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Home›California mortgages›‘These problems are not one-off’: New report calls for review industry reform, denounces lack of diversity

‘These problems are not one-off’: New report calls for review industry reform, denounces lack of diversity

By Daniel Templeten
January 20, 2022
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SAN FRANCISCO (KGO) — A new report released Wednesday by the National Fair Housing Alliance calls for sweeping reforms in the appraisal industry and highlights a lack of diversity in the field, among other challenges.

When you are looking to buy a home or refinance your mortgage, the lending institution you work with hires an appraiser to make sure the home is not worth less than the loan amount. Today, the profession of around 105,000 people is scrutinized in this new report.

“We didn’t expect to find some of the issues that we found,” said Lisa Rice, CEO of the National Fair Housing Alliance, a national civil rights organization focused on combating discrimination and gender equality. access to housing.

RELATED: Black California couple undervalued by $500,000 in home appraisal, think race was a factor

the Evaluation standards and evaluation criteria The report released Wednesday is considered the most comprehensive examination of bias in the appraisal industry to date, covering 80 pages.

“There have been a lot of anecdotes about evaluation bias,” Rice said. “What our study shows is that these issues are not one-time, that there are really deep structural issues and obstacles that no family could overcome.”

VIDEO: West Oakland family beats $70,000 low appraisal after ABC7 News help

For the past year, ABC7 News Race and Culture reporter Julian Glover has extensively covered allegations of rating discrimination involving Black and Latino families in the Bay Area.

Families believe their homes have been undervalued by up to $500,000 because of the color of their skin.

EXCLUSIVE: Ex-California mayor battles home valuation he says delayed sale of his home

The report cites two such cases and highlights oversight and governance issues in the appraisal industry, gaps in fair housing education, barriers to entry into the appraisal field and a shocking lack of diversity in the field.

An ABC Data Team analysis of US Census data confirmed these racial inequalities in the appraisal industry, showing that nationally, approximately 86% of appraisers are white, while only 61% of the population American is white.

The numbers also show that Hispanic/Latino, Black, and Asian reviewers are underrepresented nationally.

These same racial inequalities are present in the Bay Area. In San Francisco and the East Bay, whites make up 40% of the population, but about 72% of raters.

RELATED: Black East Oakland owner beats the system after paying $155,000 in appraisal

The underrepresentation gap is largest for the Hispanic/Latino community at 22% of the population, but only about 7% of raters.

Asian Americans make up 26% of the population, but are estimated to make up only 14% of raters.

For blacks, it’s 7% of the population but about 4% of raters.

In the South Bay, the percentage of Asian raters reflects the Asian population, but white raters are still overrepresented. There is a double-digit gap for Hispanic/Latino reviewers and it is estimated that only 1% of South Bay reviewers are black.

VIDEO: Bay Area Black, Latin American real estate couple paid $250,000 for home appraisal

“That’s borne out by the stats you see, not just from a race and ethnicity perspective, but also from a gender perspective. The majority of raters are male and white,” Jim said. Park, executive director of the evaluation subcommittee.

The ASC is the federal appraisal industry regulator that commissioned this independent report.

“When I first started appraising, many appraisers would ask who in your family was an appraiser. Very quickly, I learned that it was a tradition often passed down from father to son,” said Jillian White. , Head of Collateral at Better Mortgage – a state-of-the-art mortgage lender.

RELATED: Data Reveals Racial Inequality in Bay Area Housing Market

As a black woman, White is a rarity in the appraisal industry. She shared her experience of having to change her name to “Jay” on her resume just to land a job interview to become a trainee appraiser – a requirement for being licensed in the field.

“When I showed up for a job interview things changed. All his enthusiasm was gone and instead of conducting an interview he kept telling me ‘you’re overqualified’ and ‘I don’t know why you want to become an expert.’ The interview was very short because he never even asked me to sit down,” she said.

The NFHA report released today suggests re-examining barriers to the appraisal profession that prevent women and people of color from entering the industry, such as college degree requirements, hours of training and hours of experience to obtain a license that takes between tens and hundreds of hours of work. under the supervision of a supervising evaluator.

RELATED: State Assembly Holds Hearing on Racial Disparities in Housing

“It presents a very unique barrier for people of color, first of all, who don’t already know an evaluator who would take them under their wing,” Rice said.

The Appraisal Institute, the nation’s largest association of real estate appraisers, provided the following statement:

“The report recognizes that improved standards and greater diversity within the profession are essential elements in addressing fairness and eliminating bias in assessment – ​​we agree. This is why since 2018, the ‘Appraisal Institute has worked to recruit and expand opportunities for appraisers of color and women through the Appraisal Diversity Initiative, raised ethical standards for our members, brought together researchers and experts, worked closely with congressional leaders, and advanced legislation to require education about anti-discrimination and fair housing. Much more needs to be done, and these efforts remain at the heart of our work as ‘organization.”
-Jody Bishop, MAI, SRA, AI-GRS, President of the Evaluation Institute

According to the Appraisal Institute, he is working on an initiative to diversify the industry by partnering with government-sponsored companies that service mortgages like Fannie Mae and Freddie Mac, and the National Urban League.

Since 2018, AI says it has awarded 113 scholarships. Fifteen beneficiaries have completed the program and 84 other beneficiaries are still in training.

EXCLUSIVE: HUD investigating $439,000 difference in Oakland homeowner assessments

While this represents progress, it is just a breach in the industry of 105,000 U.S. appraisers that has come under intense scrutiny as families of color file federal lawsuits and HUD complaints in response to alleged low price assessments.

However, major changes in the way the industry works could come in a few weeks.

TAKE ACTION: Find resources to help you address issues of equality, justice and race

The interagency Property Appraisal and Valuation Equity (PAVE) task force created by President Biden and led by Housing and Urban Development Secretary Marcia Fudge and Domestic Policy Advisor Susan Rice is expected to release a major report soon identifying the root causes and solutions to misvaluation and undervaluation. of properties belonging to color families.

A HUD spokesperson sent ABC7 News the following statement:

“Secretary Fudge and Ambassador Rice and recognize that each of us has a role to play in ensuring that all Americans have the opportunity to build generational wealth through the value of their homes. This is especially important in communities of color, and why the president launched a first-of-its-kind task force aimed directly at providing a set of concrete actions the federal government will take to correct assessment bias. HUD and its partners are proud to continue to engage appraisers, lenders, philanthropic organizations, civil rights groups, and victims We commend partners like the NFHA for stepping up to reveal and correct biases and inequities, and we look forward to review the contents of the NFHA study as HUD finalizes its report to the President.

SEE ALSO: HUD Launches Task Force To Combat Biased Home Ratings

“We need to have a comprehensive response from Congress, regulators, industry, civil rights groups, to address these issues,” Rice said.

Other charges in the report include the call for the Appraisal Standards Council to revise the code of ethics for appraisers known as the Uniform Standards of Professional Appraisal Practice to make it clear that discrimination in appraisals is prohibited.

The NHFA is also calling for reform of the value review process where owners and lenders report a potentially erroneous appraisal value and have it reviewed. The civil rights group suggests that the Appraisal Foundation, government entities, GSEs and lenders develop standards and guidance for appraisers to make the process more fair, transparent and increase accountability.

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