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Abstract: 

This article is an update of a prior article on the subject of appraisal bias, specifically, appraisal bias that results in undervaluations. It discusses efforts from the beginning of 2024 until the present by federal and state governmental entities and courts to deal with the problem. It explains how these efforts create a conundrum for mortgage lenders faced with complaints of appraiser bias from loan applicants: If they take action with regard to such complaints, they risk violating existing appraiser independence rules (by “directly or indirectly” attempting to influence the third-party appraiser’s “independent judgment”); but if they refuse to take action, they risk violating, or aiding and abetting a violation of, federal and/or state anti-discrimination laws. And it offers some suggestions to lenders on ways they may be able to reduce these risks.

Keywords: Undervaluations; Mortgagee Letter 2024-07; The Appraisal Foundation; Appraiser Qualification Board; Appraiser-Independence Rules

Affiliations:  1: Holland & Knight LLP.