Statement outlines exam principles for evaluating value discrimination, bias in residential lending

Exam principles intended to assess valuation discrimination and bias in residential lending are outlined in a statement released Monday by federal financial institution regulators.

The Federal Financial Institutions Examination Council (FFIEC) said the principles are aimed at helping its member entities (which include all five federal financial institution regulators) in assessing whether their supervised institutions’ compliance and risk management practices are appropriate to identify and mitigate discrimination or bias in their residential property valuation practices.

More specifically, the FFIEC said, the principles focus on the review and assessment of institutions’ practices for identifying, monitoring, and controlling the risk of valuation discrimination or bias.

The agency noted that financial institution supervisors “routinely assess the risk management processes of institutions’ residential lending activity during both consumer compliance and safety and soundness examinations.” The FFIEC said that the principles are designed for both types of exams.

In separate attachments to the statement, the FFIEC provided principles for both types of exams.

However, the FFIEC stated that the principles are not new guidance to financial institutions. The principles also should not be interpreted as an increased focus on supervised institutions’ appraisal practices, the agency said.

“Instead, the statement of principles offers transparency into the examination process and supports risk-focused examination work,” the FFIEC stated.

FFIEC Issues Statement on Examination Principles Related to Valuation Discrimination and Bias in Residential Lending