12 CFR §1026.42 — Valuation independence (Reg Z)

reg-z-1026-42

Regulation Z §1026.42 prohibits coercion of appraisers and similar valuation-independence violations in connection with covered transactions secured by a consumer's principal dwelling.

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source:
  type: regulation
  id: reg-z-1026.42
  authority: 12 CFR §1026.42 — Valuation independence (Reg Z)
  description: |
    Regulation Z §1026.42 prohibits coercion of appraisers and similar
    valuation-independence violations in connection with covered
    transactions secured by a consumer's principal dwelling.
obligations:
  - id: reg-z-1026.42-c1-no-coercion
    canonical_id: reg-z-1026.42-c1-no-coercion
    section: 12 CFR §1026.42(c)(1) — Coercion of appraisers prohibited
    description: |
      In connection with a covered transaction, [LENDER] (and any other
      covered person) shall not, and shall not attempt to, directly or
      indirectly cause the value assigned to the consumer's principal
      dwelling to be based on any factor other than the independent
      judgment of the person preparing the valuation — through coercion,
      extortion, inducement, bribery, intimidation, compensation or
      instruction to, or collusion with the appraiser or any person
      performing valuation management functions.
    type: dont
    audit_question: Can [LENDER] demonstrate that no employee, agent, or affiliate has coerced, induced, bribed, intimidated, or otherwise improperly influenced an appraiser to assign a particular value to a covered-transaction property?
    program_review: Do the P&Ps facilitate appraisal independence so that no employee, agent, or affiliate coerces, extorts, induces, bribes, intimidates, compensates, instructs, or colludes (or attempts to) with an appraiser or valuation-management person to cause the value of the consumer's principal dwelling to be based on any factor other than the appraiser's independent judgment?
    file_review: Review the appraisal-ordering and communications population; the compliance person judges whether any person improperly influenced an appraiser toward a particular value on a covered transaction.
    judgment: true
    feeds: []
    workflow_phase: origination
    owner_role: compliance_officer
    secondary_owner_role: loan_officer
    cadence: continuous
    consequence: ''
    tags:
      - round-b
      - regulator-direct
      - reg-z
      - valuation-independence
      - appraisal
      - promoted
    primary_source:
      tier: 1
      authority: 12 CFR §1026.42(c)(1)
      source_class: cfpb-regulation
      source_url: https://www.law.cornell.edu/cfr/text/12/1026.42
      snapshot_id: 639f785c5b544250
      fetched_at: '2026-05-24T00:21:59Z'
      content_hash: sha256:5841ffc68689f344b2de85d2fe3eed77e4308f244a46e876493c627c5f1fabb1
      paragraph_quote: no covered person shall or shall attempt to directly or indirectly cause the value assigned to the consumer 's principal dwelling to be based on any factor other than the independent judgment of a person that prepares valuations
      drafter_attestation: Copied verbatim from snapshot 639f785c5b544250 at 2026-05-24.
    auditor_minimum_evidence:
      derivation: snapshot_extract
      derivation_source:
        snapshot_id: 639f785c5b544250
        paragraph_quote: no covered person shall or shall attempt to directly or indirectly cause the value assigne
        page_or_section: 12 CFR §1026.42(c)(1)
        fetched_at: '2026-05-22T11:32:38Z'
      pathway_selection_kind: parallel_satisfaction
      pathways:
        - pathway_id: csh-amep-reg-z-1026.42-c1-appraiser-comms-monitored
          name: All [LENDER]-to-appraiser communications monitored for coercion/influence
          evidence_items:
            - evidence_id: csh-ev-reg-z-1026.42-c1-comms-policy
              kind: document
              description: Written appraiser-independence policy prohibiting coercion, undue influence, threats, bribes, attempts to compromise appraiser independence, or supplying target values/LTV ratios.
              retention_rule_ref: reg-z-1026.25
              examiner_question_ref: 'CFPB Mortgage Origination Exam Procedures, Module 6: Appraisals'
              cite_verified: true
            - evidence_id: csh-ev-reg-z-1026.42-c1-comms-monitoring-log
              kind: record
              description: Communications-monitoring log (or AMC-vendor attestation) showing all [LENDER]-to-appraiser interactions were channel-controlled and reviewable.
