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A better ROV!  Please reconsider the direction of your boat.   Try this bigger oar.  And use it only on the right side of the boat.

Appraisers have long been asked to “reconsider” their opinion.  Now we have a more official “standardized process” which affects appraisers, lenders, AMCs, GSEs, and of course, the borrower.

This part 1 is intended to overview the outlined ROV (Reconsideration of Value) process.  We also intend to provide Evidence Based Valuation EBV© solutions to existing and potential problems.  These are already presented in the Valuemetrics.info introductory course called Stats, Graphs, and Data Science 1.

I suspect, this is the first of several blogs dedicated to this “new official” method – because:

While we can ask questions here on what might happen, more will be revealed as the actual required implementation happens after the effective date of August 29, 2024.

Per the 5/1/2024 announcement, a Reconsideration Of Value is “a request to an appraiser” to re-assess the appraised value of a property due to:

  • Potential appraisal reporting deficiencies, or;
  • Inappropriate selection of comparable properties, or;
  • Additional information the appraiser should consider.

The purpose of the reconsideration policy is fair treatment of consumers, combatting racial bias, and promoting valuation accuracy.

The new policies:

  • “Provide clear requirements” for lender disclosure and process for consumers;
  • Standardize communication with appraisers;
  • Establish ROV response expectations;
  • Require lender’s reporting of anti-discrimination law violations by appraisers.

On quick review, I see some unintended consequences, as well as some which have been anticipated.  The anticipation includes the additional burden on lenders as well as appraisers.  There is administrative time involved, as well as legal factors.  Also, the burden on borrowers appears greater than before, including detail and reason.

First, the burden on borrowers.  They start the row.  Borrowers must believe the opinion of value is:

  • Unsupported;
  • Deficient (due to unacceptable appraisal practices); or
  • Reflects prohibited discriminatory practices.

And regardless of the impact on borrowers and appraisers, the FannieMae Selling Guide is almost entirely focused on the responsibilities of the lender.

In our next (part 2) of this series on ROV, we overview how modern data science practical valuation methods can help prevent (or eliminate) the stated problems.  In particular, we will address how EBV© can substantially reduce the issues of accuracy and resulting vulnerability to perceptions of racial bias.