March 27, 2023

Volume XIII, Number 86


March 24, 2023

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CFPB Hosts Hearing on Appraisal Bias

In light of growing concerns, the Federal Financial Institutions Examination Council (FFIEC) Appraisal Subcommittee (ASC) held its first hearing on appraisal bias on January 24, 2023, at the Consumer Financial Protection Bureau (CFPB) headquarters. The FFIEC, a federal interagency body comprised of the Board of Governs of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and the CFPB, is tasked with the role of promoting uniformity in the supervision of financial institutions. In the same regard, the ASC ensures uniformity within the real estate appraisal regulatory framework for federal transactions.

The hearing offered an opportunity for key stakeholders to assess concerns surrounding appraisal bias and navigate solutions for the future. To aid in the process, a panel of witnesses representing the various facets of the home appraisal process included Paul Austin and Tenisha Tate-Austin, homeowners from Marin, California, who claimed to have personally experienced bias in the valuation of their home; Dr. Michael Fratantoni, senior vice president of Research and Technology and chief economist for the Mortgage Bankers Association; Craig Steinley, president of the Appraisal Institute and Certified Appraiser; and Dr. Junia Howell, visiting assistant professor of Sociology at the University of Illinois Chicago.

Prior to the panel discussion, ASC Executive Director Jim Park detailed the ASC’s role in the appraisal regulatory system. Specifically, he noted that the ASC is the federal agency tasked with oversight of the appraisal regulatory system and has authority over state programs. Park also noted ASC’s recent initiatives to address appraisal bias, including involvement in the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) Action Plan. Announced in March 2022, the PAVE Action Plan consists of a detailed plan aimed to eliminate bias and advance equity in home appraisals. The action plan consists of measures such as building a diverse appraiser workforce and empowering consumers to take action to address the appraisal bias issue.  

A central theme throughout the hearing was the immense subjectivity offered to appraisers in the valuation process. As a solution, panelists suggested a move to more data-based objective metrics, such as the use of automated valuation models (AVMs). However, CFPB Director Rohit Chopra emphasized that bias is not simply removed by automating the process. Director Chopra also expressed concern with the role of the Appraisal Foundation and its authority over the appraisal industry, perhaps alluding to increased oversight by federal agencies in the future.  The hearing also addressed the Federal Housing Administration’s (FHA) recently announced a proposed policy for reconsideration of valuation requests, the importance of public access to appraisal data on government-backed loans to aid in research and for efforts to eliminate racial bias, barriers of entry into the appraiser workforce, and the impact of appraisal bias on the mortgage market. As it relates to the mortgage market, the hearing made clear the importance of accurate valuation of collateral, while simultaneously understanding the need to eliminate appraisal bias from the process.

© 2023 Bradley Arant Boult Cummings LLPNational Law Review, Volume XIII, Number 37

About this Author

James W. Wright Jr. Attorney Banking Financial Services Bradley Arant Boult Cummings Birmingham

Jay Wright is a partner in the firm’s Banking and Financial Services and Litigation practice groups. Jay has earned his Accredited Mortgage Professional (AMP) designation through the Mortgage Bankers Association (MBA), and is one of a small number of lawyers who have achieved this status.

Jay’s practice focuses on financial services litigation and regulation, and he is actively involved in lawsuits and disputes across the country representing companies involved in a wide array of state and federal law claims. His representation includes general...

Britney M. Crawford Financial Attorney Birmingham Bradley

Britney Crawford is an associate in the firm’s Banking and Financial Services Practice Group. Her practice is focused on regulatory and compliance matters related to financial and mortgage institutions and lenders. Britney also has experience assisting clients in responding to and resolving government investigations by federal regulators.

Prior to joining the firm, Britney represented broker-dealers and registered representatives in securities arbitrations in claims involving allegations of sales practice violations, unsuitability,...