On February 14, Patrice Ficklin, the Fair Lending Director for the Consumer Financial Protection Bureau (CFPB), together with senior officials from the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration, U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, and U.S. Department of Justice sent a joint letter to The Appraisal Foundation (TAF), the private organization that sets appraisal standards, urging it to revise the fourth draft of its 2023 Edition of the Uniform Standards of Professional Appraisal Practice (USPAP or Uniform Standards) to include a detailed statement of federal prohibitions against discrimination. Specifically, the agencies requested that TAF include in its Uniform Standards the nondiscrimination standards under the Fair Housing Act and the Equal Credit Opportunity Act rather than the current summary of the distinctions between “unethical discrimination” and “unlawful discrimination.” This is the second letter that federal officials have sent TAF raising concerns with the Uniform Standards.
In the blog accompanying release of the joint letter, the CFPB explained the impetus for the letter. “For more than 50 years, federal law has forbidden racial, religious, and other discrimination in home appraisals. It is imperative that TAF provide appraisers clear, detailed, and unambiguous warnings about the requirements of federal law covering appraisal standards. [TAF], however, appears reluctant to act. Its recalcitrance undermines efforts to rid the housing market of bias and discrimination and threatens the market’s fairness and competitiveness.”
As discussed here, combatting appraisal bias continues to be a top priority for the CFPB and other federal regulators. The agencies have been actively working with the White House Property Appraisal and Valuation Equity (PAVE) Interagency Task Force and the Federal Financial Institutions Examination Council’s Appraisal Subcommittee to address the issue of appraisal bias, and the CFPB is engaged in a project to develop regulations for automated valuation models to prevent algorithmic bias in home valuations. The CFPB has also warned that lenders that fail to ensure borrowers can seek a reconsideration of their home valuation risk violating federal law. This joint agency letter and accompanying blog post only serve to underline the seriousness with which the regulators take the issue of appraisal bias.