Freddie’s Study, NPR Story Recall Notable Academic Hoax

Freddie Study, NPR Story Recall Notable Academic Hoax. 

NPR topped the online edition of its article with the headline, “Black and Latino Homeowners are About Twice as Likely as Whites To Get Low Appraisals.” The problem? Freddie never called the appraisals “low.” While the Freddie Mac study finds no evidence of undervaluation, the NPR story about the study somehow does.

Almost 30 years ago, Alan Sokal, now a professor of mathematics at University College London, perpetrated a memorable hoax. He submitted a pseudoscientific article to a cultural studies journal called Social Text. By design, his paper was strewn with nonsense. Titled “Transgressing the Boundaries: Towards a Transformative Hermeneutics of Quantum Gravity,” the article held that physical reality was merely a social construct.

The nation’s 80,000 state-licensed real property appraisers will recognize elements of Sokal’s hoax as crusaders — appointees at places like the Federal Housing Finance Agency and the U.S. Department of Housing and Urban Development – perpetuate a false narrative that is weakening a critical guardrail in the nation’s $11 trillion mortgage market.

At the time of Sokal’s hoax, so-called “postmodernists” in higher education were waging a crusade against scientific objectivity. The “science wars” of the mid-1990s saw academics in the fields of cultural studies, comparative literature, media studies, cultural anthropology, feminist studies, and science and technology studies attacking scientists. Most in the former group knew almost nothing of the sciences they criticized.

Sokal’s aim was to see whether such a hoax paper would be published if it 1) sounded legitimate and 2) stoked the vanities and ideological preconceptions of the editors.

As professor Sokal predicted, his article gained publication in the 1996 spring/summer issue of Social Text, published by Duke University Press. His paper briefly became the toast of certain academic circles, but it was never peer-reviewed by an actual scientist.

Sokal quickly set the record straight in the May 1996 edition of the Lingua Franca journal in the article “A Physicist Experiments with Cultural Studies.” He concluded that editors at the first publication ignored the required intellectual rigor of verification and “felt comfortable publishing an article on quantum physics without bothering to consult anyone knowledgeable in the subject.”

Fast-forward to September 2021. Mortgage giant Freddie Mac scoured 12 million appraisals between 2015 and 2020 and published a study that found the sales of homes in black- and Latino-majority census tracts were more likely to appraise below the negotiated sale price than sales of homes in white-majority tracts.

While appearing to reveal something sinister about the nation’s real property appraisers, buried in the report was the begrudging acknowledgment that the comparables selected by appraisers to value homes owned by people of various racial groups tended to be reconciled within a range that differed little from one another statistically.

Tucked well into the report was the recognition, “Appraisals for properties in Black and Latino tracts tend to be slightly closer to the lower end of the [comparable] range. But the report then conceded, “the average dollar impact is less than $500.”

An impact of $500 or less off the median U.S. home sales price of $428,700 around the time of the study represented a departure of about 0.1% or less. The amount fails to rise to even a rounding error. Analysts at the mortgage giant seemed to be grasping at straws to find something – anything – wrong with the appraisals but, as they conceded, couldn’t. Systemic bias, the study found, was a phantom issue.

So, instead, the study trumpeted a finding that 7.4% of appraisals in majority-white census tracts appraised below the property’s negotiated sale price, while 12.5% appraised below the negotiated sale price in black-majority census tracts with an even wider 15.4% gap for Latino-majority census tracts.

Since Freddie Mac concedes it found no problem with the valuations beyond a statistical aberration, its finding of a contract-price-vs.-actual-value gap points to a more complicated issue in which brokers in minority areas seem to be more likely to advise buyers to agree to values that were above market. Whether this is due to inexperienced buyers, inexperienced brokers representing them, a greater proportion of brokers conflicted by dual agency, sellers with unrealistic expectations, home sales kept out of MLS systems or the prevalence of so-called affinity schemes is anyone’s guess. Freddie dishonestly left this question unacknowledged.

The 2007-2008 financial crisis exposed the degree to which low-income borrowers were preyed upon by bad actors. Fannie and Freddie drove the exploitation by buying or guaranteeing so-called Alt-A, negative-amortizing and stated-income mortgages that proved toxic to minority homeownership in communities from Modesto, California, to Hartford, Connecticut.

But back to Freddie’s study. On the heels of its release, editors at National Public Radio misreported the findings. NPR topped the online edition of its article with the headline, “Black and Latino Homeowners are About Twice as Likely as Whites To Get Low Appraisals.” The problem? Freddie never called the appraisals “low.”

While the Freddie Mac study finds no evidence of undervaluation, the NPR story about the study somehow does. NPR’s headline should have read, “Minority Buyers Twice as Likely to be Advised to Overbid on Homes.”

Both the Freddie Mac study, along with the misreported NPR story, were seized on by disrupters in government. This group is seeking to eliminate appraisals in federally related mortgages in a misguided attempt at erasing the racial wealth gap in America. It’s the equivalent of eliminating reading tests as a way to solve illiteracy. Quietly stoking these fires have been the nonbank lenders, the fintechs, the homebuilders and the Realtors, who have been trying to weaken appraisers for decades related more to issues like bonuses, commissions and the transference of risk to the U.S. taxpayer than ideology.

