On March 18, Rohit Chopra, Director of the Consumer Financial Protection Bureau (CFPB), submitted comments to the Appraisal Subcommittee (ASC) regarding its oversight of The Appraisal Foundation. Director Chopra, who serves as a voting member of the Federal Financial Institutions Examination Council (FFIEC) and has been the designated executive sponsor for the ASC since 2022, highlighted several concerns about The Appraisal Foundation’s governance and conflict of interest policies.
In his comments, Director Chopra emphasized the importance of accurate appraisals in a well-functioning mortgage market. He noted that federal regulation of appraisals involves two entities: The Appraisal Foundation and the ASC. The Appraisal Foundation, a not-for-profit corporation, sets qualifications for becoming an appraiser and standards for conducting appraisals. The ASC, established under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and comprised of individuals appointed by the heads of a number of federal agencies such as the CFPB and Department of Housing and Urban Development, monitors and reviews The Appraisal Foundation’s practices and procedures.
Over a year ago, the ASC began conducting a series of hearings focused on appraisal bias. On February 13, 2024, the fourth hearing examined how state and federal regulators can address appraisal bias and increase diversity in the profession. That hearing prompted Director Chopra’s comment submission in which he highlighted several issues he saw with The Appraisal Foundation. First, he pointed out deficiencies in The Appraisal Foundation’s conflict of interest policies, which he believes are less comprehensive and specific than those of federal agencies. For example, the Standards of Ethical Conduct applicable to executive branch employees are 77 pages, whereas The Appraisal Foundation’s conflict of interest policies are each under two pages. Director Chopra also criticized The Appraisal Foundation’s governance structure, which he described as insular and favoring private interests. Specifically, until the end of last year, paying “sponsors” selected around half the members of The Appraisal Foundation’s Board of Trustees. Even after minor modifications to the bylaws, The Appraisal Foundation’s president acknowledged that sponsors, now renamed as “partners,” can nominate themselves as “public interest” trustees, and that the current trustees can elect a full slate of new trustees from companies contributing financially to the regulatory body. Lastly, Director Chopra expressed concerns about the lack of transparency in The Appraisal Foundation’s processes, including the selection of its President. Specifically, The Appraisal Foundation has stopped allowing ASC staff to attend closed deliberations of applicants to boards.
In conclusion, Director Chopra described The Appraisal Foundation as a lawmaking body that is neither accountable to the public nor subject to competitive market forces. He expressed deep concern about the organization’s controlling role in key issues contributing to appraisal bias. “As long as The Appraisal Foundation remains an insular body controlled by a small circle, operating behind closed doors, those issues will continue to go unaddressed.”
