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.