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Congresswoman Tees Up Federal Action on Appraisal Discrimination

March 1, 2022, 2:53 PM

On the problem of Black-owned homes being appraised at lower values than white-owned homes, Congresswoman Maxine Waters has heard enough.

In a letter last week to appraisal industry leaders and regulators, she announced plans to propose legislation reining in racial discrimination in home appraisals. Waters, chair of the House Financial Services Committee, wrote that her committee will “hold the appraisal industry fully accountable” for systemic racial disparities, citing studies from researchers Junia Howell, Elizabeth Korver-Glenn and Andre Perry. The committee will convene hearings in the coming months to prepare for a bill to be filed.

Proposed legislation addressing systemic appraisal discrimination would be the latest sign of reform in the appraisal industry, which determines the fair market value of homes. Low housing appraisals usually mean less profit, or no profit, for homeowners looking to sell or refinance their mortgage loans, and Black homeowners have historically suffered disproportionately from lower home appraisals. Such racial disparities have exacerbated long-running racial wealth and homeownership gaps.

But for years, the leading professional organizations for appraisers hardly acknowledged this problem, and in some cases flat out denied systemic discrimination. Only recently have industry leaders initiated steps to address the issue, in the wake of several new analyses adding to the evidence that appraisals perpetuate housing inequities.

Waters attached an example of flagrant bias to her letter: an email recently sent to Korver-Glenn from an appraiser berating her for her research that also made racist statements about Black neighborhoods. In the email, which is signed with the Appraisal Institute logo, appraiser Dave Lavigne invites Korver-Glenn to spend time “in the heart of the deep south where minorities are paid to raise their poorly educated kids.” (Lavigne did not respond to calls and emails for comment.)

Leaders of the top appraisal organizations — The Appraisal Institute, the Appraisal Foundation and the Appraisal Subcommittee — condemned the appraiser’s message in a joint statement.

“There is no place in our society for the kind of race-based vitriol expressed in this email, but these views are especially troubling coming from an appraiser,” reads the statement. “Appraisers are duty bound to remain objective and unbiased in all aspects of their work and holding these views in any manner is antithetical to the very concept of appraisal practice.”

Appraisal Institute President Pledger Bishop also responded to Waters with a letter explaining the steps his organization is taking to address racism in the industry. The Institute has updated its professional ethics code, and is proposing a “a zero tolerance policy that would extend the realm of appraisal practice to public discourse” when its logo is used. It also is partnering with the Urban League, Fannie Mae and Freddie Mac on a diversity initiative to hire more people of color as appraisers. White appraisers currently make up 97% of the industry, according to U.S. Bureau of Labor data on the profession’s demographics.

Besides legislation, Waters also requested that U.S. Housing and Urban Development Secretary Marcia Fudge launch a fair housing investigation into Lavigne’s email, as well as into systemic discrimination more broadly. Fudge is already heading up the Property Appraisal and Valuation Equity (or PAVE) task force, which has appraisal discrimination as one of its top priorities. The task force has convened several hearings and is scheduled to issue a report based on its findings.

A number of recent studies have already documented where the problem areas are that have been leading to the racial disparities. In September, the Federal Home Loan Mortgage Corporation, known as Freddie Mac, found in a study that racial appraisal gaps are “pervasive” throughout the industry. After examining more than 12 million appraisals from 2015 to 2021 across the U.S., the research team found that 12.5% of appraisals in majority-Black census tracts and 15.4% in majority-Latino tracts came in below the contract price of the houses they assessed, compared to 7.4% of appraisals in white tracts.

And while appraisers are not supposed to make any reference to a neighborhood’s racial or ethnic composition in their valuation reports, the Federal Housing Finance Agency’s recent review of appraisals found “thousands of potential race-related flags” in appraisers’ comments. Several examples listed from the FHFA’s December blog on this:


  • A town was described as having a “Black race population above state average.”


  • A reference to a neighborhood being originally “White-Only,” before becoming a “White-Flight Red-Zone” to explain why the neighborhood is mostly “Working-Class Black” now.


  • Noting an area’s “decline in population, which transitioned from being predominately Eastern European to having a substantial amount of Black and Hispanic people.”

In a February report by Federal National Mortgage Association, known as Fannie Mae, researchers analyzed 1.8 million appraisals for mortgage refinancing applicants and found that Black borrowers received “slightly lower appraisal values” than those issued via automated valuation models, while white borrowers got “slightly higher” appraisals. And while they found no “notable racial pattern” in appraisals that met the official definition of “undervalued” (those more than 10% less than automated appraisal models), they did find that white borrowers more often had their homes “overvalued” (more than 10% higher than automated models) than Black borrowers. These overvaluations were heavily concentrated in Southern states, with Georgia, Louisiana, South Carolina, North Carolina, Mississippi and Alabama constituting nearly 50% of above-market appraisals.

Last June, in the wake of these findings, Fannie Mae issued new language guidance that steers appraisers away from language such as “crime-ridden area” or “affordable neighborhood” when describing housing locations in their valuations, arguing that they can be viewed as racially loaded terms that lead to discriminatory outcomes.

In January, the National Fair Housing Alliance released a report, commissioned by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council, which found that a major part of the problem is that appraisal industry leaders are perhaps too insular in the regulation of their work.

“Our analysis finds that the appraisal industry has operated in a relatively closed, self-regulated framework,” reads the report. “It is time to examine the structure and governance of the appraisal industry, particularly as they impact borrowers of color.”

Among the report’s recommendations is a call for The Appraisal Foundation, which sets the standards and qualifications for the profession, to repeal the requirement that the majority of its trustee board be appraisers, and open up more trustee seats to civil rights and consumer advocates.

It also recommends that the industry shore up its fair housing components in standards training. At minimum, reads the report, the fair housing training should include teaching the history of housing segregation, and the appraiser’s role in it; information on how appraisal discrimination impacts racial wealth and homeownership gaps; and, an explanation of federal, state and local fair housing laws.

The U.S. Department of Justice has also taken action on the enforcement side, by involving itself in several lawsuits against appraisers, including the Tate-Austin v. Miller case where an appraiser valued a Black couple’s home $500,000 lower than it was ultimately valued by another appraiser. The couple filed a fair housing claim, but the defendant argued that fair housing laws don’t apply to appraisers. The Justice Department chimed in this month with a statement of interest declaring that fair housing laws most definitely do apply to them.

For researchers like Korver-Glenn, who wrote about racial discrimination in housing finance in her 2021 book Race Brokers, the problem is much larger than individual appraisers’ personal biases, or even the kind of racism found in the testy email she got.

“It’s important to note that systemic racism doesn’t mean all appraisers express explicitly racist ideas like the appraiser who emailed me,” said Korver-Glenn. “To me, the story is not just or mainly about this individual appraiser. It is about the racist context from which his remarks emerged.”

To contact the author of this story:
Brentin Mock in New York at bmock8@bloomberg.net

To contact the editor responsible for this story:
Nicole Flatow at nflatow@bloomberg.net

Jennifer Sondag

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