FHA recently announced its publication of Mortgagee Letter 2021-27, Appraisal Fair Housing Compliance and Updated General Appraiser Requirements, which updates and revises language in its Single Family Housing Policy Handbook 4000.1 to clarify expectations for compliance with applicable anti-discriminations laws for appraisals related to FHA-insured transactions. In the letter, FHA cited the current administration’s Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), which is an initiative meant to address inequities in home appraisals, and noted that this publication is one such effort to address appraisal process discrimination. The letter clarifies FHA’s expectations for appraisers and mortgagees to know and comply with all applicable anti-discrimination laws, including the Fair Housing Act as it relates to appraisals. In its background discussion, FHA provides HUD’s expectations that parties engaged in FHA mortgage insurance programs need to eliminate from the appraisal process considerations on prohibited bases, “including considerations of race or national origin of the homeowner, homeowner’s neighbors, and the racial composition of neighborhoods where comparable properties are identified.”
The letter clarifies FHA’s standards for appraisers and mortgagees, noting that the appraiser’s performance must adhere to all applicable federal, state, and local laws, “including the Fair Housing Act and other federal, state, or local antidiscrimination laws,” and that the mortgagee’s evaluation of the appraisal must ensure compliance with the same. These include FCRA, ECOA, and the Fair Housing Act. The letter further makes revisions to the handbook sections on general appraiser requirements, stating requirements for a nondiscrimination policy (e.g., prohibiting any part of the appraisal process from being based on the “race, color, religion, sex, actual or perceived sexual orientation, actual or perceived gender identity, age, actual or perceived marital status, disability, familial status, national origin of” present and prospective owners or occupants of the subject property, “or the present owners or occupants of the properties in the vicinity of the Property, or on any other basis prohibited by federal, state, or local law”). The letter further adds provisions on required appraiser conduct, including, among other things, that an appraiser must execute all FHA appraisal assignments “in a competent, independent, impartial, and objective matter” and avoid practices that potentially impact an appraisal report opinions’ and conclusions’ reliability, and sets forth restrictions beyond mere compliance with USPAP and the Competency Rule.