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Appraisals and Valuations

Appraisers give HUD an earful during bias roundtable

Appraisers suggest positive public marketing campaign to draw new recruits to profession, increased data-sharing from Feds

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As federal efforts to rid the appraisal profession of bias move forward, appraisers still have some burning questions.

They had a chance to take them directly to Melody Taylor, executive director of the Department of Housing and Urban Development’s task force on appraisal bias, during a roundtable discussion on appraisal bias hosted by the Appraisal Subcommittee on Tuesday.

The housing finance and policy community is interested. Hundreds of appraisers and representatives from appraisal management companies showed up. Even federal regulators and prominent mortgage lobbyists tuned in.

Taylor said the task force has made “immense progress” in the past three months toward its final action plan, which it will deliver to President Biden early next year.

The task force is focused on government oversight and industry practice to further valuation equity, combating inequities in the appraiser workforce and educating consumers and ensuring equity and valuation by making high quality data available. The task force will also seek to combat valuation bias through enforcement and compliance.

In what she described as a “Herculean effort,” Taylor said the task force is working to “harmonize policies, guidance and regulations to more succinctly address industry standards and practices.”

The pervasiveness and character of appraisal bias is still unclear. Researchers, including Freddie Mac, have attempted to resolve some of the unknowns.

In September, the government-sponsored enterprise published research showing that appraisals are more likely to fall short of the contracted sales price in minority areas. Their research was the first look at the appraisal data the GSEs have been collecting since the end of 2011.

That research “validated some of the efforts the task force is embarking upon,” Taylor said.

Two of the report’s authors, Vivian Li, Freddie Mac’s senior manager of fair lending analytics, modeling, econometrics, data science and analytics, and Danny Wiley, Freddie Mac’s senior director of single family valuation, discussed their findings with the audience of appraisers.

“We are confident when we say that the gaps are not just from a few appraisers,” Li said.

During the discussions that followed presentations, several appraisers asked that the GSEs share their trove of appraisal data. “The GSEs have accumulated robust data but refuse to share it with the appraisers who could use it,” said one appraiser.

Other sources of data which could add to understanding bias in appraisals have been elusive, too.

During the Mortgage Bankers Association annual convention in San Diego, one lender said that a subset of the requests for reconsideration of value it receives are related to appraisal bias, but the lender declined to provide that data to HousingWire.

HUD has also declined to specify how many complaints of appraisal bias it receives. In June, however, Alanna McCargo, senior advisor for housing finance at HUD and Biden’s nominee to lead Ginnie Mae, said the volume of bias complaints the agency received had risen tenfold since 2019. The Washington Post reported the agency received only three such complaints in 2019.

The complaints HUD received were not just related to undervaluation, McCargo said. They also included complaints related to “automated valuation approaches, lending requirements, the diversity of the appraisal industry and its employment practices and requirements.”

Several participants in the round table discussion noted that some sort of centralized intake for appraisal bias complaints could be useful. One appraiser said the Consumer Financial Protection Bureau might be a suitable data collector.

David Bunton, president of the Appraisal Foundation, also suggested the creation of a national data repository for bias complaints.

Bunton, who said in a 2019 Congressional hearing that racial discrimination did not factor in to the devaluation of homes in Black neighborhoods, asked, “If we don’t know where we are today as a baseline, how do we measure improvement in subsequent years?”

One of the more clear-cut ways for the appraisal profession to address concerns of appraisal bias is by addressing its demographics. Appraisers are overwhelmingly white and male, a point which a panelist emphatically made in the last roundtable discussion.

But it’s difficult to add diversity when the typical path to become an appraiser is an apprenticeship. Trainees are typically not able to perform site visits or collect data, further disincentivizing appraisers from taking one on.

“Most minorities don’t see appraisers, we don’t see them on television. Unless you are buying or selling a house and getting a loan, you really don’t know what an appraiser is,” said Jeff Hogan, who is Black. He suggested a public marketing campaign to increase awareness of the profession.

Currently, however, the appraisal profession is getting unwanted media attention. Reports of appraisal bias could create negative perceptions of the industry, which could deter those interested in joining it.

“Right now, the only thing you’re hearing about appraisers is negative,” said Hogan. “So we need to work on that.”

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