The Trump Administration has withdrawn the reconsideration of value process implemented at the Federal Housing Administration by the Biden Administration in response to appraisal bias findings, effective immediately.
Mortgagee letter 2025-08 cites Pres. Trump's executive orders signed on Jan. 20 that reverses policies in areas like the housing market.
"As part of this ongoing effort, FHA is focused on eliminating policies that have created barriers, increased regulatory and financial burdens, and deepened disparities in lending practices," the mortgagee letter said. "Rescinding the policy announced in these MLs is a step in aligning with the Administration's broader goal to reduce unnecessary regulatory burden and foster long-term economic stability for all Americans."
Besides changes made in the mortgagee letter for the reconsideration of value policy, it also reverses revisions made in a 2021 rule titled Appraisal Fair Housing Compliance and Updated General Appraiser Requirements.
The requirements were proposed by the Biden Administration following
Why was the policy created?
The now-rescinded rule was designed to encourage lenders to establish an appeals process for consumers, explained Bill Garber, director of communications at the Appraisal Institute. While the specifics varied across agencies, such as the Federal Housing Finance Agency and the Office of the Comptroller of the Currency, it represented an effort to bring greater consistency to the system.
"With FHA, at least, it's reverted back to prior policy, which FHA was unique in that it was the only agency that really had anything in place about reconsideration of value," Garber said.
That is why the Community Home Lenders of America, which represents independent mortgage bankers, thought this rule was redundant and didn't serve a purpose.
"CHLA is supportive of this elimination of unnecessary FHA Reconsideration of Value appraisal requirements, which were overly cumbersome and not necessary since mechanisms already exist to address appraisal undervaluations," Scott Olson, executive director of the group, said.
The practical effect for FHA lenders, Garber said, is less prescription in the protocols when it comes to these appeals.
Appraisers did benefit by having some standardization in place, but the policy does live on, he said. Flexibility can also be good for the mortgage industry to have in this area.
The impact on fair housing rules
Garber noted that a key concern for the appraisal industry is how fair housing complaints against practitioners are being addressed at the HUD level..
"We've been seeking some resolution and some due process on the fair housing matters before HUD," which has not resolved these issues. Going forward, the Appraisal Institute is looking for HUD to provide some clarity and resolution on those cases; Garber estimated more than 150 complaints from consumers were still pending at HUD.
But lenders cannot outright dismiss the fair housing aspect of the appraisal process even as this rule goes away.
That is because the Fair Housing Act still applies here, said Jay Wright, a partner at the law firm of Bradley Arant Boult Cummings
"Lenders still need to be on the lookout for potential appraiser bias," Wright said. "They still maintain the ability to request their own reconsiderations of value if the lender thinks that there's something off."
The rescission "doesn't change the fact that lenders cannot discriminate in lending," Wright said.
How consumers are affected
This change hurts all borrowers, no matter what their race or gender is, said Mike Calhoun, president of the Center for Responsible Lending.
"This step not only sets back fair lending and preventing discrimination, it takes away an important right for all home buyers," Calhoun said. This rule was one that made the system fairer, less discriminatory, more transparent and made it work better for all home purchasers.
Among the findings of PAVE was a substantial amount of racial discrimination existed in home appraisals. Last July, HUD settled a fair housing complaint
But the findings also noted that regardless of the borrower's race or gender, a wide range of errors were found in appraisals, Calhoun said, and this rule gave everyone the right to question the results or ask for a reappraisal, not just the lender.
Are other agencies going to follow suit?
"So our hope would be, this is a temporary setback, but it is a setback, and it's a setback that really hurts everyone," Calhoun said. "The whole market works better when there are more accurate, fairer appraisals."
In July 2024, the Mortgage Bankers Association sent a letter to both FHFA and HUD supporting a delay in implementation, but also speaking favorably about the reconsideration of value process.
But it also noted the difficulty certain lenders, primarily smaller ones, were having in adjusting systems to meet the new guidelines.
It is hard to tell what the other agencies will do, but given the overall trend in the Trump Administration, they too will likely withdraw their reconsideration of value rules. Calhoun pointed out that after the inauguration, all references to the PAVE group and appraisals were scrubbed from government websites.
National Mortgage News reached out to the FHFA and the OCC regarding the future of their reconsideration of value policies. The FHFA had no comment. An OCC spokesperson said the agency declines to comment.
Wright noted that this was a signature interagency focus of the Biden Administration.
But among the first things HUD Secretary Scott Turner did was to
So Wright wouldn't be surprised if the other agencies acted similarly.
