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Acting comptroller discusses bias in appraisals

Federal Issues OCC CFPB Appraisal Racial Bias Disparate Impact Consumer Finance Bank Regulatory

Federal Issues

On June 15, OCC acting Comptroller Michael J. Hsu delivered remarks during the CFPB’s Virtual Home Appraisal Bias Event to raise awareness on the importance of reducing bias in real estate appraisals. The event included discussions with civil rights organizations, housing policy experts, and other federal agencies on how bias can occur in real estate appraisals and automated valuation models. Biased appraisals, Hsu noted, have a large impact on lending and contribute to inequity in housing values. He pointed to data from studies showing that homes in Black neighborhoods are valued at approximately half the price as homes in neighborhoods with few or no Black residents. This difference has created a $156 billion cumulative loss in value across the country for majority-Black neighborhoods, Hsu stated. He further emphasized that “[w]hile appraisers and the appraisal process are not often seen as parts of the banking system, there are clear intersections. Banking regulations require appraisals on certain transactions, and banks rely on third-party appraisals in their underwriting and overall risk management practices. Regulators, including the OCC, expect banks to ensure their vendors treat customers fairly and do not discriminate, and we are seeing banks held accountable for discrimination in appraisals they use.” Hsu added that holding banks accountable, while necessary, is not enough to solve the problem of biased appraisals, and that a solution will require collaboration between all stakeholders, including the attendees participating in the Bureau’s event.

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