FFIEC Issues Statement on Examination Principles on Value Discrimination, Bias

FFIEC recently issued its Statement on Examination Principles Related to Valuation Discrimination and Bias in Residential Lending (the Statement).  Under Consumer Compliance Examination Principles, the FFIEC stated that examination processes should consider whether the institution’s risk management practices for residential real estate valuations are appropriate to identify and address valuation discrimination.

To promote compliance with statutory and regulatory requirements, FFIEC recommends institutions establish a formal valuation review program utilizing the Interagency Appraisal and Evaluation Guidelines, which are attached to the Statement as Attachment A and Attachment B.  FFIEC further notes that effective review programs enable institutions to identify noncompliance with appraisal regulations or USPAP, inaccuracies, poorly supported valuations, and to address deficiencies resulting from potential valuation discrimination or bias before making a credit decision.