February 12, 2024, the Federal Financial Institutions Examination Council (FFIEC) issued a Statement on Examination Principles Related to Valuation Discrimination and Bias in Residential Lending. The statement was issued to communicate principles for the examination of the appraisal and evaluation practices of supervised institutions. The Statement outlines risks from valuation discrimination and bias, which can lead to increased safety and soundness risks, as well as consumer harm. Outlined below are highlights from the Statement:

Risks from Valuation Discrimination and Bias

Failure of internal controls to identify, monitor, and control valuation discrimination or bias could negatively affect credit decisions, potentially exposing an institution to legal and compliance risks or affecting an institution’s financial condition and operations. Material findings and concerns related to noncompliance with laws and regulations generally negatively affect the supervisory assessment of an institution’s management in a safety and soundness examination.

Consumer Compliance Examination Principles

In assessing compliance management systems, supervisory examination processes will consider whether the institution’s risk management practices for residential real estate valuations are appropriate to identify and address valuation discrimination. Examiners will consider the following principles when assessing potential valuation discrimination:

• Board and management oversight
• Third-party risk management
• Policies and procedures
• Training
• Monitoring or audit
• Consumer complaints

Access the Statement here:

https://files.consumerfinance.gov/f/documents/cfpb_ffiec-statement-on-exam-principles_2024-02.pdf

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