CFPB Warns of Serious Issues with Fair Lending Standards for AppraisersThe Consumer Financial Protection Bureau (“CFPB”) released a blog post on February 4 warning of the possibility of discrimination in the appraisal process. The CFPB explained that, although appraisal discrimination based on racial inequalities has been outlawed for more than 50 years, they are still seeing reports of biased appraisers who “base their value judgments on biased, unfounded assumptions about borrowers and the neighborhoods in which they live.”

In particular, the CFPB points out that The Appraisal Foundation (“TAF”) – a private, non-governmental organization that sets professional standards for appraisers – has failed to include appropriate warnings about the requirements of federal law, including the standards and training of appraisers. This deficiency persists despite the regular updating of its policies. The CFPB expressed major concern with TAF’s lack of existing anti-discrimination standards and urged TAF to provide clear guidance about existing legal standards related to appraisal bias.

In an effort to show the seriousness of this issue, the CFPB has committed to carefully reviewing the “Identifying Bias and Barriers, Promoting Equity: An Analysis of the USPAP Standards and Appraiser Qualifications Criteria.” Finally, the CFPB assured that it would continue to collaborate and participate in the Integrity Task Force on Property Appraisal and Valuation Equity.

Takeaways

The CFPB has continued to stress its commitment to strengthening enforcement of fair lending issues. In particular, the Bureau – through public statements, enforcement actions, and investigations – has made it abundantly clear that fair lending risk can manifest in all phases of a lender’s business operation: from marketing and advertising to appraisal, closing to servicing, and even to loss mitigation.

In light of this renewed focus, lenders should reassess their fair lending controls, training, and policies and procedures.

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Photo of Andrew J. Narod Andrew J. Narod

Andrew Narod is an experienced litigator who represents bank and non-bank financial services institutions and other types of businesses in class-action litigation, complex commercial litigation, and other high-profile litigation disputes nationwide. His clients entrust him to navigate some of their most sensitive litigation…

Andrew Narod is an experienced litigator who represents bank and non-bank financial services institutions and other types of businesses in class-action litigation, complex commercial litigation, and other high-profile litigation disputes nationwide. His clients entrust him to navigate some of their most sensitive litigation matters in some of the most difficult venues in the country.

Photo of Beryl Newchurch Billings Beryl Newchurch Billings

Beryl Billings is an associate in the Banking and Financial Services Practice Group.

Beryl received her J.D. from the University of Tennessee College of Law. While in law school, she was a judicial intern for the Hon. R. David Proctor of the United…

Beryl Billings is an associate in the Banking and Financial Services Practice Group.

Beryl received her J.D. from the University of Tennessee College of Law. While in law school, she was a judicial intern for the Hon. R. David Proctor of the United States District Court for the Northern District of Alabama. She earned a B.S. in Political Science from Spring Hill College, where she was captain of the women’s soccer team and served as president of the Student Athletics Advisory Committee.

Photo of Christopher K. Friedman Christopher K. Friedman

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated…

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated sector. Chris focuses on both small business lenders and alternative business finance products and has helped non-bank small business lenders, banks who make small business loans, commercial credit counselors, lead generators, and others in the industry. He helps clients launch new products, conduct due diligence, engage in compliance reviews, evaluate litigation risk, and solve some of the unique legal problems faced by companies who work with small businesses. In that vein, Chris has written extensively about the upcoming rulemaking related to Dodd-Frank 1071, which will require data collection and reporting by companies making loans to certain small businesses.