The mortgage giant, which is under federal conservatorship, is no doubt being pressured by its regulator, the Federal Housing Finance Agency, to play ball and adhere to Executive Order 13985, an early Biden administration directive titled “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” Freddie’s study appears to have been shaded by an overarching need to find something.

Commenting on the study was Michael Bradley, a senior vice president at Freddie Mac. “An appraisal falling below the contracted sale price may allow a buyer to renegotiate with a seller,” he told NPR.

But then he seemed to come out in favor of minority buyers overpaying (and overborrowing) if that’s what it takes, “it could also mean families might miss out on the full wealth-building benefits of homeownership or may be unable to get the financing needed to achieve the American dream in the first place.”

Or perhaps Bradley was just fuzzy on which party in the transaction would be experiencing the American dream and the full wealth-building benefits of homeownership – the seller receiving a double-digit premium above the home’s market value or the buyer, who appears to be at a disadvantage in Bradley’s world view.

Professor Sokal no doubt saw the publication of his hoax paper with some degree of vindication and ironic satisfaction. Appraisers, who have been maligned by Freddie’s study and NPR’s incompetence in reporting it, are unsatisfied and haven’t yet been vindicated.

Jeremy Bagott
Image credit flickr - Marco Verch Professional Photographer
Jeremy Bagott

Jeremy Bagott

Jeremy Bagott is a real estate appraiser and former newspaperman. His most recent book, “The Ichthyologist’s Guide to the Subprime Meltdown,” is a concise almanac that distills the cataclysmic financial crisis of 2007-2008 to its essence. This pithy guide to the upheaval includes essays, chronologies, roundups and key lists, weaving together the stories of the politics-infused Freddie and Fannie; the doomed Wall Street investment banks Lehman and Bear Stearns; the dereliction of duty by the Big Three credit-rating services; the mayhem caused by the shadowy nonbank lenders; and the massive government bailouts. It provides a rapid-fire succession of “ah-hah” moments as it lays out the meltdown, convulsion by convulsion.

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10 Responses

  1. Maureen Sweeney on Twitter Maureen Sweeney on Twitter says:

    @NPR, it’s most disappointing you didn’t check your sources for your story and are doing your best to violate the public trust.

  2. Avatar Jason says:

    It seems Freddie’s intent was to raise the false flag and let the damages accrue!

    • Avatar Kenneth Smith says:

      Why didn’t Fannie or Freddie come out and correct the record and let the controversy die down.

      • Baggins Baggins says:

        Perhaps the concerted dismantling of the appraisal valuation profession at the behest of lenders, whom would rather not have independent checks and balances standing in the way of their aggressive loan efforts? People are so old fashioned, thinking government institutions still actually serve the people.

  3. Avatar Mark Davis says:

    Excellent article Mr. Bagott. But the fix is in by the political/media enablers and promoters of race hoaxes. Stupid is as stupid does…

  4. Avatar Shawn Prince says:

    Did Fannie or Freddie pay queen Latifah to put that show on couple days back. Where white appraisers caused inadequate home valuation to occur because they were racist? I would love to find out who wrote the script for that episode as it was mirrored on a proven inaccurate report.

  5. Avatar jaydee says:


  6. Avatar Mary says:

    Just what I have always thought. Minority buyers are overpaying period and those who stand to gain a commission are leaders of this pact to get them into homes at all costs. The very people they are trying to protect in this bias nightmare are the ones who will and have been hurt. But we are dealing with the racial narrative in this Country and it stands above all other logical and factual data. SAD!

  7. Baggins Baggins says:

    We’re not talking about a ham sandwich, but rather a vital safeguard to the entire American populaces interest in comprehensively fairly managed lending processes. As well as the multitudes of professional working persons whom are harmed by these actions. These companies have violated their own stated guidelines.

  8. Avatar Seneca says:

    Including the recent Appraiser Blog article “”
    I think there is one glaring stat researchers are overlooking. The rate a neighborhood increases. In my market, Columbus, OH and central Ohio, Searching the year 2021 saw white neighborhoods increased mostly at 10-17%. The minority neighborhoods increased mostly at 16-25%. Both stats have some outliers since my MLS doesn’t do census tracts. The rapid increase in the black neighborhoods is due to but not limited to the finding of affordable housing, investor flipping, gentrification and other factors. At these incredible rates of increase it is reasonable to conclude that the appraiser market data may have not kept up with these large increases in evaluating a the small recent month or two prior to the effective date. Also these neighborhoods had a higher SP/LP ratios of 3% to over 4%. Which is 1-2% higher than white neighborhoods. Just because you bid higher than everyone else doesn’t mean the house is worth what you bid. Which may be one of the bigger factor in the spread. So if there is really a 5% difference in “Low” appraisals between the two neighborhoods these factors should be considered. I’m sure you can reason that there are other takes & possible conclusions from this but I haven’t seen these factors discussed in any research. Probably way too over their heads for them.


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Freddie’s Study, NPR Story Recall Notable Academic Hoax

by Jeremy Bagott time to read: 5 min