NCUA Chairman: Regulators Working On Appraisal Bias Rules

Agency head testifies at House hearing as Republican committee members lay out concerns over financial regulators’ authority on climate issues.

Federal credit union and banking regulators are working on two proposed rules aimed at eliminating racial bias in the home appraisal industry, NCUA Chairman Todd Harper told the House Financial Services Committee Wednesday.

The first rule would deal with governing bias in the automated valuation process, he said, while the second would focus on the process by which a prospective homebuyer may ask for reconsideration of an appraisal.

Harper, who currently chairs the Federal Financial Institutions Examination Council, previously said the council’s staff was working on the issue.

He also added that appraisers should receive training on fair lending issues.

During the hearing, Harper referred to a study conducted by the National Community Reinvestment Coalition that found serious racial bias in the appraisal industry in Baltimore.

Republicans Poised for Control of Committee

Harper faced little direct questioning during the hearing, which featured all of the prudential banking regulators. Republicans, who are likely to take over control of the committee next year, spent much of the session criticizing the Biden Administration’s regulatory philosophy.

“When you can’t legislate, you regulate,” said Rep. Patrick McHenry of North Carolina, the ranking Republican on the committee. “When you can’t regulate, you pursue enforcement actions.”

With Republicans all but certain to control the House majority, McHenry is likely to chair the committee next year.

Concerns Over Climate Regulation

GOP members also harshly criticized the banking regulators for the attention they are paying to the risks that climate change may have on financial institutions.

“Oklahoma is a commodity-driven economy,” said Rep. Frank Lucas, R-Ok. He promised that the committee will be focusing on that issue when Republicans take over.

Several of the regulators responded that they will not tell credit unions and banks that they cannot lend to particular businesses. The NCUA’s 2022 Performance Plan does, however, call for the agency to issue a request for information from credit unions and the public on the issue. That request for information is not on the NCUA board’s agenda for its monthly meeting on Thursday, so presumably, it will be considered in December.

Rep. Andy Barr, R-Ky., questioned whether any of the banking regulatory agencies had staff members with expertise in climate risks.

Rep. Blaine Luetkemeyer, R-Mo., whose family used to own a community bank, noted that an Obama Administration program, known as “Operation Choke Point,” attempted to restrict lending to politically sensitive businesses. That program no longer is in existence. “We’re going to watch you carefully,” he told the regulators.

And Rep. Alex Mooney, R-W.V., said he was not sure that he believed the regulators who said they will not closely regulate climate risk. “Coal is critical to my economy,” he told the regulators. “We West Virginians remain skeptical.”