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Volume XII, Number 182

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CFPB Director Addresses the Final Report of the Interagency Task Force on Property Appraisal and Valuation Equity

The current leadership of the CFPB has not been shy about highlighting the importance of fair lending—and it is becoming increasingly clear that fair lending and equity within the financial services industry is one of the CFPB’s greatest priorities under Director Rohit Chopra. Just last month, the CFPB released a blog post to discuss possible discrimination in the appraisal process. And last week, the CFPB set forth major changes to its supervisory operations with respect to “unfair” discriminatory practices in the financial services industry. Director Chopra and other CFPB personnel have also made numerous recent public statements to express their concerns regarding “algorithmic bias,” “digital redlining,” and “robo discrimination”—signaling the likelihood of enforcement actions related to the use of algorithms and machine learning in the near future.

This trend continued on March 23, 2022, as Director Chopra issued a statement regarding the final report of the Interagency Task Force on Property Appraisal and Valuation Equity (“PAVE”). In his statement, Chopra stated that PAVE’s report “underscores the critical importance of fair and accurate appraisals in residential real estate.” One critical part of ensuring fair and accurate appraisals, in the eyes of the CFPB, is fairness and accuracy in the home valuation process—whether computed by algorithm or conducted in-person. As a result, Chopra explained that discriminatory home valuations “undermine longstanding goals for fair housing and fair lending across our country.”

The CFPB intends to take several actions to further the work of the PAVE task force and the Bureau seeks an end to discriminatory lending practices. First, the CFPB will be taking an active leadership role in the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. Congress has assigned critical responsibilities to the Appraisal Subcommittee, and Chopra explained in his statement the importance of meeting these expectations. The CFPB will be closely scrutinizing the work of The Appraisal Foundation, which wields enormous power to set standards and levy fees on the professional appraiser community.

Additionally, both the CFPB and numerous other federal financial regulators, with full support from the White House, will work to “implement a dormant authority in federal law” to ensure that algorithmic valuations are fair and accurate. Chopra reaffirmed that the CFPB is “committed to addressing potential bias in these automated valuation models.”

Finally, the CFPB intends to take additional steps to promote fair lending through research, supervisory examinations of financial institutions and their service providers, and through law enforcement actions. The continued threat of enforcement actions in the fair lending space—particularly with respect to algorithms and machine learning—comes as no surprise in light of recent guidance from the CFPB, but it is nonetheless noteworthy that Chopra has raised the specter of such actions once again this week.

Takeaways

This new development is one of many that forecasts that the CFPB intends to scrutinize fair lending issues, including discriminatory home valuations. Lenders are cautioned to carefully review their appraisal practices and address potential bias in their automated and manual processes.

© 2022 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 83
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About this Author

Beryl Newchurch Billings Financing Attorney Bradley Arant Boult Cummings Birmingham
Associate

Beryl Billings is an associate in the Banking and Financial Services Practice Group.

Beryl received her J.D. from the University of Tennessee College of Law. While in law school, she was a judicial intern for the Hon. R. David Proctor of the United States District Court for the Northern District of Alabama. She earned a B.S. in Political Science from Spring Hill College, where she was captain of the women’s soccer team and served as president of the Student Athletics Advisory Committee.

205-521-8800
Andrew J. Narod Financial Lawyer Bradley Arant Boult Cummings LLP
Partner

Andrew Narod is an experienced litigator who represents bank and non-bank financial services institutions and other types of businesses in class-action litigation, complex commercial litigation, and other high-profile litigation disputes nationwide. His clients entrust him to navigate some of their most sensitive litigation matters in some of the most difficult venues in the country.

A considerable amount of Andrew’s practice is devoted to representing bank and non-bank financial services entities in class-action litigation and other consumer litigation matters. His clients include...

202-719-8271
Christopher Friedman Nashville Lawyer Bradley Arant Boult Cummings Law Firm
Associate

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated sector. Chris focuses on both small business lenders and alternative business finance products and has helped non-bank small business lenders, banks who make small business loans, commercial credit counselors, lead generators, and others in the industry. He helps clients launch new products,...

615-252-3504
Christy Hancock Financial Services Lawyer Bradley
Partner

Christy Hancock’s practice is dedicated to financial services regulatory compliance and litigation. Her work with mortgage servicing and financial institution clients has given her a broad base of knowledge regarding laws affecting the mortgage servicing business, including bankruptcy and foreclosure best practices, payment application, correspondence requirements, allowable fees, loan modifications, escrow requirements, and property preservation. In recent years, the majority of her practice has focused on advising large financial institutions on bankruptcy-related...

704.338.6005
David T. Long Jr. Associate Bradley Arant Boult Cummings LLP
Associate

David Long counsels clients in complex banking and financial services matters in both state and federal courts across the country. Based upon the specific needs of his clients, he advises individuals and corporate clients on their claims and outlines strategies to achieve the best result for each client.

David also has extensive experience representing and advising multinational corporations to ensure compliance with state and federal regulations.

*Admitted only in Virginia; practicing law in the District of...

202-719-8239
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