Chopra underscores bureau’s focus on work of the Appraisal Subcommittee, foundation as AVMs undergo scrutiny

The federal agency charged with financial consumer protection is training its focus on the work of the federal panel that oversees real estate appraisal practices and the body that sets professional appraiser standards, the agency’s director said Wednesday.

The Consumer Financial Protection Bureau (CFPB) last month published a set of “options” the agency is reviewing with a small business review panel on a potential, eventual rulemaking on the use of automated valuation models (AVMs), which the bureau has flagged for potential bias. On Wednesday, CFPB Director Rohit Chopra pointed to a report issued by the Interagency Task Force on Propety Appraisal and Valuation Equity (PAVE) in issuing a statement underscoring his agency’s attention to the matter of fairness in real estate appraisals.

“Today’s report underscores the critical importance of fair and accurate appraisals in residential real estate,” Chopra said in his statement. “Discriminatory home valuations, whether computed by an algorithm or conducted in-person, undermine longstanding goals for fair housing and fair lending across our country.”

Chopra said the CFPB plans to take an “active leadership role” in the Federal Financial Institutions Examination Council (FFIEC) Appraisal Subcommittee, a panel on which Chopra serves along with other federal and state financial institution regulators. “In particular, we will be closely scrutinizing the work of The Appraisal Foundation, which wields enormous power to set standards and levy fees on the professional appraiser community,” Chopra said.

[In February, representatives from eight federal agencies and departments, including federal bank and credit union regulators, the CFPB, housing finance agencies, and the Department of Justice (DOJ), told The Appraisal Foundation that its ethics rule and Advisory Opinion 16 for the 2023 edition of the Uniform Standards of Professional Appraisal Practice (USPAP) are inadequate in addressing what constitutes federally prohibited discrimination by real estate appraisers.]

In Wednesday’s statement, Chopra said that the bureau and other federal financial regulators will be working to implement a “dormant authority” in federal law to ensure that algorithmic valuations are fair and accurate. “We have already begun to solicit input from small businesses in order to develop a proposed rule,” he said, referring back to the bureau’s February issuance, “and we are committed to addressing potential bias in these automated valuation models.”

Chopra said the bureau will also take steps through its research, supervisory examinations of financial institutions and their service providers, and law enforcement actions. “We welcome input and engagement from the public, the professional appraiser community, and across the residential real estate industry,” he said.

CFPB Director Chopra Statement on Appraisal Task Force Report

Task force report: Action Plan to Advance Property Appraisal and Valuation Equity

RR: Regulatory, enforcement agencies note flaw in Appraisal Foundation’s description of banned discrimination (Feb. 10, 2022)