Fannie Mae’s Latest Progress Report on Ending Biased Appraisals
Written by: Rob Ellis, Senior Compliance Consultant
Fannie Mae’s Appraiser Quality Monitoring (AQM) program scans appraisal reports for prohibited and subjective language. Starting in 2021 (1), Fannie has sent thousands of letters to appraisers alerting them of unacceptable phrases and statements in violation of the selling guide section on Unacceptable Appraisal Practices (B4-1.1-04),
Most of these letters detail instances where the appraiser used subjective phrases such as:
“Pride of ownership”
“Good neighborhood”
“Desirable location”
Fannie Mae’s latest Appraiser Update(2) highlights how AQM’s efforts have dramatically reduced the use of prohibited words in valuations and has made strides in limiting bias against protected classes. This latest update also applauds “the remarkable progress appraisers have made in becoming more objective in their thinking and writing, and in eliminating consideration of protected class. “
In 2023, Fannie expanded AQM’s scanning to include language that may infer consideration of protected class along with additional cases of subjectivity or unsupported assumptions. Fannie sent an additional 1,900+ letters as a result. Fannie Mae’s stated purpose of these letters is simply to educate appraisers.
I'm certain all our readers have heard of appraisal bias as one of the latest hot topics in fair lending compliance. And many of our clients have come to us with questions on how to implement an effective appraisal bias monitoring program. Fannie Mae presents a good example of one such method of monitoring for appraisal bias.
A couple of questions I would be asking myself if I was a chief lending officer or compliance director would be:
What are we doing to monitor and preventing appraisal bias?
Can we document to examiners our program is effective?
Is our vendor management program strong in detecting/identifying if any of the appraisers we utilize have received a letter(s) from Fannie Mae?
SCA takes pride in assisting our clients in implementing effective appraisal bias monitoring programs that are tailored to reduce their unique and specific fair lending risk.
Don’t wait, reach out today to us to discuss how SCA can assist and support you in strengthening your fair lending program. Please contact our Director, Bill Dolan, at WDolan@scapartnering.com or by phone at (617) 694-2617 and schedule a time to speak with us today.
(1) June 2022 “Appraiser Quality Monitoring update,” (pg. 5) described how Fannie began notifying appraisers in November 2021 via letter.
