On May 1, the Federal Housing Administration (FHA), and the Federal Housing Finance Agency (FHFA) announced new policies that will allow borrowers to challenge property appraisals they believe to be inaccurate or biased.

The FHA’s new requirement for lenders participating in its single-family mortgage program allows borrowers to request a reconsideration of the appraised value (ROV) if they believe bias was involved.

The new ROV policies at Fannie Mae and Freddie Mac, developed in collaboration with the FHFA, enable borrowers to request an appraiser re-assess the appraised value of a property due to potential appraisal reporting deficiencies or inappropriate selection of comparable properties.

In June 2023, the FHFA and FHA, as part of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), established a working group to develop consistent ROV standards for both FHA-insured mortgages and those purchased or guaranteed by Fannie Mae and Freddie Mac.

Effective as of September 2, 2024, the FHA policy contained in its Single Family Housing Policy Handbook 4000.1 will include an updated ROV section. The new policy requires lenders to disclose to borrowers that they may request a ROV with instructions that explain the process, including information that will be required from a borrower, and the expected processing times. These disclosures must be provided at both the time of mortgage application and at the presentation of the appraisal. For lenders, the new policy includes:

  • A requirement that underwriters be trained to identify appraisal deficiencies, including racial and ethnic bias;
  • Requirements for lenders when receiving, processing, and communicating the status of ROV requests;
  • Standards for lender quality control of appraisal reviews and ROVs; and
  • Standards for appraisers to respond to requests from lenders for a ROV.

The new policies for Fannie Mae and Freddie Mac are similar.