SR 24-3: Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations

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SR 24-3 / CA 24-4: Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C. 20551

DIVISION OF SUPERVISION AND REGULATION

DIVISION OF CONSUMER AND COMMUNITY AFFAIRS

SR 24-3 / CA 24-4

July 18, 2024

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK AND INSTITUTIONS SUPERVISED BY THE FEDERAL RESERVE

SUBJECT:

Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations

Applicability : This guidance is relevant for all financial institutions supervised by the Federal Reserve, including those with $10 billion or less in consolidated assets.

The Board of Governors of the Federal Reserve System (Board), Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency have adopted the attached guidance on reconsiderations of value of residential real estate valuations (interagency guidance). A reconsideration of value (ROV) is a request from a financial institution to the appraiser or other preparer of the valuation report to reassess the report based upon potential deficiencies or other information that may affect the value conclusion. Valuations that are deficient may pose risks to the financial condition and operations of a financial institution.

The interagency guidance describes the risks of deficient collateral valuations and outlines applicable laws, regulations, and existing guidance relating to the appraisal review process and the correction of valuation deficiencies. The interagency guidance also explains how financial institutions may incorporate ROV processes into existing risk management functions such as appraisal review and complaint management. Finally, the interagency guidance provides examples that financial institutions may choose to adopt when developing risk-based ROV-related policies, procedures, control systems, and complaint processes to identify, address, and mitigate the risk of deficient valuations.

Reserve Banks are asked to distribute this letter to the supervised financial institutions in their districts and to appropriate supervisory staff. In addition, questions regarding this letter may be sent via the Board’s public website. 1

signed by Michael S. Gibson Director Division of Supervision and Regulation

signed by Eric S. Belsky Director Division of Consumer and Community Affairs

Attachments:

Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations

Federal Register Notice

Cross References:

SR letter 23-4, “Interagency Guidance on Third-Party Relationships: Risk Management”

CA letter 24-2, “Interagency Guidance on Third-Party Relationships: Risk Management”

SR letter 24-2 / CA letter 24-1, “Third-Party Risk Management: A Guide for Community Banks”

Notes:

See http://www.federalreserve.gov/apps/contactus/feedback.aspx

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Last Update: July 18, 2024