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The Detection And Control Of Appraisal Discrimination

The Detection and Control of Appraisal Discrimination

What is Discrimination in Appraisals?

The detection and control of appraisal discrimination. Homeownership has been the main means by which Americans have amassed wealth for a large portion of American history. People of color, however, have not had equal access to this opportunity to generate wealth because of America’s history of discriminatory and racist housing rules, as well as more pernicious kinds of discrimination that persist today. The assessment system has historically undervalued homes in communities of color, placing the highest value on White, homogenous communities, dating back to the days of redlining. Appraisal discrimination is still an issue today and contributes to the growing income disparity between races.

When a home is devalued due to the owner’s race, ethnicity, religion, or other protected class, this is known as home appraisal discrimination. In comparison to White neighborhoods, Black and Latino populations are significantly more likely to experience this kind of prejudice. In fact, a 2018 Brookings Institution study found that even after adjusting for property attributes and local amenities, homes in mostly Black communities still had valuations that were 23 percent lower than those in predominantly White neighborhoods. While undervaluing homes in communities of color accounts for the majority of appraisal prejudice, there have also been instances of abusive and detrimental overvaluing of homes. In many cases, communities of color have lost their wealth and persons of color have been targeted for predatory lending. The overvaluation of appraisals “serves to lock borrowers in unfair and often unsustainable loans, prohibits consumers from refinancing into safer and more affordable products, limits people’s ability to sell their homes, and frequently leads to other predatory practices,” according to the National Fair Housing Alliance.

Despite being widespread, appraisal discrimination is prohibited. Home appraisal discrimination on the basis of race, color, religion, national origin, sex, handicap, familial status, and other protected classes is illegal under federal and state civil rights legislation. It is against the law, according to the Fair Housing Act, for “any person or other entity, whose business includes engaging in residential real estate-related transactions, to discriminate against any person in making such a transaction available or in the terms or conditions of such transaction” on the basis of any protected class stipulated in the law. According to the statute, “the valuing of residential real property” is a “residential real estate-related transaction.” The Civil Rights Act of 1866 has also been invoked in court proceedings to oppose appraisal discrimination along with the Fair Housing Act.

Additionally, the Equal Credit Opportunity Act of 1974 may be broken by a discriminatory appraisal that results in the refusal of mortgage funding. This law forbids discrimination by creditors based on age, marital status, source of income, race, color, religion, national origin, or sexual orientation.

Black families all around the country are affected by the prevalent issue of appraisal prejudice. Larger studies have also provided evidence to support these particular accounts of discrimination. Studies by Freddie Mac and Fannie Mae both reveal inequalities in appraisals for localities and borrowers of color. Millions of appraisals submitted for purchase deals were examined by Freddie Mac researchers, who discovered inexplicable racial inequalities in the proportion of properties with appraisal values below the asking price. The study also discovered that there is widespread and pervasive appraisal bias among appraisers. In other words, the majority of appraisers reviewed were more likely to undervalue properties in Black or Latino census tracts than in White census tracts, indicating that this problem is widespread and not merely the result of “a few bad apples.”

What Steps are Being Taken to Combat Discrimination in Appraisals?

It will take a lot of effort on the part of the appraisal system to make the process equal. The Appraisal Standards are primarily ambiguous, deceptive, and vague when it comes to fair housing and discrimination, among other systemic problems. The Appraisal Standards Board and Appraisal Foundation have received recommendations from the National Fair Housing Alliance to improve the equality of their procedures and regulations.

The good news is that people are beginning to notice the detection and control of appraisal discrimination and calling them out. The Department of Justice and the Consumer Financial Protection Bureau have recently become aware of complaints of appraisal discrimination. The CFPB has developed measures to improve regulation of potentially discriminatory automated valuation models. Combating housing discrimination, including bias in appraisals, is a key priority across the federal government, according to a statement from the DOJ Civil Rights Division.

Even though this is good news, not everyone can make a difference by working for the CFPB or the DOJ. To help the detection and control of appraisal discrimination contact a local fair housing organization in your area if you or someone you know believes that you were the victim of discrimination during the house assessment process. You can exercise your right to fair housing by making a complaint or telling your story, and you’ll also be doing your part to draw attention to the problem of appraisal bias. Contact Hoard Law for legal assistance.