Why would any regulatory body or agency choose October 31 to make a change? We are already predisposed to fear change —  Let’s leave the spooky stuff to haunted houses.  The most recent change in the mortgage industry that will impact your world is the process in which a reconsideration of value. Let’s learn what’s changing.

What is a reconsideration of value, and why is it changing? 

A reconsideration of value is when an appraiser is asked to review supportive material and data and possibly adjust their appraised value. Currently, this process lacks standard requirements, leading to different experiences across loans and lenders. The outcome is varying experiences and results without any sort of standardization.

HUD, FHFA and GSE’s (Fannie Mae and Freddie Mac) collaborated to create a consistent framework to respond to a borrower-initiated request review and revise an opinion of value. Notice the bolded words borrower-initiated — that was one of the key changes to the current process, meaning the lender or agent will no longer spearhead the request. It’s the borrower who must initiate the process now. 

Here are the highlights of what this change in process will look like:

• Shifts the initiation of the reconsideration of value from the lender to the borrower. 

• A new disclosure is provided to the borrower at the time of application outlining:

  • The right to request the reconsideration of value.

  • The process in which they are to request it (what method, ie phone, email, QR codes, etc.)

  • How much and what type of information can be provided to the appraiser for review (ie, max number of comparables, type of data, etc.)

  • How must the lender take that information and provide it to the appraiser.

• The appraiser must now review, analyze and provide a revised appraisal report even if they don’t feel a revision is required or that the value will change. (i.e., they can’t just say sorry no change, they have to put into writing what was provided and why they made the decision to revise or not revise)

The ultimate goal of these new standards is to create a level playing field and repeatable, transparent process that everyone can use. The goal is to eliminate appraisal bias by an appraiser and/or lender and set clear expectations as to what information can and cannot be used to request an appraiser to reconsider the value of the opinion they provided in the appraisal report.

These changes take effect today (October 31st). While having an appraisal come in under the agreed-upon purchase price is nothing new, understanding how to work through this process is important for both buyer and seller agents. Our Key Mortgage loan officers will be working with you to help explain this to your clients, review what data the appraiser can and cannot use and ultimately be a trust advisor that your clients can rely on you to provide them.