Racial Bias: Redlining in the Modern Era
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…are they behind this modern day redlining?…
The broad definition of an algorithm according to Merriam Webster’s Dictionary is “a step-by-step procedure for solving a problem or accomplishing some end.” It is pretty basic and fully understood, right?
Now think back to those dreaded English classes. When did you learn about acronyms? Grade School, High School, College? Regardless, let’s just say it was a while back, so I will refresh your memory. According to Merriam Webster’s Dictionary, an acronym is” a word formed from the initial letter of words of each of the successive parts or major parts of a compound term.“
Now which came first the chicken or the egg? Confused? Stay with me, it will be clear in just a moment.
Appraisers are analytical, so think outside the box. Do we know if an acronym was developed because of the compound term or was the compound term applied to the word? Do we really know?
Now take the word Algorithm. Is it a real word or is it an acronym for:
A Lined Geographically Optimized Region, Invisible To Housing Market Supervision
Yep, clear as day now. Lenders want to use algorithms to redline neighborhoods, all disguised in the complexity of a computer program.
Yes, that is a bold statement to make, but could there be truth to it? The Ted Talk circulating a few weeks ago that talked about racial bias in facial recognition programs got me thinking. If the program could be used to discriminate against people based on their skin color, then the program could be written to redline neighborhoods. I am not a tech guy, but it seems it would be easy to program and virtually undetectable to the users of the software. Of course anyone analyzing the programming might be able to detect the bias.
Seriously think about this:
The lender uses a third party to produce an Automated Value of a property; the third party program includes a redlining bias of certain neighborhoods, Bingo! the lender either has an unreliable biased value (not that any AVM is reliable) and is able to obtain higher pricing on the mortgage or is able to deny the loan entirely. Any liability of discrimination is passed on to the third party. Would regulators even think to look at the programming of the Automated Value? Do they even care? Since the government is pushing for these automated values, are they behind this modern day redlining?
What would happen if the automated loan underwriter included a redlining bias in addition to the automated value with the same bias? Does the Government have an incentive to redline neighborhoods like they did before?
Think this concept is far-fetched? Take a look at this article in the Chicago Tribune published on February 17, 2018.
All I can say, Attorneys are you paying attention?
By Advocate. The author is a Certified Residential Appraiser and has chosen to use the pen name Advocate to protect their identity. Many famous people including Benjamin Franklin, Agatha Christie, and Steven King have written under a pen name for various reasons. Just Google pen names used by famous authors, there are only 45,700,000 results to choose from.