Improving Your ROV Process to Address the Issue of Appraisal Bias

We see lenders and the industry taking a multi-pronged approach to addressing the issue of valuation bias. While this diverse approach has been effective, complying with the unique guidelines of various agencies and counterparties can be a challenge. 

Let’s quickly sum up the major agencies and policies.

The Fair Housing Act forbids the practice of discrimination in appraising a dwelling, and the Fair Housing Act applies to all stakeholders in the consumer lending space. Government agencies including HUD, VA, USDA, state appraiser boards, the government sponsored enterprises of Fannie Mae, and regulatory agencies of OCC, the Federal Reserve the Consumer Financing Protection Board and the Federal Deposit Insurance Corporation have all issued policies and guidance to address bias in appraisals and valuations. Additionally, lenders have to navigate state and local laws as well. The PAVE task force commissioned through The Office of the President of the United States Executive Order, issued an Action Plan in 2022 to create a path for change.  

To help lenders navigate this, and effectively root out valuation bias, Reggora provides lenders with practical tools to address bias. This includes:

1. Communicating specific requirements around bias on a per order basis to their appraisal partners, educating appraisers and appraisal management companies on your specific needs 
2. Isolating potential problematic language contained in appraisal reports
3. Making it simple to educate borrowers on their options when they feel they’ve experienced bias, and request a Reconsideration of Value (ROV)

We continue to get questions around #3, so let’s take some time to expand on what we offer, how it helps, and review how one lender uses us to run their process.

How Reggora Strengthens Your Reconsideration of Value Notification Process

We’ve worked with lenders to make this process as simple and effective for both the lender and the borrower on any given appraisal. Of course, each lender is unique, so we provide a variety of options which you can pick and choose from. We’ll start with the most basic and expand from there.

1. ‍Customize the text sent in the delivery email of the appraisal to the borrower. This makes it easy to let your borrowers know what their options are the moment they get their appraisal. Appraisals are automatically delivered to borrowers by Reggora, and this allows you to customize the message borrowers get with their appraisal. Most lenders who use this simply list out the options borrowers have if they feel they’ve experienced bias.
2. Automatically add a PDF document to the top of every appraisal. This takes the previous feature a step further by making sure your bias and ROV process details are the first thing a borrower sees when they open their appraisal documents. This document can serve as a concise guide, highlighting the borrower's rights and the lenders reconsideration of value process. By placing this information front and center, Reggora ensures that borrowers have immediate access to essential details, fostering transparency and trust from the very beginning.
3. Instantly see your data on ROVs. Reggora's reporting and analytics solution allows you to track the number of reconsiderations of value and the reasons behind them. This not only helps you make informed decisions about your operations, but also allows for easy reporting, creating a more transparent and accountable appraisal process for anyone who needs visibility into it.
4. Learn best practices from other lenders like you. Reggora's commitment to customer success extends beyond just providing software. Our dedicated team is ready to assist mortgage lenders by sharing templates and best practices. Leveraging our experience with various solutions, we can offer tailored guidance on what works well, what doesn’t, and the trade-offs between different approaches.

How a Mid Size Regional Bank Runs Their Reconsideration of Value Process

Now let’s take a more detailed look at how a lender utilizes our functionality to run a smooth, compliant process. This mid size depository was preparing for a routine regulatory audit with the FDIC and its compliance team reached out to Reggora to help strengthen their existing reconsideration of value process.

To start, they hired a legal consultant to host mandatory training for the bank’s internal team. To be specific, it’s mandatory for LO’s, processors, underwriters and file starters. This training is now done annually to ensure the team is up to date. 

They also sent the training out to their panel of appraisers. Some took part, and some had actually already been through a bias training with this particular consultant.

Next, they put together a one page disclosure that is given to the borrower as part of their loan application and again, using our ability to append a PDF to the borrower’s appraisal, when the borrower receives their appraisal. This clearly explains the ROV process to the borrower so it’s easy to follow, and the borrower knows what to expect back from the bank. This includes how quickly the borrower can expect a response (in this case three business days), what the bank needs from the borrower in order to conduct the ROV (once they receive the information the bank then gives themselves 10 days to respond), what the bank’s review process entails on the appraisal, and more. For example, the bank tells the borrower that they first work with the original appraiser to correct any issues. If the bank feels they’re not able to resolve the issue with that appraiser, the bank will have another appraiser value the property at no expense to the borrower.

That process also includes an email address dedicated to ROVs. So, borrowers have a dedicated point of contact that’s prepared to handle these requests. 

Improve Your ROV Process

With multiple regulatory bodies, multiple policies, and often multiple interpretations of the requirements, we appreciate the complexity a lender faces in addressing bias. If you need more flexible technology solutions to improve your process, or you just want a thought partner, don’t hesitate to reach out. We’re happy to help.