The present management of the CFPB has not been shy about highlighting the significance of truthful lending—and it’s changing into more and more clear that truthful lending and fairness inside the monetary companies trade is one of the CFPB’s best priorities beneath Director Rohit Chopra. Simply final month, the CFPB launched a weblog submit to debate doable discrimination in the appraisal course of. And final week, the CFPB set forth major changes to its supervisory operations with respect to “unfair” discriminatory practices in the monetary companies trade. Director Chopra and different CFPB personnel have additionally made quite a few current public statements to specific their considerations concerning “algorithmic bias,” “digital redlining,” and “robo discrimination”—signaling the chance of enforcement actions associated to the use of algorithms and machine studying in the close to future.
This pattern continued on March 23, 2022, as Director Chopra issued a statement concerning the last report of the Interagency Task Force on Property Appraisal and Valuation Equity (“PAVE”). In his assertion, Chopra said that PAVE’s report “underscores the critical importance of fair and accurate appraisals in residential real estate.” One vital half of guaranteeing truthful and correct value determinations, in the eyes of the CFPB, is equity and accuracy in the residence valuation course of—whether or not computed by algorithm or carried out in-person. In consequence, Chopra defined that discriminatory residence valuations “undermine longstanding goals for fair housing and fair lending across our country.”
The CFPB intends to take a number of actions to additional the work of the PAVE activity drive and the Bureau seeks an finish to discriminatory lending practices. First, the CFPB might be taking an energetic management position in the Appraisal Subcommittee of the Federal Monetary Establishments Examination Council. Congress has assigned vital tasks to the Appraisal Subcommittee, and Chopra defined in his assertion the significance of assembly these expectations. The CFPB might be intently scrutinizing the work of The Appraisal Basis, which wields huge energy to set requirements and levy charges on the skilled appraiser group.
Moreover, each the CFPB and quite a few different federal monetary regulators, with full support from the White House, will work to “implement a dormant authority in federal law” to make sure that algorithmic valuations are truthful and correct. Chopra reaffirmed that the CFPB is “committed to addressing potential bias in these automated valuation models.”
Lastly, the CFPB intends to take extra steps to advertise truthful lending by way of analysis, supervisory examinations of monetary establishments and their service suppliers, and by way of legislation enforcement actions. The continued menace of enforcement actions in the truthful lending area—notably with respect to algorithms and machine studying—comes as no shock in gentle of current steering from the CFPB, however it’s nonetheless noteworthy that Chopra has raised the specter of such actions as soon as once more this week.
This new growth is one of many who forecasts that the CFPB intends to scrutinize truthful lending points, together with discriminatory residence valuations. Lenders are cautioned to fastidiously assessment their appraisal practices and deal with potential bias of their automated and handbook processes.