HUD Takes Action Against Home Loan Appraisal Bias
June 6, 2023
The Department of Housing and Urban Development has announced more actions to fight appraisal bias in the residential mortgage process.
According to a press release on HUD.gov, the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), is taking steps to “prevent algorithmic bias in home valuation,” provide tools to help them “take action against appraisal bias, break down barriers to entry into the appraisal profession,” and increase transparency.
An Effort to End Appraisal Bias
This effort got started two years ago when the President announced interagency efforts to improve the appraisal system and end bias associated with it. A Whitehouse.gov fact sheet discussing these efforts notes that one family’s home “was appraised at roughly $500,000 more than its initial appraised value after having a white friend stand in for them.”
That information came shortly after the family agreed to settle a housing discrimination lawsuit they filed due to that alleged appraisal bias.
Fixing the Appraisal Bias Problem
What steps are the Biden administration and the banks taking? According to the DoD fact sheet dated 1 June 2023, “Federal banking agencies are in the process of issuing proposed guidance” on how financial institutions may integrate fair appraisal controls into their current processes for a start.
Other steps include offering “publicly available datasets of aggregate statistics on appraisal records, providing the public with access” to appraisal trends and the raw data found in appraisal reports. Transparency is an important part of reform.
“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,” according to HUD Secretary Marcia L. Fudge, quoted in the HUD press release on these appraisal reforms.
Fudge adds, “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.”
According to HUD, home ownership plays a key role in where someone may fall in terms of the “wealth gap,” with what HUD describes as “wide racial and ethnic disparities” in homeownership rates in the United States.
The latest actions by HUD are part of a larger action plan, and there is more work to be done before HUD declares its actions to fix appraisal bias finished.
Who’s Leading the Charge to Fix Appraisal Bias?
The HUD task force addressing this issue includes (but is not limited to) a variety of inter-agency partners:
RELATED VIDEOS:
Reverse Mortgages Are Ideal for Senior Borrowers
The Pros and Cons of Subprime Mortgages
A Good Faith Estimate Provides Mortgage Information
According to a press release on HUD.gov, the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), is taking steps to “prevent algorithmic bias in home valuation,” provide tools to help them “take action against appraisal bias, break down barriers to entry into the appraisal profession,” and increase transparency.
An Effort to End Appraisal Bias
This effort got started two years ago when the President announced interagency efforts to improve the appraisal system and end bias associated with it. A Whitehouse.gov fact sheet discussing these efforts notes that one family’s home “was appraised at roughly $500,000 more than its initial appraised value after having a white friend stand in for them.”
That information came shortly after the family agreed to settle a housing discrimination lawsuit they filed due to that alleged appraisal bias.
Fixing the Appraisal Bias Problem
What steps are the Biden administration and the banks taking? According to the DoD fact sheet dated 1 June 2023, “Federal banking agencies are in the process of issuing proposed guidance” on how financial institutions may integrate fair appraisal controls into their current processes for a start.
Other steps include offering “publicly available datasets of aggregate statistics on appraisal records, providing the public with access” to appraisal trends and the raw data found in appraisal reports. Transparency is an important part of reform.
“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,” according to HUD Secretary Marcia L. Fudge, quoted in the HUD press release on these appraisal reforms.
Fudge adds, “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.”
According to HUD, home ownership plays a key role in where someone may fall in terms of the “wealth gap,” with what HUD describes as “wide racial and ethnic disparities” in homeownership rates in the United States.
The latest actions by HUD are part of a larger action plan, and there is more work to be done before HUD declares its actions to fix appraisal bias finished.
Who’s Leading the Charge to Fix Appraisal Bias?
The HUD task force addressing this issue includes (but is not limited to) a variety of inter-agency partners:
- Secretary of Housing and Urban Development
- White House Domestic Policy Advisor
- Department of Justice
- Secretary of Agriculture
- Secretary of Labor
- Secretary of Veterans Affairs
- Chairman of the Board of Governors of the Federal Reserve
- Chairman of the National Credit Union Administration
- Director of the Federal Housing Finance Agency
- Director of the Consumer Financial Protection Bureau
RELATED VIDEOS:
Reverse Mortgages Are Ideal for Senior Borrowers
The Pros and Cons of Subprime Mortgages
A Good Faith Estimate Provides Mortgage Information
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