              retention_rule_ref: reg-z-1026.25
              examiner_question_ref: 'CFPB Mortgage Origination Exam Procedures, Module 6: Appraisals'
              cite_verified: true
        - pathway_id: csh-amep-reg-z-1026.42-c1-appraisal-uw-firewall
          name: Underwriting / production firewall — appraisal-orderer separated from origination-incentive role
          evidence_items:
            - evidence_id: csh-ev-reg-z-1026.42-c1-firewall-policy
              kind: document
              description: Organizational chart + role-segregation policy showing appraiser engagement is separated from loan-originator compensation incentive structure (e.g., via AMC, internal appraisal department reporting to risk/QC, etc.).
              retention_rule_ref: reg-z-1026.25
              examiner_question_ref: 'CFPB Mortgage Origination Exam Procedures, Module 6: Appraisals'
              cite_verified: true
      pathway_selection_logic: |
        Both pathways required in parallel: A — communications-level controls preventing coercion attempts; B — structural firewall preventing the financial incentive for coercion. Communications alone with no firewall is fragile; firewall alone with no comms control leaves the door open. Defense-in-depth.
    promoted_at: '2026-05-24T00:22:30+00:00'
    promoted_from: reg-z-1026.42-roundb-v1.yaml
  - id: reg-z-1026.42-b3-valuation-definition
    canonical_id: reg-z-1026.42-b3-valuation-definition
    section: 12 CFR §1026.42(b)(3) — Definition of "valuation"
    description: |
      For purposes of §1026.42, "valuation" means 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.
      [LENDER]'s valuation-independence procedures apply to every such
      valuation used in a covered transaction.
    type: do
    audit_question: Can [LENDER] demonstrate that its valuation-independence procedures apply to every written or electronic estimate of value used in a covered transaction (excluding pure AVM-only outputs)?
    program_review: Does the overall program account for the valuation definition — applying the valuation-independence procedures to every written or electronic estimate of the value of the consumer's principal dwelling used in a covered transaction, excluding outputs produced solely by an automated model or system?
    file_review: Spot-check covered-transaction files; confirm the valuation-independence procedures attached to each written/electronic value estimate used (excluding pure AVM-only outputs).
    judgment: false
    feeds: []
    workflow_phase: origination
    owner_role: compliance_officer
    secondary_owner_role: underwriter
    cadence: continuous
    consequence: ''
    tags:
      - round-b
      - regulator-direct
      - reg-z
      - valuation-independence
      - definitions
      - promoted
    primary_source:
      tier: 1
      authority: 12 CFR §1026.42(b)(3)
      source_class: cfpb-regulation
      source_url: https://www.law.cornell.edu/cfr/text/12/1026.42
      snapshot_id: 639f785c5b544250
      fetched_at: '2026-05-24T00:21:59Z'
      content_hash: sha256:5841ffc68689f344b2de85d2fe3eed77e4308f244a46e876493c627c5f1fabb1
      paragraph_quote: means 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.
      drafter_attestation: Corrected verbatim copy from snapshot 639f785c5b544250 at 2026-05-24 (original quote leading 'Valuation?' artifact dropped — substring match confirmed against snapshot post-fix).
    promoted_at: '2026-05-24T00:22:30+00:00'
    promoted_from: reg-z-1026.42-roundb-v1.yaml
_promotion_history:
  - promoted_at: '2026-05-24T00:22:30+00:00'
    candidate_path: obligations\_remediation\_round_b_drafts\reg-z-1026.42-roundb-v1.yaml
    candidates_promoted: 2
    candidates_skipped_existing: 0

Verbatim regulatory text (2)

Verbatim provisions from 12 CFR §1026.42 — Valuation independence (Reg Z) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.

12 CFR §1026.42(c)(1) — Coercion of appraisers prohibited

no covered person shall or shall attempt to directly or indirectly cause the value assigned to the consumer 's principal dwelling to be based on any factor other than the independent judgment of a person that prepares valuations

Source: 12 CFR §1026.42(c)(1) · source URL · snapshot 639f785c5b544250

12 CFR §1026.42(b)(3) — Definition of "valuation"

means 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.

Source: 12 CFR §1026.42(b)(3) · source URL · snapshot 639f785c5b544250