The Mortgage Bankers Association (MBA) believes lenders should not be held responsible for the actions of independent appraisers.
The association made that clear in an amicus brief filed late Friday in response to a Statement of Interest filed March 13 by the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) examining the liability standard that would apply to lenders for the acts of independent, third-party appraisers.
The CFPB and DOJ Statement of Interest and the MBA’s brief were filed in U.S. District Court for the District of Maryland in the case of Nathan Connolly and Shani Mott v. Shane Lanham, 20/20 Valuations, LLC, and loanDepot.com, LLC.
The complaint in the case alleges that an appraiser and a lender violated the Federal Housing Act (FHA) and Equal Credit Opportunity Act (ECOA) by lowering the valuation of a home because the owners were Black, and by denying a mortgage refinancing application based on that appraisal. The defendants have moved to dismiss the complaint.
The DOJ said the Statement of Interest explains that it is illegal for a lender to rely on an appraisal that it knows or should know to be discriminatory, and provides guidance on pleading and proof standards under the FHA and ECOA.
MBA President and CEO Bob Broeksmit, CMB, said appraisal bias is unacceptable, and that his organization “is working with policymakers and industry stakeholders to develop solutions that ensure borrowers receive fair, equitable, accurate appraisals. Following the Great Financial Crisis, Congress and regulators established rules to ensure appraiser independence by limiting the role of mortgage lenders in the appraisal process.”
He continued, “By federal design, lenders have extremely limited control over the actions of appraisers and are subject to other legal responsibilities that prevent them from influencing or participating in the appraisal process.”
Broeksmit said the MBA is concerned, however, that the arguments made by the CFPB and DOJ in the Statement of Interest would hold lenders liable for the actions of an appraiser who is neither an employee nor an agent of the lender.
In its brief, the MBA asks the court to recognize that a lender is not liable for the alleged actions of an independent appraiser who was not chosen by the lender.
“Our members have a substantial interest in this case because there is no existing legal authority to hold a lender liable for the acts of a third-party appraiser,” Broeksmit said. “In fact, the liability that does exist is for improperly interfering with an appraiser’s independent judgment. We disagree with the CFPB’s and DOJ’s statement that tries to extend liability to lenders for bias arising from the use of independent appraisers.”
MBA’s amicus brief does not address the specific allegations in the lawsuit, nor does it take a position regarding the conduct of the appraiser. Instead, the brief outlines MBA’s disagreement with DOJ’s and CFPB’s Statement of Interest, which it says attempts to impose requirements on lenders beyond the existing federal legal framework for their interactions with third-party appraisers.
Both consumers and lenders are harmed by inaccurate and biased appraisals, the MBA said in a news release about the brief.
“MBA and its members have made improving the valuation process and reducing the risk of appraisal bias a top policy issue, and have prioritized it both as part of its CONVERGENCE initiative to promote more sustainable, affordable housing for minority and low- to moderate-income families and communities, and as part of the Building Generational Wealth Through Homeownership campaign,” the organization said.
MBA said it has also submitted recent comments to government agencies, including the U.S. Department of Housing and Urban Development, on feedback related to appraisals in response to the Biden Administration’s Interagency Task Force on Property Appraisal and Valuation Equity (PAVE).
