WBK Industry News - Federal Regulatory Developments

VA Enhances Oversight Procedures to Better Identify Discrimination in Appraisals

The recent VA Circular 26-23-05 announced that since December 19, 2022, the VA has utilized an enhanced review process of home loan appraisals associated with its home loan guaranty program.  Consistent with the broader goals of the PAVE Report, the new review process will enable the VA to better identify discriminatory bias in home loan appraisals. 

Under the new process, the VA will review appraisal reports submitted to it under the loan guaranty program.  If the initial review flags the appraisal for potential discriminatory bias, the file will undergo an escalated review process.  If the escalated review confirms the bias, the VA may revoke the appraiser’s VA-approved status and refer the case to the proper authorities for further investigation. 

The VA also reminds VA Fee Panel appraisers of the existing certifications they attest to on the Fannie Mae Form 1004 URAR.  Under those attestations, appraisers must not possess any bias toward any participants in the transaction.  Further, an appraiser must not base any “analysis and/or opinion of market value [in appraisal reports] on the race, color, religion, sex, age, marital status, handicap, familial status, or national origin of [individuals involved with the transaction].”

Additionally, the “VA highly recommends that all VA Fee Panel appraisers and lender-approved staff appraisal reviewers (SARs) take training on appraisal bias, fair housing, and fair lending.”  In circumstances where evidence of potential discriminatory bias appears, the “VA and other enforcement agencies may consider a participant’s unwillingness to take the training as a relevant factor in any inquiry.”

Finally, the VA advises lender-approved SARs to immediately contact the VA if they identify potential discriminatory bias.