FDIC Expands Appraisal Examinations To Identify, Eliminate Bias

The FDIC is enhancing its examination focus on property appraisals in an effort to eliminate racial bias in the appraisals used in mortgage lending and refinancings.

“Homeownership remains one of the biggest drivers of the racial and ethnic wealth gap,” the FDIC says on a new web page, saying bias is associated with “wide racial and ethnic disparities in homeownership rates and [in] the financial return associated with sustainable homeownership.”

Per American Banker, the FDIC’s move “comes as discriminatory actions in home valuations have taken center stage for regulators in recent years.” Two years ago, for example, the Property Appraisal and Valuation Equity (PAVE) task force was launched, followed by findings and an action plan last year.

The agency signaled its intentions in its recent Consumer Compliance Supervisory Highlights, which also include sections on crypto-related activities, flood insurance compliance, and Home Mortgage Disclosure Act reporting.

On the Agenda: The FDIC says it will enhance its risk-scoping process to evaluate a bank’s compliance management system for appraisals. It is also developing enhanced examiner training to heighten awareness of potential bias in the appraisal process, as well as developing educational materials to inform consumers about appraisal bias and the PAVE Action Plan.