Appraisals and ValuationsRegulatory

CFPB is the latest agency to criticize the Appraisal Foundation

Appraisal Foundation, in response, pledged to be "immediately available to discuss the issues"


A collection of federal agencies, including the Consumer Financial Protection Bureau (CFPB), the department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA), took the Appraisal Foundation to task for its weak anti-bias guidance.

The Feb. 3 letter, which the Office of the Comptroller of the Currency, National Credit Union Administration, Federal Deposit Insurance Corporation, U.S. Department of Justice and Federal Reserve Board also signed on to, lambasted the Appraisal Foundation’s guidance for appraisers to avoid bias.

The Appraisal Foundation — a private group that is the de facto appraisal regulator — tells appraisers in its Advisory Opinion 16 not to rely on “unsupported conclusions relating to characteristics such as race, color, religion, national origin, sex, sexual orientation, gender, marital status, familial status, age, receipt of public assistance income, disability, or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value.”

But that guidance leaves room for “supported” conclusions that take those protected class characteristics into account, which the regulatory agencies said will not fly.

The regulatory agencies wrote that the “federal ban on discrimination under the [Fair Housing Act] and [Equal Credit Opportunity Act] is not limited only to “unsupported” conclusions.

“Any discussion of prohibited appraisal bias should call attention to, and maintain consistency with, all applicable nondiscrimination standards provided in federal law,” including the FHAct and ECOA.

The CFPB, along with signing the letter to the Appraisal Foundation, had even stronger words for the private group on its blog.

The CFPB wrote that they have seen the Appraisal Foundation “fail to include clear warnings about the requirements of federal law in the standards it sets, and in the training it provides for appraisers.”

The Appraisal Foundation’s actions, the CFPB continued, “undermine a fair and competitive market free of bias and discrimination.”

In response, Dave Bunton, president of the Appraisal Foundation, said his group is committed to “fostering public trust” in the appraisal profession.

“There is no room for discrimination in the appraisal profession, and we appreciate these government regulators bringing their concerns about our standards to our standards board,” Bunton said in a statement. “We hope they will continue to work with us to ensure our standards make it crystal clear that discrimination in violation of federal law is strictly prohibited.”

The Appraisal Foundation also shared its email response to the interagency letter from regulators. In that response, Michelle Czekalski Bradley, the chair of the foundation’s appraisal standards board, wrote that the body she leads is “deeply concerned about the issues [regulators] have raised.”

“Your assistance in these matters is of the utmost importance,” Bradley wrote. “We can make ourselves immediately available to discuss the issues you have raised and explore changes to the Ethics Rule to make clear the illegality of discrimination against protected classes.

“The ASB is committed to addressing your concerns and working with you to strengthen USPAP for all who rely on the appraisal profession.”

For Meg Burns, now executive vice president at the Housing Policy Council, the interagency letter from regulators is the latest sign that regulatory agencies are thinking about the potential root causes — in this case, an ineffective regulatory regime — that could lead to bias in appraisals.

Burns said the letter is part of a “steady drumbeat” from regulators, signaling that there is a “fundamental systemic flaw” in the appraisal industry’s regulatory framework.

In January, the Appraisal Subcommittee published a report it commissioned from the National Fair Housing Alliance revealing the appraisal industry’s dysfunctional regulatory framework and gaps in fair housing training for appraisers. Much of the report centers on the Appraisal Foundation.

But Burns said that the Appraisal Foundation is not responsible for all the industry’s problems — state regulatory obligations combined with loose federal oversight also poses a challenge.

The FHFA has in the past said that a “uniform regulatory framework does not exist at both the state and federal levels that holds non-appraisers accountable for their work on appraisals.”

For the observant, the public positions regulators take on appraisal issues now may be a good barometer for how the interagency task force on appraisal bias, led by HUD, is approaching the same problems.

“This is an indication that the PAVE task force is trying to delve in and try to discern whether these problems [of bias] stem from personal animosity and intentional bias, or are other things at play,” Burns said.

According to a HUD spokesperson, the PAVE task force has already “meaningfully engaged” with key civil rights, philanthropic, industry and other stakeholders to identify persistent pain points and to identify solutions that bring about transformational change in how residential property is valued.

Those engagements include more than 450 individuals, the spokesperson said, in multiple PAVE listening sessions. The task force is set to deliver its final report to the Biden administration in the coming month.

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