Census Tracts & Appraising

Census Tracts as Neighborhood Boundaries in Appraising

CENSUS TRACTS are based primarily on POPULATION density…

The latest ‘buzz word’ in our profession is an indication from Fannie Mae that as of Jan. 26, 2015, their Collateral Underwriter electronic review software (made available only to Lenders/AMC’s for 1004 and 1073 reports)  will be able to compare your report info to other property reports and data narrowed down to a local CENSUS TRACT.

In my previous messages, I’ve asked a basic question:

When’s the last time you actually researched comparable sales or other property info based around local CENSUS TRACTS?

I would guess for the vast majority of (residential) appraisers you never have!

I would also bet that most appraisers never have seen (or even cared about!) a CENSUS TRACT map for their area. Well, have no fear. You can click the link below, and find the CENSUS TRACTS in your county/parish – choose your state first. By enlarging the presented map, you can see the actual boundaries with some clarity.  Note, some counties have two or more maps.


The CENSUS TRACT number has been a data reporting point on our mortgage report forms for decades. Put there as a way to track how well lenders complied with fair housing and lending laws. Well, now FNMA has decided this is a valid data point with which to compare the subject and comparable properties, and then judge your work based on what their Collateral Underwriter report process produces.

CENSUS TRACTS are based primarily on POPULATION density, not on actual types of structures and residences within each boundary. CENSUS TRACTS don’t always follow the same defined geography that an appraiser uses for a neighborhood description. CENSUS TRACTS in urban areas are compact and closely spaced; in suburban/rural areas they are larger, again, defining the population density in a given area which is kept around 4,000 people, although this can vary from around 1,500 to around 7,500 or so. CENSUS TRACT boundaries (and numbers) are dividable, as POPULATION changes.

Why is this being done? Short version: because it can be done easily and quickly using the UCDP/.xml report submittal process. Longer version: because FNMA can’t easily ‘define a neighborhood’ for data tracking purposes, so they have settled on the CENSUS TRACT as a way to “somewhat” define the subject’s neighborhood for THEIR purposes. In other words, they can’t easily geo-code your written neighborhood description in the report.

In suburban/rural areas, this new CENSUS TRACT evaluation process may not be a significant problem. But in urban areas, especially where developed residential areas have hopscotched across the landscape as in-fill developments and don’t follow a neat and tidy build-out in terms of quality, size and condition of homes, this may start to bite appraisers in the toosh, when multiple CENSUS TRACTS have to be used to obtain appropriately comparable properties.

It’s not time to panic, yet. Or to decline assignments routed to FNMA. But appraisers need to become more aware of the entire evaluation process soon to overtake ‘us’ and learn to write reports and rebuttals that are defensible when the inevitable letter(s) of concern from FNMA start arriving.

Do I sense that FNMA will change their position on this. Nope! They refuse to change a poorly designed MC Form, so why should they modify their stance on CENSUS TRACTS even when presented evidence that a CENSUS TRACT and Neighborhood don’t mesh?

Dave Towne
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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3 Responses

  1. Baggins Baggins says:

    New disclosure. I have performed my job in an unbiased manner, without attention to race, age, income, etc, etc, except if the census tract told me there was a difference I should pay attention to, for fear of losing FNMA approval.

  2. Dave, I always enjoy reading your insightful articles. Everything you said is spot on, however it is Baggins that is touching on the issue I think is most important.

    Census tract information contained in almost every title company property profile contains demographic information. Extensive demographic information. Originally compiled to aid in measurement of Fair Housing Laws, and perhaps ECOA compliance-this old, out of date system continues to provide the very basis and support for redlining and racial discrimination, it purports to prevent!

    I cannot include photos of humans (even in the distance) that may show race, because fools could construe it as being racist. If my photos show the owners family members proudly displayed against a wall or on a mantle, I must either shoot another angle or request they be moved (try explaining THAT one). Some AMCs, lenders and even appraisers think it is ok to routinely ALTER the photos so the persons are not clearly visible.  I recall shooting a street scene for a commercial property in California. The Easterly street scene view which was the MOST representative of the subject location clearly showed the CITY BUILT AND MAINTAINED monument sign in the center divider “Little Saigon”. The underwriters had a fit! I insisted that I would not take a picture that misrepresents the subject location as a concession to ignorance.

    My Thomas Bros Guide maps still show, Korea Town; China Town, Little Armenia, and so on…but that is overlooked.

    You get the idea.

    Now, every single appraisal form has census tract data. Anyone with access to a title company customer service office, OR NDC; RealQuest, or RealList, or any of the online records services has instant access to ALL of the racial and ethnic / national origin data for the immediate sub neighborhood that the feds have tried so hard to pretend no longer exists; or that is  not used for loan decision making.

    I naively used to believe that, until not too long ago a correspondent lender for a Large Bank located in Los Angeles told me the bank decided not to make the loan in Compton even though no appraisal had been done. They told him they checked the census data and a map and they know that’s “not a good area”. Sadly, the broker would not give me the name of the bank…or they would be closed today.

    So, perhaps FNMA will kindly explain WHY they based their measure of comparability on a system (census data) that promotes ongoing racism and redlining, under the guise of “measuring” compliance? Don’t they understand that we cannot truly end racial bias and “isms” until we actually END the systems that promote it?

    FNMA’s & GSEs and Feds ignorance of unintended consequences when they micro manage just keeps rolling along…


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Census Tracts & Appraising

by Dave Towne time to read: 2 min