The Consumer Financial Protection Bureau (“CFPB”) released a blog post on February 4 warning of the possibility of discrimination in the appraisal process. The CFPB explained that, although appraisal discrimination based on racial inequalities has been outlawed for more than 50 years, they are still seeing reports of biased appraisers who “base their value judgments on biased, unfounded assumptions about borrowers and the neighborhoods in which they live.”

In particular, the CFPB points out that The Appraisal Foundation (“TAF”) – a private, non-governmental organization that sets professional standards for appraisers – has failed to include appropriate warnings about the requirements of federal law, including the standards and training of appraisers. This deficiency persists despite the regular updating of its policies. The CFPB expressed major concern with TAF’s lack of existing anti-discrimination standards and urged TAF to provide clear guidance about existing legal standards related to appraisal bias.

In an effort to show the seriousness of this issue, the CFPB has committed to carefully reviewing the “Identifying Bias and Barriers, Promoting Equity: An Analysis of the USPAP Standards and Appraiser Qualifications Criteria.” Finally, the CFPB assured that it would continue to collaborate and participate in the Integrity Task Force on Property Appraisal and Valuation Equity.

Takeaways

The CFPB has continued to stress its commitment to strengthening enforcement of fair lending issues. In particular, the Bureau – through public statements, enforcement actions, and investigations – has made it abundantly clear that fair lending risk can manifest in all phases of a lender’s business operation: from marketing and advertising to appraisal, closing to servicing, and even to loss mitigation.

In light of this renewed focus, lenders should reassess their fair lending controls, training, and policies and procedures.