The Federal Financial Institutions Examination Council (FFIEC)
released a statement detailing principles intended to help member entities determine
whether a supervised institution’s residential property valuation practices are
adequate for identifying and mitigating discrimination or bias.
Financial examiners routinely assess institutions’ risk
management processes for residential lending activity during consumer
compliance and safety and soundness examinations, the FFIEC noted in the
statement. Consumer compliance examinations focus on adherence to consumer
financial protection laws and regulations. Safety and soundness examinations
focus on an institution’s financial condition and operations.
The statement is not intended to be interpreted as new
guidance for supervised institutions or an increased focus on appraisal
practices at supervised institutions, the FFIEC noted.The principles are
intended to provide transparency into the examination process and support
risk-focused examination work.
The statement highlights applicable laws and regulations
supervised institutions must account for in their valuation practices,
including provisions of the Equal Credit Opportunity Act the Truth in Lending
Act and the Federal Trade Commission Act.
“Real estate valuations are a critical component of
residential real estate lending that support an institution’s credit decisions,”
the FFIEC wrote. “Valuation discrimination or bias can cause consumer harm,
lead to violations of law, and have a detrimental impact on communities. In
addition, valuation discrimination or bias could result in deficient and
unreliable collateral valuations that undermine an institution’s credit
decisions and negatively impact its safety and soundness. Member entities will
consider the attached examination principles in the context of consumer
compliance and safety and soundness examination processes and procedures
relative to assessing supervised institutions’ residential real estate
valuation programs, as applicable.”
The FFIEC member entities are the Consumer Financial
Protection Bureau, the Federal Deposit Insurance Corp., the Federal Reserve,
the National Credit Union Administration, the Office of the Comptroller of the
Currency and the State Liaison Committee.