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HousingWire Magazine: December 2021/ January 2022

AS WE ENTER A NEW YEAR, let’s look at some of the events that we can look forward to in 2022. But what about what’s next for the housing industry?

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Appraisals & Valuations

HUD settles with JPMorgan over appraisal bias case

Black homeowner reported racial bias during appraisal, settles for $50,000

The Department of Housing and Urban Development (HUD) has announced that JPMorgan Chase has come to an agreement with a Black homeowner who claimed the bank’s mortgage division – relying on a valuation done by an appraiser – valued her home at an amount lower than its actual worth because of her race.

Under the conciliation agreement, JPMorgan will pay the homeowner, a Black woman, $50,000. The finance giant will also begin training home lending advisors and client care specialists in the reconsideration of value process and fair lending issues related to appraisals.

“Discrimination in home buying, mortgage lending and property appraisal deprives qualified individuals of an equal opportunity to pursue homeownership as a path to family stability and financial security,’’ Jeanine Worden, HUD’s acting assistant secretary for Fair Housing and Equal Opportunity, said in a statement. “HUD is committed to ensuring that all housing, whether for rent or for sale, is free from discrimination.” 

JPMorgan quickly denied any wrongdoing or racial bias upon the homeowner filing a complaint in October 2020. In a statement, the company said it is “firmly committed to the principles of home ownership, fair housing, and equal opportunity.”

A spokesperson for JPMorgan said in a written statement that the bank researched the matter extensively. “Appraisers are independent contractors who are not employed by the bank,” the spokesperson said. “They are specialists in the specific regions and use market-based comparisons to come up with a value. Our internal review of the appraisal assessment, as well as a market analysis, found no substantive issues and supported the appraiser’s value.”

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According to official court documents, JPMorgan entered into the agreement “solely for the purpose of obtaining expeditious administrative closure of this matter.”

Though the bank did not admit to any wrongdoing or any appraisal bias, it moved quickly to update its policies on valuations.

Specifically, employees will be trained on how to handle complaints of discrimination in the appraisal process, as well as handling the process for customers who wish to submit a Reconsideration of Value (ROV) request. Appraisers must also provide three comparable sales on each listing.

Additionally, JPMorgan will include a cover letter with language pertaining to valuation bias on all appraisal reports it sends to its customers. All cover letters will include a hotline phone number to call if the homeowner feels appraisal bias has occurred.

“Chase is committed to maintaining appraiser independence and preventing attempts to influence appraisers in the preparation of appraisal reports, as well as avoiding any discrimination or bias in the appraisal process,” reads the letter.

This could be the beginning of similar settlements in the mortgage and real estate industry, as several cases of perceived valuation bias have popped up across the country in the past year. One couple in San Francisco – Paul and Tenisha Austin, who are Black – went so far as to have their white friends pose as the homeowners in order to get a better valuation.

Appraisal institutions have been scrambling to underline – or, in some cases, update entirely – their policies on appraisal bias as these cases have come to life. The Appraisal Institute, in fact, has said it will now require all appraisers to take a seven-hour course focused on Fair Housing laws and bias.

The Fair Housing Act makes it unlawful to discriminate in the terms, conditions or privileges of the sale of a dwelling because of race, color, religion, national origin, sex, disability and familial status.

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