CFPB Suggests Appraisal Standards Include Federal Prohibitions Against Discrimination

The CFPB recently warned that current appraisal standards fail to adequately inform appraisers of nondiscrimination prohibitions that exist under the Fair Housing Act and Equal Credit Opportunity Act. The CFPB recommends that new appraisal standards include a detailed statement of the federal prohibitions against discrimination that exist under these statutes.

The CFPB raised these concerns in response to a 2023 draft of new appraisal standards issued by The Appraisal Foundation—a private, nongovernmental organization charged with setting appraisal standards. According to the CFPB, the draft lacks specific norms and standards to guide appraisers in avoiding discriminatory practices. 

The CFPB specifically raises concerns about language in the draft emphasizing that “[a]n appraiser must not engage in unethical discrimination.” The CFPB believes the term “unethical discrimination” would confuse appraisers by implying that appraisers may engage in “ethical” discrimination, a concept foreign to current law and practice. While the draft includes language about avoiding “bias, prejudice, or stereotype,” the CFPB believes appraisers and regulators need more specific norms to guide practice and enforcement. 

The CFPB issued the recommendations in a joint letter with other federal agencies, including the FDIC, the Federal Reserve Board, the Department of Housing and Urban Development, the Department of Justice, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency. The recommendations come in the wake of studies issued by Freddie Mac and Fannie Mae revealing appraisal disparities for communities and borrowers of color.