CFPB: Appraisal Foundation Is Hampering Efforts on Discrimination

A inter-agency letter released by the CFPB and signed by an NCUA official has questioned the latest guidance on appraisal ethics rules. Learn why.

David Baumann


Feb 16



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David Baumann

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David Baumann

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Joint letter signed by NCUA official questions latest guidance on appraisal ethics rules.

The foundation that sets standards for the home appraisal industry is hampering efforts to eliminate racial discrimination in the appraisal process, the CFPB charged Tuesday.

The Appraisal Foundation…appears reluctant to act,” bureau officials said, as they released an inter-agency letter detailing objections to updated guidance developed by the foundation. “Its recalcitrance undermines efforts to rid the housing market of bias and discrimination and threatens the market’s fairness and competitiveness.”

Separate from the CFPB statement, the letter itself, which is signed by financial regulators—including JeanMarie Komyathy, deputy director of the NCUA’s Office of Credit Union Resources and Expansion—specifically criticizes the latest draft of appraiser ethics rules for relying on vague terms to define discriminatory behavior by appraisers.

Background and Context

The appraisal industry has a unique regulatory structure.

Each state or territory has a regulatory agency responsible for licensing and certifying appraisers, while the Appraisal Foundation develops generally accepted standards of practice for the industry nationwide.

The foundation’s work is in turn monitored and reviewed by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.

Inside the Letter

In the letter, Komyathy and officials from other financial regulatory agencies said that a previous “Exposure Draft” had provided details about the nondiscrimination standards contained in federal law.

The latest draft, however, drops the explanation of federal law and instead substitutes a distinction between unethical discrimination and unlawful discrimination.

“The term ‘unethical discrimination’ is not well established in either current law or practice,” they wrote, adding that regulators examining compliance with laws and rules would have a difficult time determining whether an appraiser has discriminated.

They noted further that the introduction of the concept of unethical discrimination implies that appraisers are permitted to engage in “ethical” discrimination.

The letter also states that suggesting appraisers avoid “bias, prejudice or stereotype” as general norms would provide individual appraisers with wide discretion.

The NCUA on Appraisal Bias

The Biden Administration and the NCUA have identified appraisal bias as a problem. In June 2021, the administration formed an interagency task force to study the issue, which reported that the problem continues to plague the industry.

NCUA Chairman Todd Harper has said he is working with other agencies on joint rules to establish quality control standards for automated valuations. Additionally, the regulators are developing examination principles that consider how appraisal bias impacts safety and soundness and consumer financial protection.

However, if some of the public comments on the latest version of the ethical guidelines are any indication, certain segments of the appraisal industry dispute whether discrimination is a problem at all.

“People are always going to complain about value, and some use discrimination as the basis for that complaint when there is no evidence, whatsoever, to support the complaint,” one longtime appraiser told the foundation. “I find this entire exercise in suggesting that changes are necessary because appraisers discriminate as utterly disgusting, degrading to the profession, and patently unwarranted.”

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