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CFPB Warns Mortgage Lenders That Failure to Have Appraisal Reconsideration Policies Can Violate Federal Law

In a recent blog post the CFPB warned mortgage lenders that “[l]enders that fail to have a clear and consistent method to ensure that borrowers can seek a reconsideration of value risk violating federal law.”

In the blog post the CFPB states the following:

“Accurate appraisals are essential to the integrity of mortgage lending. Overvaluation can decrease affordability, make it harder to sell a home or refinance, and increase the risk of foreclosure. Undervaluation can prevent a homeowner from accessing accumulated equity, whether through sale or a home equity loan. Both over- and under-valuation keep individuals, families, and neighborhoods from building wealth through homeownership.”

The CFPB then states that responsible lenders will provide borrowers with “clear, actionable information about how to raise concerns about the accuracy of an appraisal.” The CFPB adds that a “lender’s reconsideration of value process must ensure that all borrowers have an opportunity to explain why they believe that a valuation is inaccurate and the benefit of a reconsideration to determine whether an adjustment is appropriate. While an individual lender’s reconsideration of valuation process may vary, lenders must make sure that their reconsideration of value process is nondiscriminatory and available and accessible to all.”

Clearly, having accurate appraisals that are free from unwarranted bias is important to mortgage lending.  Having clear guidance from regulators on this matter would be most welcome. As we have observed, on significant issues it would be appropriate for the CFPB to engage in notice and comment rulemaking. But yet again, it appears that this CFPB simply intends to issue unofficial directives threatening the industry. 

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