Appraisal independence under Regulation Z, explained

An appraisal is meant to be an independent opinion of a home’s value. This page sets out what Regulation Z prohibits and allows when a lender or anyone else deals with the person preparing it.

The short version: Regulation Z § 1026.42 bars a creditor or settlement-service provider from trying to cause a home’s assigned value to rest on anything other than the appraiser’s independent judgment, and lists examples such as seeking a minimum or maximum value or conditioning pay on closing.^[2] It also permits asking an appraiser to consider more comparable-property information or to correct errors.^[2] A creditor that knows of a violation at or before consummation may not extend credit based on the valuation unless it documents reasonable diligence.^[2]

What this term means: A valuation is “an estimate of the value of the consumer’s principal dwelling in written or electronic form, other than one produced solely by an automated model or system.” Valuation management functions include recruiting, selecting or retaining a person to prepare a valuation, managing the process and reviewing or verifying that person’s work.^[2] A covered person is a creditor, or a person that provides settlement services, in connection with a covered transaction.^[2]

What Regulation Z prohibits

Paragraph (c)(1) of § 1026.42 bars a covered person from trying, directly or indirectly, to cause the value assigned to the home to rest on anything other than the independent judgment of the person preparing the valuation, through “coercion, extortion, inducement, bribery, or intimidation of, compensation or instruction to, or collusion with” that person or a person performing valuation management functions.^[2] The regulation lists examples of violations and examples of permitted actions.^[2]

Examples that violate (c)(1)	Examples that do not violate (c)(1) or (c)(2)
Seeking to influence the appraiser to report a minimum or maximum value Withholding or threatening to withhold timely payment because the appraiser does not value the home at or above a certain amount Implying that current or future retention depends on the amount at which the appraiser estimates value Excluding an appraiser from future engagement because the reported value does not meet or exceed a predetermined threshold Conditioning the appraiser’s compensation on consummation of the transaction ^[2]	Asking the appraiser to consider additional, appropriate property information, including comparable properties Requesting further detail, substantiation or explanation for the conclusion Asking the appraiser to correct errors Obtaining multiple valuations to select the most reliable one Withholding compensation due to breach of contract or substandard performance Taking action permitted or required by applicable Federal or state law or agency guidance ^[2]

The other rules in § 1026.42

Paragraph	What it says
(c)(2) Mischaracterization	A person that prepares valuations may not materially misrepresent the value of the home; a bona fide error is not a misrepresentation. No covered person may falsify a valuation, and no covered person other than the person that prepares it may materially alter it. A covered person may not induce a violation.^[2]
(d) Conflicts of interest	A person preparing a valuation or performing valuation management functions may not have a direct or indirect interest, financial or otherwise, in the property or transaction. Being an employee or affiliate of the creditor, or providing another settlement service, is not by itself a violation. Separate safeguards apply for a creditor with assets of more than $250 million as of December 31 for both of the past two calendar years (paragraph (d)(2)) and for a creditor with assets of $250 million or less as of December 31 for either of those years (paragraph (d)(3)).^[2]
(e) When credit is prohibited	A creditor that knows of a violation of paragraph (c) or (d) at or before consummation may not extend credit based on the valuation, unless it documents that it acted with reasonable diligence to determine that the valuation does not materially misstate or misrepresent the value.^[2]
(f) Fee appraiser compensation	The creditor and its agents must compensate a fee appraiser at a rate that is customary and reasonable for comparable appraisal services in the geographic market of the property. The regulation sets out presumptions of compliance in (f)(2) and (f)(3).^[2]
(g) Mandatory reporting	A covered person that reasonably believes an appraiser has not complied with the Uniform Standards of Professional Appraisal Practice or applicable ethical or professional requirements must refer the matter to the appropriate state agency if the failure is material, meaning likely to significantly affect the value assigned.^[2]
(i) Automated valuation models	Paragraph (i) sets quality control standards for the use of automated valuation models in credit decisions and covered securitization determinations. It applies to use of these models by a mortgage originator or secondary market issuer, other than a financial institution as defined in 12 U.S.C. 3350(7) or a subsidiary owned and controlled by one and regulated by a federal financial institutions regulatory agency, and (i)(1) lists uses it does not cover.^[2]

What the CFPB says in plain language

The CFPB says appraisers “have to follow rules in arriving at the value of a property, and lenders are not allowed to interfere with the appraiser’s judgment.” It also says the lender is required to send you a copy of the appraisal.^[1]

Our guide to the appraisal copy requirement explains that separate right, and the guide to higher-priced mortgage loan appraisal rules covers another set of appraisal rules.

How to verify this yourself

Read § 1026.42 in the eCFR (reference 2) and the CFPB page (reference 1). The regulation applies to a consumer credit transaction secured by the consumer’s principal dwelling; paragraph (a) states the scope, including a different scope for paragraph (i). To check the person you are working with, use our guide to verifying a loan officer’s NMLS license. Our published standard covers how we check loan originators, and the Register shows that method; neither reviews a lender’s or servicer’s handling of your loan.

What this page does not cover

This page does not explain how an appraiser reaches a value, what to do about a value you dispute, or the licensing rules for appraisers and appraisal management companies, which the regulation points to in 12 CFR part 34. The CFPB page was last reviewed in September 2024. This page is general information, not legal advice, and it does not compare lenders, loan products or rates. It was last reviewed 7 October 2026.

Your next step

Notes of what happened and when, kept with your copy of the appraisal, give you a record to refer to if you contact the CFPB or your state’s appraiser licensing agency. Then return to the Mortgage help library for related guides.