General

PAVE Task Force Issues Action Plan To Address Appraisal Bias – Finance and Banking – United States – Mondaq News Alerts


United States:

PAVE Task Force Issues Action Plan To Address Appraisal Bias


To print this article, all you need is to be registered or login on Mondaq.com.

A&B Abstract: As part of the Biden
Administration’s stated focus on narrowing the racial gap in
wealth and homeownership, federal agencies launched an Interagency
Task Force on Property Appraisal and Valuation Equity (PAVE), with
the goal of “addressing the persistent misvaluation and
undervaluation of properties experienced by families and
communities of color.” On March 23, 2022, the PAVE Task Force
released its 
Action Plan
, which contains 21 specific actions to be taken by
the 13 member agencies and offices of the Task Force and, in
certain cases, Government-Sponsored Enterprises (GSEs), as well as
general recommendations for the appraisal industry.

Components of the PAVE Action Plan: The Action
Plan delineates 21 specific actions for the appraisal industry,
with the goal of:

  • Increasing accountability and oversight of the appraisal
    industry, primarily by encouraging federal agencies to update their
    appraisal-specific policies and guidelines, expand regulatory
    agency examinations of mortgage lenders, and enhance interagency
    coordination and collaboration.

  • Ensuring that consumers are fully informed regarding the steps
    they can take after receiving a property valuation that is lower
    than expected, including the reconsideration of value process.

  • Preventing algorithmic bias by incorporating a
    “nondiscrimination quality control standard” into
    proposed federal rulemaking for automated valuation models
    (AVMs).

  • Promoting diversity in the appraiser profession by
    “remov[ing] unnecessary educational and experience
    requirements that make it difficult for underrepresented groups to
    access the profession,” as well as by bolstering fair lending
    training of existing appraisers.

  • Developing an aggregated database of federal appraisal data to
    better study, understand, and address appraisal bias,
    “complemented by a working group of subject matter experts
    from stakeholder agencies.”

Scope of the Action Plan: It is worth noting
that, apart from these recommendations and the overall push toward
federal rulemaking regarding appraisals, the PAVE Action Plan does
not itself propose any substantive changes to the existing
appraisal process. Unlike recent suggestions by various advocacy
groups and public policy organizations, the PAVE Action Plan does
not recommend specific revisions to the Uniform Standards of
Professional Appraisal Practice (USPAP), such as identifying the
homeowner or mortgage loan borrower as the intended user of the
appraisal report. Rather, the Action Plan focuses on the existence
of appraisal bias in home purchase appraisals (while acknowledging
that refinances have not been studied as extensively) and suggests
that more work is needed to evaluate alternatives to traditional
appraisals, the use of range-of-value estimates in lieu of point
estimates, and potential modifications to the sales comparison
approach to appraisals. Notably, the Action Plan also acknowledges
the federal government’s historical role in increasing
valuation bias through the implementation of the Home Owners Loan
Corporation.

Federal agency reaction: In response to the
Action Plan, certain member agencies have publicly pledged their
commitment to eradicating appraisal bias. For one, the Consumer
Financial Protection Bureau (CFPB) has 
announced that it will be “closely scrutinizing the
work of The Appraisal Foundation,” “working to implement
a dormant authority in federal law to ensure that algorithmic
valuations are fair and accurate,” and “developing a
proposed rule.” The Federal Housing Finance Agency 
added
 that it will be “working with HUD and other
interagency partners to share information and resources that
strengthen fair lending oversight of the mortgage finance
system.”

Takeaways: The various components of the Action
Plan demonstrate that collaboration between lenders, federal
agencies, advocacy groups, and industry associations will be
necessary to craft a successful approach toward eliminating
potential appraisal bias. For a more detailed discussion of the
lender’s role and limitations in the existing appraisal
process, please see 
Appraisal Values and Lender Liability: Art, Science, or
Gamble?

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Finance and Banking from United States

Cadwalader Corner Q&A: BNY Mellon’s Jason Granet

Cadwalader, Wickersham & Taft LLP

Jason Granet is the Chief Investment Officer at BNY Mellon, responsible for managing the firm’s securities portfolio as well as BNY Mellon’s LIBOR transition efforts.

LIBOR Federal Legislation Takes Big Step Forward

Cadwalader, Wickersham & Taft LLP

Federal legislation addressing the transition of legacy LIBOR contracts took a big step forward when it was included in the Omnibus bill passed late last night by the House of Representatives.

US Enacts LIBOR Transition Law

Herbert Smith Freehills

President Biden on March 15, 2022 signed into law the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”).

Next Post