Appraisal discrimination is illegal under federal law

Home ownership is one of the best paths for building intergenerational wealth. But for some homebuyers and owners, a home’s valuation may be skewed by one’s skin color or the demographics of the surrounding community. A biased home appraisal can worsen racial inequities and distort the housing market. That’s why, for more than 50 years, federal law has forbidden racial, religious, and other discrimination in home appraisals. But we still see reports of appraisers who don’t follow the law and base their value judgments on biased, unfounded assumptions about borrowers and the neighborhoods in which they live.

We have also seen the organization that sets the standards for appraisers, The Appraisal Foundation (TAF), fail to include clear warnings about the requirements of federal law in the standards it sets, and in the training it provides for appraisers. TAF is a private, non-governmental organization, and the only entity with the power to set professional standards for appraisers. However, TAF has yet to highlight these important laws even though it frequently revises its standards. These actions undermine a fair and competitive market free of bias and discrimination.

Today, we joined senior staff from across the federal government to submit a joint letter to TAF emphasizing that federal prohibitions against discrimination under the Fair Housing Act and Equal Credit Opportunity Act extend to appraisals.

The CFPB remains concerned that some appraisers may be unaware of these federal discrimination bans and urges The Appraisal Foundation to provide clear guidance on the existing legal standards as they relate to appraisal bias. The CFPB is deeply troubled by the discriminatory statements the Federal Housing Finance Agency recently identified in some home appraisals, and the appraisal disparities for communities and borrowers of color recently found in both Freddie Mac and Fannie Mae studies.

Moreover, the CFPB is carefully reviewing the findings of the Identifying Bias and Barriers, Promoting Equity: An Analysis of the USPAP Standards and Appraiser Qualifications Criteria report funded by the Federal Financial Institutions Examination Council's Appraisal Subcommittee. Among other things, the independent report raises serious concerns regarding existing appraisal standards and provides recommendations with respect to fairness, equity, objectivity, and diversity in appraisals and the training and credentialing of appraisers.

We are proud to be members of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) formed to create an equitable path toward addressing the persistent misvaluation and undervaluation of properties experienced by families and communities of color. We look forward to engaging with all relevant stakeholders and using all of the CFPB’s tools, in collaboration with our inter-agency partners, to address these important issues.

Read the joint letter , submitted by the Bureau’s Fair Lending Director, together with senior officials from the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration, Department of Housing and Urban Development, Federal Housing Finance Agency, and Department of Justice.