FHFA will host second public forum on appraisal bias

The Federal Housing Finance Agency (FHFA) will host the Appraisal Subcommittee (ASC) in May for its second public hearing on appraisal bias.

The housing regulator, led by Sandra Thompson, said it will look at the current regulatory framework for the industry, with a particular eye toward standards, qualification criteria, barriers to entry into the profession and appraisal practices.

“Based on public comments received and information gathered during the first hearing, it was clear that additional information on the appraisal regulatory system as a whole was needed to provide necessary context to any discussion of bias,” ASC Executive Director Jim Park said in a prepared statement. “This is an opportunity to expand our understanding of the issues facing today’s appraisal industry and to get a clearer picture of how current practices and the appraisal regulatory system impact lending in this country.”

At the first ASC hearing in January, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra took aim at the dysfunctional regulatory system that governs the appraisal industry.

“I think not many people understand how this byzantine system works,” Chopra said. He called for the system to be dismantled and created from scratch.

A report commissioned by the Appraisal Subcommittee in 2021 and led by the National Fair Housing Alliance found that the industry has been allowed to regulate itself, a rarity in the heavily regulated housing and mortgage industries.

“Until recently … the appraisal industry seems to have escaped the type of regulation and scrutiny faced by other participants in the mortgage market,” the authors wrote. “Our analysis finds that the appraisal industry has operated in a relatively closed, self-regulated framework.”

That report criticized the Appraisal Foundation, an industry-run nonprofit that sets both standards and criteria for appraisers. The foundation’s boards are stacked with representatives from appraisers, lenders, banking institutions and industry trade groups, but there are no consumers or fair housing advocates on the board.

The ASC is responsible for monitoring and reviewing the nonprofit, but it has no enforcement authority.

Government reports have also questioned the high barriers to entry to the profession, most notably that it requires college degrees and up to 3,000 supervised experience hours.

The White House recently marked the one-year anniversary since the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) released its action plan to curb instances of bias in the housing appraisal process.

And Fannie Mae recently said that appraisals were no longer the default standard, which could radically change how property valuations are determined in the U.S. housing market in the future.

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