FFIEC addresses residential lending discrimination, bias principles

The Federal Financial Institutions Examination Council (FFIEC)—of which the NCUA is a member—Monday issued a statement on examination principles related to valuation discrimination and bias for member entities to consider in their consumer compliance and safety and soundness examinations.

The principles aid in assessing whether supervised institutions’ compliance and risk management practices are “appropriate to identify and mitigate discrimination or bias in their residential property valuation practices.”

The statement includes separate examination principles for both consumer compliance and safety and soundness examinations. In the release issuing the statement, the FFIEC noted that the statement “should not be interpreted as new guidance to supervised institutions nor an increased focus on supervised institutions’ appraisal practices.”

Instead, the statement “offers transparency into the examination process and supports risk-focused examination work,” according to the FFIEC.

From a consumer compliance perspective, the statement underscores the importance of having a sound compliance management system that is tailored to a credit union’s risk profile and can identify and address risks of bias and discrimination in valuations and appraisals. The safety and soundness principles consider whether a credit union’s risk management identifies valuation bias and discrimination and fosters credible valuations underlying a credit decision.

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