United States: CFPB warns of serious problems with fair lending standards for appraisers
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The Consumer Financial Protection Bureau (“CFPB”) has issued a blog post on February 4, warning of the possibility of discrimination in the evaluation process. The CFPB explained that although valuation discrimination based on racial inequality has been prohibited for more than 50 years, they still see reports from biased evaluators who “base their value judgments on biased and unsubstantiated assumptions. borrowers and the neighborhoods they live in.”
In particular, the CFPB points out that The Appraisal Foundation (“TAF”) – a private, nongovernmental organization that sets professional standards for appraisers – failed to include appropriate disclaimers regarding the requirements of federal law, including standards and training of evaluators. This gap persists despite the regular updating of its policies. The CFPB expressed serious concern about the lack of existing anti-discrimination standards at the TAF and urged the TAF to provide clear guidance on existing legal standards relating to valuation bias.
In order to show the seriousness of this problem, the CFPB is committed to carefully reviewing the document “Identifying Bias and Barriers, Promoting Fairness: An Analysis of USPAP Standards and Evaluator Qualification Criteria”. Finally, the CFPB assured that it will continue to collaborate and participate in the Assessment Integrity and Assessment Fairness Working Group.
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The CFPB continued to emphasize its commitment to strengthening enforcement of fair lending issues. In particular, the Bureau – through public statements, enforcement actions and investigations – has made it clear that fair lending risk can manifest itself in all phases of a lender’s business operations: from marketing and from advertising to valuation, from closing to service, and even loss mitigation.
In light of this renewed interest, lenders should reassess their fair lending controls, training, policies and procedures.
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