Appraisals and Valuations

Bill would combat appraisal bias with new agency, public GSE database

A draft bill would scrap the Appraisal Foundation and replace it with an independent federal agency

Congress hopes to supplant the appraisal governing body at the center of the industry’s self-regulated framework and make public the trove of appraisal data held by the government-sponsored enterprises.

A draft discussion bill circulated this week, sponsored by House Financial Services Chairperson Maxine Waters (D-CA), would strike the Appraisal Foundation, and replace it with an independent federal agency. The new Federal Valuation Agency would be responsible for developing real estate valuation standards and appraiser criteria, a function the Appraisal Foundation currently performs.

The draft bill also proposed an “Office of Fair Lending” within the new valuations agency, which would report to the head of the agency. That office would oversee fair lending supervision and examination procedures, as well as the consumer complaint process. Consumer complaints during the appraisal process, such as when a borrower challenges the appraised value, are now mostly handled by the lender. The lack of a central reporting system for complaints of bias has made it difficult to determine the scope of the problem.

A recent report by the National Fair Housing Alliance found that the Appraisal Foundation, an industry-run private nonprofit group and de facto regulator of the appraisal industry, had significant gaps in fair housing training. The Department of Housing and Urban Development, in its recently-released appraisal bias task force report, amplified those findings.

The proposed bill would also see the creation of a national registry of appraisers, to track appraisers’ ethnicity, race and gender, as well as the appraisal management company, for each appraisal report. The registry would also track whether an appraiser had completed the minimum required fair housing training.

Further, the bill would mandate the creation of a national public valuation database, which would include information on race and ethnicity, be searchable, and include single-family appraisals and automated value models. It would specifically include census tract-level appraisal data from Fannie Mae, Freddie Mac, appraisal management companies.

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The Consumer Financial Protection Bureau would coordinate the development of the public database, together with the heads of the Federal Housing Finance Agency, HUD, the Department of Agriculture, the Department of Veterans Affairs, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Federal Reserve and the National Credit Union Administration.

Trade associations, researchers, fair housing advocates and members of the Senate have all called for the release of the GSEs’ appraisal data to better understand appraisal bias.

Last week, in a Senate Banking Committee hearing, ranking minority member Sen. Pat Toomey, of Pennsylvania, asked who could release that data. The FHFA, the GSEs’ conservator, said it is still weighing whether and how to release the data with the proper privacy protections.

“Federal researchers, appraisers, academics, tax assessors, and private sector actors could all use these data in ways that inform better-understood valuations and mitigate racial and ethnic bias in valuations,” an FHFA spokesperson said.

Waters’ proposal also increases penalties for incidents of appraisal bias. Those found to be victims of appraisal bias would be awarded damages, at a minimum, equal to the difference in the corrected appraised value and the “discriminatory or improper” valuation.

The Appraisal Foundation did not immediately respond to a request for comment.

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