Processes, Preparation Important Part of Appraisal Bias Conversation, Panelists Say

(From left, Kider, Rose-Smith and Maddox. Photo by Anneliese Mahoney)

PHILADELPHIA–Be prepared and have good processes.

Those were some lessons regarding the hot topic of appraisal bias imparted during a breakout session panel on “Today’s Top Regulatory Issues” at the Mortgage Bankers Association’s Annual Convention & Expo here Oct. 17.

“Take a look at your [processes] that you have for things like reconsideration of value,” said Sabrina Rose-Smith, Partner at Goodwin, noting that sometimes lenders can run afoul of bodies such as the Consumer Financial Protection Bureau even when they’re just put on notice for the potentially discriminatory practices of another party–such as an appraiser.

“But if you’re getting information that suggests that there’s some sort of discrimination, understand that the CFPB at least thinks that that allegation that the consumer made that may or may not be true, was enough notice for you to take some action,” Rose-Smith continued.

“You have to plan for reconsideration [of value],” said Robert Maddox, CMB, Partner at Bradley. “I want you to think about what are the first five steps that we’re going to do when we get a reconsideration. That way, you already have a process.”

“You may not be able to deal with if there was an appraiser who had discriminatory impact–that’s outside of your control–what you need to do now, you need to go back, build a process out that says: ‘this is what we do. And this is how we follow it,” Maddox said.

Mitch Kider, Chairman and Managing Partner for Weiner Brodsky Kider PC, reiterated the importance of processes.

“You have to have a process for your consumers and your borrowers to file complaints and bring this to your attention,” Kider said, noting those complaints should come into the same place so they can be handled in a consistent manner.

There are other things to consider as well, he said. “There’s been a real lack of training internally on appraisal bias,” Kider said. “Lenders have not really trained their employees very well on appraisal bias themselves.” He said lenders should be on the lookout for potential appraisal bias, including language that raises red flags.

And, Kider said, companies should audit their appraisal operations internally, to make sure any policies and procedures are being followed.