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CFPB Targets Appraisal Algorithms

June 16, 2022
The CFPB announced separate initiatives designed to ensure that home valuations used by lenders are fair and accurate, and not discriminatory.

The CFPB recently announced separate initiatives designed to ensure that home valuations used by lenders to determine loan amounts and other terms are fair and accurate, and not discriminatory. The first initiative announced here creates a Small Business Review Panel that will investigate potential quality control standards for automated valuation models (AVMs). The report will inform a future CFPB rulemaking that will be designed to ensure a high level of confidence in the AVM value estimate, protect the AVM from data manipulation, avoid conflicts of interest, and require random sample testing and reviews of AVMs. The CFPB also anticipates that future rulemaking will also specify quality control criteria to ensure compliance with applicable nondiscrimination laws.

The CFPB’s second initiative is the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), which published a report and action plan to promote valuation equity (the Report), available here. The Report notes the results of recent research indicating that appraised property values tend to decrease as the share of historically marginalized populations increases. Appraiser ‘free-form narratives’ in the appraisal reports themselves sometimes make racial and ethnic references that may indicate bias. A widespread pattern of undervaluation in minority communities can have a significant effect on the accumulated wealth of homeowners in those communities. The action plan in the Report includes the potential use of alternatives to traditional appraisals to reduce the impact of appraisal bias, use of value ranges instead of a specific value, modification of the sales comparison approach to yield more accurate and equitable valuations, and public sharing of aggregated historical data to foster the development of unbiased valuation methods.

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In this blog concerning legal and regulatory matters of interest to the mortgage industry, Sandler Law Group (SLG) provides general information and industry observations that are not motivated by or concerned with a particular past occurrence or event, or a specific existing legal problem of which SLG is aware. Nothing published herein is intended to constitute legal advice and the use of the newsletter by a reader shall not give rise to an attorney-client relationship with SLG. SLG expressly disclaims any representation of accuracy or reliability as to the content of this newsletter, as well as any obligation to maintain such content over time or to ensure it is free from errors. Brad Cope is the attorney responsible for the SLG content of this newsletter. The attorneys of SLG are not certified by the Texas Board of Legal Specialization, except as otherwise noted at

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