Leading Civil Rights, Consumer, and Technology Advocates Urge the CFPB and Other Federal Regulators to Promote Fairness in Automated Valuation Models

WASHINGTON – May 18, 2022 – A diverse group of leading civil rights, consumer, and technology advocates has submitted a letter to the Consumer Financial Protection Bureau (CFPB) in response to its request for comment on an outline of proposals (CFPB Outline) for a rule to impose quality control standards on Automated Valuation Models (AVMs). Racial discrimination in home appraisals continues to affect homeowners of color throughout the country, and documented instances of appraisal discrimination in California, Indiana and other areas are reflective of practices that restrict housing and lending access. AVMs are sometimes used as an alternative to or a check on traditional home appraisals, but there are no national quality control standards to ensure that AVMs are fair, unbiased, and transparent.

The CFPB Outline comes at a time when the United States is once again at a critical crossroads in determining whether to develop equitable systems that serve and uplift the whole of the housing market, or systems that perpetuate, amplify, and even exacerbate existing discriminatory patterns. For example, AVMs may rely on biased data that reflects the undervaluation of communities of color and formerly-redlined areas. The advocates believe that the time to act is now as the use of automated technologies proliferates and has the potential for far-reaching adverse impacts for borrowers of color and other protected groups. 

“We need continued innovation as well as strong regulatory oversight to put an end to housing and financial inequality,” said Lisa Rice, President and CEO of the National Fair Housing Alliance (NFHA). “We must be intentional about developing technology that places underserved families in positions to participate fully in economic opportunities, own homes, and accumulate intergenerational wealth.” 

Specifically, the advocates believe it is critically important for the CFPB and the other agencies involved in this rulemaking (the Board of Governors of the Federal Reserve, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, National Credit Union Administration, and Office of the Comptroller of the Currency, collectively, the “Agencies”) consider the following:

• The Agencies already have the supervision and enforcement authority to ensure that entities have sound Compliance Management Systems to mitigate risk (including fair lending risk) if they are using AVMs to determine the value of a consumer’s principal dwelling.
• That said, the advocates support prompt action on this rule to set clear, robust regulatory expectations regarding the use of AVMs.
• With respect to the specific proposal:
  • The advocates believe that the CFPB’s proposed scope of the rule is too narrow. It is inconsistent with the letter and spirit of the statute, places a higher burden on small businesses, and fails to protect consumers, particularly consumers of color.
  • The advocates fully support the addition of “nondiscrimination” as an additional quality control standard, but urge the Agencies to incorporate “nondiscrimination” in each of the quality control standards. Fair lending risk should not be separated from safety and soundness risk.

The response to the CFPB’s Outline was issued jointly by a diverse group of national and state/local organizations. National organizations include American Civil Liberties Union; Americans for Financial Reform Education Fund; Center for Critical Race and Digital Studies; Center for Responsible Lending; Consumer Action Equal Rights Center; National Consumer Law Center (on behalf of its low-income clients); National Fair Housing Alliance; National Housing Law Project; The Greenlining Institute; and Woodstock Institute.

State/local organizations include CNY Fair Housing Inc.; CSA San Diego County; Fair Housing Advocates Association; Fair Housing Advocates of Northern California; Fair Housing Center of Central Indiana; Fair Housing Center of the Greater Palm Beaches; Fair Housing Center of West Michigan; Fair Housing Council of Orange County; Fair Housing Justice Center; Fair Housing Rights Center in SEPA; Housing Choice Partners; Housing Opportunities Made Equal of Greater Cincinnati; Long Island Housing Services, Inc.; Louisiana Fair Housing Action Center; Metro Fair Housing Services Inc.; Miami Valley Fair Housing Center Inc.; North Texas Fair Housing Center; Savannah Chatham County Fair Housing Council, Inc.; Southwest Fair Housing Council; and Texas Appleseed.

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The National Fair Housing Alliance (NFHA) is the country’s only national civil rights organization dedicated solely to eliminating all forms of housing and lending discrimination and ensuring equal opportunities for all people. As the trade association for over 170 fair housing and justice-centered organizations and individuals throughout the U.S. and its territories, NFHA works to dismantle longstanding barriers to equity and build diverse, inclusive, well-resourced communities.