Harper: Regulators Must Address Appraisal Inequities

Federal financial regulators must adopt a rule to address inequities in appraisal and valuation services, National Credit Union Administration Chairman Todd Harper said Monday.

Speaking at the National Association of Federally-Insured Credit Unions, Harper said, “We continue to see stresses in the appraisal system, including bias based on race. Indeed, I have read multiple news stories and investigations about this problem, and I am deeply concerned.”

Harper is the current chairman of the Federal Financial Institutions Examination Council, a group that includes all the financial regulators. He said he intends to work toward a joint agency rule to establish quality control standards for appraisal valuation models.

He cited several federal laws intended to address discrimination in the appraisal industry. “And we should use these laws to regulate, supervise, and enforce against appraisal bias,” he said.

Harper also renewed his call for Congress to give the NCUA power to regulate third-party vendors. He said that the Government Accountability Office, the Financial Stability Oversight Council and the NCUA’s own inspector general have said the agency needs that power.

“While necessary, the increased dependence of credit unions on these vendors diminishes the ability of the NCUA to accurately assess all the risks present in the credit union system,” Harper said.

He added, “Without this authority, thousands of credit unions, millions of credit union members, and billions of dollars in assets are potentially exposed to unnecessary risks.”

Harper called on Congress to give the NCUA greater flexibility to manage the Share Insurance Fund so the agency can build reserves during “sunny days.” He has called on Congress to give the agency more flexibility to charge credit unions a premium.

Congress also should increase funding for the NCUA’s Community Development Revolving Loan Fund, Harper said. He added that demand for the community development funding continues to exceed the appropriated amount. The program received $1.5 million in FY21. The House has approved an FY22 spending bill that would provide $4 million for the program. Harper said the program should receive $10 million in FY22.

Finally, Harper asked NAFCU members to submit comments on the NCUA’s request for information on how credit unions may use digital assets. He said that in the past few years, blockchain and decentralized finance have moved into the financial mainstream. “While we should recognize and harness the potential opportunities these products and technologies offer, we must also recognize the potential risks they pose and develop appropriate guardrails,” he said, adding that any action the NCUA takes should, when possible, be coordinated with other financial regulators. The deadline for comments is Sept. 27.

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