Effective August 29, 2024, Freddie Mac, in collaboration with Fannie Mae and HUD, is introducing significant changes to the Reconsideration of Value (ROV) process. These changes are aimed at ensuring consistency and fairness when dealing with perceived appraisal issues or deficiencies. This update is crucial for sellers, borrowers, and appraisers alike. Let’s dive into what these new requirements entail and how they impact the mortgage and appraisal industry.

Key Components of the New ROV Process

1. Consistent Review and Resolution Procedure:
   • The new requirements mandate that sellers must have clear policies and procedures for handling ROV requests. This includes allowing borrowers to appeal appraisal reports if they believe the value assessment is unsupported or reflects discriminatory practices.
   • The procedure must outline steps for reviewing and resolving these requests, ensuring a fair and transparent process for all parties involved. 
2. Disclosure and Initiation Process:
   • Borrowers must be informed about the ROV process and how to initiate a request. Clear instructions need to be provided to ensure borrowers understand their rights and the steps they need to take.
3. Standardized Communication:
   • A standardized format for communicating the rationale and supporting documentation to the appraiser is required. This ensures that all parties have a clear understanding of the reasons behind the ROV request and the necessary information to support it.
4. Revised Appraisal Report:
   • Appraisers must provide a revised appraisal report with specific commentary explaining their conclusions regarding the ROV request. This adds a layer of accountability and clarity to the appraisal process.
5. Turn-time Expectations:
   • There must be clear expectations for the turnaround time in communicating the results of the ROV to the borrower. This ensures timely responses and reduces uncertainty for borrowers.
6. Documentation Retention:
   • All documentation and communications related to the initiation and outcome of the ROV must be retained in the mortgage file. This ensures a thorough record-keeping process for future reference.

Additional Seller Responsibilities

• Reporting and Compliance:
  • If material deficiencies are identified in an appraisal report that are not corrected, or if unacceptable appraisal practices are suspected, sellers must forward the appraisal report and summary of findings to the appropriate appraisal licensing agency or regulatory board.
  • In cases of suspected violations of antidiscrimination laws, sellers must report these to the relevant local, state, or federal agency.
• Training and Remediation:
  • Valuation staff, including third parties, must be trained to identify prohibited discriminatory practices and appraisal deficiencies. Sellers must have processes in place to remediate these deficiencies to ensure compliance and uphold standards.

Future Tracking and Updates

Freddie Mac is also evaluating methods for future tracking of mortgages where an ROV was obtained. Additional information on this tracking process will be provided as it becomes available, ensuring ongoing transparency and accountability in the appraisal process.

Conclusion

Freddie Mac’s new ROV process represents a significant step towards ensuring fairness and consistency in the appraisal process. By understanding and implementing these requirements, sellers can better serve their borrowers, uphold high standards of appraisal practices, and ensure compliance with regulatory expectations.

Stay tuned for more updates as Freddie Mac continues to refine and expand these processes. For more information on how these changes affect your mortgage and appraisal procedures, feel free to contact us. We’re here to help you navigate these new requirements with ease.