discrimination in residential property appraisals.
The new standards, Mortgagee Letter 2024-07, enhance the FHA's existing process for review and reconsideration of home valuations (ROV). The update requires lenders to establish minimum standards for borrower-initiated ROV requests, including providing disclosures and instructions at loan application and appraisal delivery.
"This update addresses key components of the Action Plan to Advance Property Appraisal and Valuation Equity," the FHA said in a press release, citing inconsistent industry policies as an "obstacle" for some borrowers seeking legitimate revaluations.
Under the new rules, lenders must properly train underwriters to identify appraisal deficiencies and discriminatory practices. Their review process must include protocols for remediating problems and allow for a limited quantity of data to be provided to appraisers, who must respond.
Lenders are also required to incorporate the enhanced appraisal review and ROV procedures into quality control plans.
The changes are the result of feedback from a January 2023 policy proposal and engagement with stakeholders like the Federal Housing Finance Agency "to identify policies that would support a consistent industry-wide framework," the FHA said.
Read more: Fed agencies push for change to reconsiderations of value for property appraisals
The provisions can be implemented immediately but are mandatory for FHA case numbers assigned on or after September 02. They will be incorporated into an updated Single Family Housing Policy Handbook.
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"This strengthens FHA's existing ROV process as part of HUD's commitment to... safeguards against unlawful discrimination in residential property valuations," the agency stated.
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