Liability for Appraiser Bias and Appraiser Independence Rules: A Conundrum for Home Mortgage Lenders

Financial Services attorney Bob Jaworski authored an article for The Review of Banking & Financial Systems analyzing the issue of appraiser bias that results in undervalued home appraisals. Mr. Jaworski's article begins by providing background on the issue, defining "appraisal bias" and explaining the consequences of undervaluations for loan applicants and financial institutions. He then reviews efforts from the federal government and state regulators to combat the problem, including actions from the Federal Housing Administration (FHA) and U.S. Department of Housing and Urban Development (HUD), Illinois' Community Reinvestment Act (CRA) rules and New Jersey's Lender Bulletin 2024-15, as well as private litigation involving mortgage lenders and appraisers. He concludes his piece with a discussion on how the Trump Administration has approached this area, such as HUD's rescission of three Mortgagee Letters. He also highlights best practices for lenders: maintaining written policies and procedures with regard to complaints of appraiser discrimination, documenting receipt and resolution of complaints, and overall exercising common sense when assessing valuations.

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