Appraisal Bias, Automated Valuation Models (AVMs), and Reconsiderations of Value (ROVs): How Should We Handle This?
Even in this age of dynamic regulatory change and uncertainty, it is important to remember that property valuations not be influenced by bias on the part of the appraiser (or algorithm in the case of an automated model). This reality is no less important to regulators even with a seeming pullback in regulatory enforcement. The risk continues to be real.
There has been much written about bias in the property valuation industry, and it has become clear that mortgage lenders must take steps to ensure the appraisals (and AVMs) they use in lending decisions are not subject to bias.
The regulatory agencies, as well as HUD, FHFA, and Fannie Mae and Freddie Mac, issued their Final Interagency Guidance on ROVs, which creates clear expectations on mortgage lenders to formulate and execute programs to provide customers with access to ROV requests, as well as how to handle them once received. As well, final regulations were issued regarding AVMs to ensure they are not subject to conflict or bias.
There are a number of disclosure requirements that go along with this as well, as a means to notify customers that they have the ability contest an appraisal if they wish. Then, what do you do if the appraisal is in fact fatally flawed? Should (or can) you order a new one? What about charging the borrower a fee for that second one? Doesn’t that fly in the face of appraiser independence?
In this webinar we’ll address all these important questions, as well as provide practical advice on how to incorporate this critical new requirement into your lending program.
