CFPB and Other Federal Agencies Address Discrimination in Assessment | Ballard Spahr LLP


CFPB’s Director of Fair Lending, in conjunction with senior officials from other federal agencies, sent a letter to The Appraisal Foundation (TAF) commenting on proposed changes to the Uniform Standards of Appraisal Professional Practice (USPAP). (TAF is a private, nongovernmental organization that sets professional standards for appraisers.) Other agencies joining the letter include the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration, Department of Housing and Urban Development, Federal Housing Finance Agency and Department of Justice.

In a blog post about the letter, the CFPB says it has found that the TAF “fails to include clear warnings about federal law requirements in the standards it sets and in the training it provides to evaluators.” According to the CFPB, “the TAF has yet to highlight these important laws even though it frequently revises its standards.” The CFPB expresses concern “that some evaluators are unaware of these federal prohibitions of discrimination” and urges the TAF “to provide clear guidance on existing legal standards with respect to evaluation bias.” The CFPB also says it is “deeply troubled by discriminatory statements that the Federal Housing Finance Agency has recently identified in some home appraisals, and appraisal disparities for communities and borrowers of color recently found in studies of Freddie Mac and Fannie Mae”.

In the letter, the agencies urge TAF to provide a “comprehensive overview” of the discrimination prohibitions in the Fair Housing Act and the Equal Credit Opportunity Act as they relate to rating bias. . The agencies say that while the Ethics Rule and Appraisal Standards Board Advisory Opinion 16 state that an appraiser cannot rely on “unsubstantiated conclusions relating to [protected characteristics]’, these elements ‘do not preclude an assessor from relying on ‘substantiated conclusions’ based on these characteristics ‘and, therefore, suggest that such reliance may be permitted’. As an example of how prohibited discrimination can occur in the context of appraisal, the agencies state that “an appraiser’s use of or reliance on conclusions based on protected characteristics, which the whether or not the evaluator thinks the conclusions are justifiable constitutes unlawful discrimination”.

The CFPB notes in its blog post that it reviews the findings of a report funded by the Federal Financial Institutions Examination Board’s Assessment Subcommittee titled “Identifying Bias and Barriers, Promoting Fairness: an analysis of USPAP standards and evaluator qualification criteria”. According to the CFPB, the report “raises serious concerns about existing appraisal standards and provides recommendations regarding the fairness, equity, objectivity and diversity of appraisals as well as the training and certification of appraisers”.

The CFPB also notes its continued participation in the Interagency Task Force on Real Estate Valuation and Equity, which was created by the Biden administration.

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