On the heels of a Thursday announcement by six federal agencies unveiling a proposed rule that would implement quality control standards that govern the use of automated valuation models (AVMs), Vice President Kamala Harris weighed in.
“Today, I’m proud to announce we are developing a rule that will require that financial institutions ensure that their appraisal algorithms are not biased, for example, that they do not produce lower valuations for homes owned by people of color,” Harris said Thursday in a call with reporters. “We are also releasing the guidance to make it easier for consumers to appeal what they suspect to be unbiased valuation.”
The White House added its own comments to the newly-announced initiative, saying that the proposed rule follows goals set out by the president in addressing issues of racial bias that have exacerbated homeownership and wealth gaps.
“These standards would require financial institutions, mortgage originators, and secondary market issuers that use AVMs to adopt and maintain policies and other safeguards to ensure greater confidence in valuation estimates, protect against data manipulation, avoid conflicts of interest, and conduct random sample testing and reviews,” the White House said on Thursday. “In addition, the proposed rule expressly includes a nondiscrimination quality control standard.”
The vice president added in her remarks that the issue warrants attention from the administration due to the role that homeownership plays in building a family’s wealth.
“Millions rely on the equity in their homes to put their children through college, to fund a startup, to retire with dignity, to create intergenerational prosperity and wealth,” Harris said according to NBC News. “We also know for generations many people of color have been prevented from taking full advantage of the benefits of homeownership.”
Harris also shared the story about a Black family receiving a low initial appraisal before “whitewashing” their home and receiving a notably higher appraisal afterward.
“Systemic change is needed,” Harris said when sharing the story, according to reporting from The Hill.
Also addressing the impact housing can have on the ability for families to build wealth was U.S. Department of Housing and Urban Development (HUD) Secretary Marcia Fudge.
“Owning a home provides a path to the American dream. Yet, that dream has been deferred for Black and Brown people, as we have consistently had our homes under-valued,” Fudge said in a statement. “Having your home undervalued is bigger than just a number on a page. It can be the difference between getting a loan and not – between having enough money for retirement or not. Through the President’s PAVE Task Force, the Biden-Harris Administration is taking bold action to address appraisal bias – and renewing our commitment to doing everything in our power to root it out, once and for all.”
The Biden administration also announced that it would expand the ability for homeowners to pursue reconsiderations of value (ROVs), saying that federal banking agencies “are in the process of issuing proposed guidance on how financial institutions may integrate ROV policies and controls into their current appraisal processes,” the White House said.
HUD and the Federal Housing Finance Agency (FHFA) are also initiating a working group to “increase coordination and develop more consistent standards for the ROV processes of HUD’s Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac lenders,” the White House said.
FHFA will also update the Uniform Appraisal Dataset (UAD) Aggregate Statistics with new appraisal data in an effort to make appraisal-related data more publicly accessible, according to the White House.
Additionally, the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) has published an online dashboard designed to expand the appraisal profession by making certain requirements clearer.
“[T]he PAVE Task Force is publishing a dashboard that shows which states impose education, examination, and experience requirements to become an appraiser that are more stringent than the federal minimum requirements and is calling on states to make appropriate changes to reduce unnecessary barriers to entry to the appraiser profession,” the White House announced.