Census Tract Info Used Against Appraisers
Appraisers, of all the issues I’ve written about or questioned since 2006, this topic about your knowledge of, and concern about, Census Tracts has overwhelmingly been the largest response ever, several hundred within just a few hours of posting!
To refresh, the questions were these:
- Do you know where the Census Tracts boundaries are in the areas you work?
- When you research and select comparables for your reports, do you pay any attention to Census Tracts?
- Do you know the racial composition of Census Tracts in the areas you work?
The vast majority of responses have been a resounding “NO” to all three, roughly 99%.
An extreme minority of appraisers do keep one eyeball on Tracts locations by using maps, but even for those, the answer to #3 was NO, except oddly, one appraiser revealed that racial components were examined. The why was not explained.
I have learned that in very rare cases, some MLS associations use Census Tract numbers to identify the “Area Number” for coding property locations, and for data research purposes – mostly in urban cities. But the vast majority of MLS services align the “Areas” with local geography or other details, which does not necessarily correspond with Census Tract boundaries.
In regard to #2 above, one appraiser provided this verbiage which is used in reports:
“Census tract boundaries do not necessarily define the subject’s market. When reasonable, comparables are selected from the same census tract, however, census tract location is not part of the primary search criteria.”
For most of our reports, our software downloads the Subject’s Census Tract number automatically into that field in the form. ‘Preferences’ in the software must be enabled to allow this. This is required per Federal Law, as explained below, because the appraisal is considered part of the mortgage application.
In rare cases, when the Census Tract field on the form is not auto-populated, appraisers can use this web site to obtain the Tract Number for the Subject’s address (and see the Tract map boundaries).
The FFIEC Geocoding/Mapping System (System) helps financial institutions meet their legal requirement to report information on mortgage, business, and farm loan applications. Geocoding refers to the Metropolitan Statistical Area/Metropolitan Division (MSA/MD), State, County, Census Tract combination (address information) that must be provided for each reported loan application and the System allows institutions to enter a street address to determine the corresponding geocode. The System also provides Census demographic information about a particular census tract, including income, population, and housing data.
I decided to write about this topic due to the current political pressure surrounding ‘race.’ I’m starting to see more and more research documents, white papers, review software, etc., that use highly detailed Census Tract information about racial demographics (Question #3) used against appraisers who by law (USPAP and others) CANNOT use race, etc., as a component of their appraisal valuation decisions.
Per this very simple survey, the majority of appraisers apparently are doing what they are supposed to do. Unfortunately, “we” are being attacked – (mostly by extremists) for following accepted appraisal protocols.
- Mortgage Application Volume Nearing Historic Low - September 22, 2023
- The Unbiased Reality of Census Tract Data Dump… Open Letter to FHFA - August 15, 2023
- Isn’t that Just PAVEY! PAVE Response and Marcia Fudge - August 8, 2023