Agencies emphasize illegality of appraisal discrimination
On February 4, CFPB Fair Lending Director Patrice Ficklin, along with senior staff from the Federal Reserve Board, OCC, FDIC, NCUA, HUD, FHFA, and DOJ, sent a joint letter to The Appraisal Foundation (TAF) emphasizing that discrimination prohibitions under the Fair Housing Act (FHA) and ECOA extend to appraisals. The joint letter, sent in response to a request for comments on proposed changes to the 2023 Appraisal Standards Board Ethics Rule (Ethics Rule) and Advisory Opinion 16, noted that while provisions prohibit an appraiser from relying on “unsupported conclusions relating to characteristics such as race, color, religion, national origin, sex, sexual orientation, gender, marital status, familial status, age, receipt of public assistance income, disability, or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value,’” the “provisions do not prohibit an appraiser from relying on ‘supported conclusions’ based on such characteristics and, therefore, suggest that such reliance may be permissible.” The letter noted that the federal ban on discrimination under the FHA and ECOA is not limited only to “unsupported” conclusions, and any discussions related to potential appraisal bias should be consistent with all applicable nondiscrimination laws. The joint letter encouraged TAF to present the nondiscrimination requirements as “an essential part of any guidance provided in the Ethics Rule or Advisory Opinion 16 to ensure compliance with fair housing and fair lending laws.”
In a blog post, Ficklin noted that despite the fact that federal law prohibits racial, religious, and other discrimination in home appraisals, there are still reports of appraisers making “value judgments on biased, unfounded assumptions about borrowers and the neighborhoods in which they live.” Additionally, Ficklin noted that the Bureau is carefully reviewing findings presented in a report funded by the Federal Financial Institutions Examination Council's Appraisal Subcommittee, which raised serious concerns related to existing appraisal standards and provided recommendations with respect to fairness, equity, objectivity, and diversity in appraisals and the training and credentialing of appraisers.