ASC Blaming Appraisers
The Appraisal Subcommittee, because they were directed to do so, has produced a report, which frankly and explicitly lays the blame for low market values of homes in ‘communities of color’ directly at the feet of independent appraisers involved with mortgage lending.
You will start seeing accusatory slanted media reports about this report. ABC news already has distributed it. A TV station in San Francisco has aired a story already.
Yes, the report casually mentions actual facts that GOVERNMENT policies and procedures promulgated segregated and extraordinarily unfair housing issues in the US, from the 1930’s into the early 1960’s. The GSE’s, FHA, VA wrote the documents appraisers followed. Banks and other lenders went along with those policies. It was part of the culture at the time. Was it wrong? Yes. Just like the slave trade many COUNTRIES encouraged. Which ended, thankfully.
Unfortunately, appraisal associations had to be sued in the early 1970’s to finally eradicate discriminatory advice they continued to promote until then. That appears to be one justification for the piling on this report does.
The report basically says “you appraisers shouldn’t have done what you were told to do”, “you caused the low values”, and now we’re coming after you, the independent appraisers and the agencies who write policies, to fix what ‘the GOVERNMENT’ originally caused.
The report also implies that ‘you’ are responsible because so few ‘people of color’ are appraisers. (If parity to equalize racial composition is such a huge concern, why no outcry about National Football League teams which are dominated by ‘people of color’?)
Appraisers need to take a few minutes and peruse this delightful document. If you read nothing else, read pages 1-12, and the Conclusion below.
There are some other interesting passages buried in the bowels. One that caught my eye is a suggestion that using the ‘Sales Comparison Approach’ is “not fair” to ‘communities of color’, unless the appraiser leaves the immediate neighborhood to seek out higher priced homes elsewhere to artificially increase the appraised value of the subject.
This is the conclusion in the report:
An appraiser has the unique power to determine the value of a home, which for most Americans, is their single most important financial asset and holds the key to wealth, stability, and opportunity for their family and generations to come.
In addition, home values affect the tax base, school funding, and community investments. Moreover, time and again, our nation’s economy and financial markets have been significantly impacted by home valuations, with communities of color often bearing the brunt of failings in the mortgage market and the home appraisal process.
Given the importance of homeownership to American families, particularly families of color, governmental and private organizations have called for reforms and a comprehensive examination of the structure and governance of the appraisal industry.
In response to these calls for reform, we have assembled the research and recommendations in this report. We urge federal and state governmental entities, The Appraisal Foundation, the GSEs, lenders, appraisers, researchers, and civil rights and consumer advocates to work together to address the concerns raised in the report, including:
- Questions About the Governance of the Appraisal Industry
- Gaps in Fair Housing Requirements and Training
- Barriers to Entry to the Appraisal Profession
- Compliance and Enforcement
We hope that this report will encourage conversations among key stakeholders in the appraisal and housing industries to seek workable, sustainable solutions that benefit the whole of the housing market, including borrowers of color.
This ‘train’ of accusations started down the track about four years ago, because appraisers are easy targets. It’s been building steam ever since. The ride toward ‘reforms’ is not going to be very scenic or pleasant for appraisers for at least three more years. Appraisers will need to keep very close tabs on the waybill of items being hauled your way.
Even though this report is extraordinarily discouraging, I will say again: if you are a biased appraiser in any way, in how you conduct yourself or in how you analyze data and report values, then you need to excise yourself from appraisal work. On the other hand, if you are doing your work appropriately and professionally according to current policies and procedures, continue being careful and diligent. And hold your head high.