https://www.brookings.edu/wp-content/uploads/2021/02/20210219_CRM_CalhounRanieri_FINAL.pdf

It’s important to consider that reform proposals represent a cumulative effort which has nothing to do with the appraisal industry and everything to do with private corporations continuing to wield excess power only capable through federal programs. Shifting the balance of power will not stop abuse of the systems, but merely redirect the favor. It may be better to wind down the GSE’s entirely and let the free market finally work again. Home owners pushing the individual experience story may not fully understand the breadth, scope, and potential of GSE influence. What one guy said to another guy or what happens with one loan is rather inconsequential from the federal perspective.

The invisible hand is always present, always active. Appraisers are not biased but our value measurements may indeed be reflective of systemic issues which are outside of our control. The appraiser is the messenger. Don’t blame the messenger.

FNMA selling guide. Use Control+F to seek out any given key word. Click arrows next to the search box to scroll through all instances. I searched; ‘crime’.
https://singlefamily.fanniemae.com/media/21821/display
Part B, Origination Through Closing
Subpart B 4, Underwriting Property
Chapter B 4-1, Appraisal Requirements
Section B 4-1.1, General Appraisal Requirements
02/05/2020
Prohibited practices include:
• use of unsupported, descriptive comments or drawing unsupported conclusions from subjective observations. These actions may have a discriminatory effect;
• use of unsupported assumptions, interjections of personal opinion, or perceptions about factors in the valuation process. These actions may have a discriminatory effect, and may or may not affect the use and value of a property;
• use of subjective terminology, including, but not limited to:
– “pride of ownership,” “no pride of ownership,” and “lack of pride of ownership”;
– “poor neighborhood”;
– “good neighborhood”;
– “crime-ridden area”;
– “desirable neighborhood or location”; or
– “undesirable neighborhood or location”;
• use of subjective terminology that can result in erroneous conclusions;
• actions that may have a discriminatory effect or may affect the use and value of the property; or
• basing the analysis or opinion of market value (either partially or completely) on the race, color, religion, sex, handicap, familial status, or national origin, of either the prospective owners or occupants of the property being appraised or the present owners or occupants of the properties in the vicinity of that property
Reporting Unfavorable Conditions
The lender must ensure that appraiser comments regarding unfavorable conditions, such as the existence of an adverse environmental or economic factor, also discuss how the condition affects the value or marketability of the property being appraised and explain how the condition was taken into consideration in the valuation process. In such cases, the appraiser’s
analysis must reflect and include comparable sales that are similarly affected whenever possible.

Local comps and limit the reporting to economic and environmental. Best not to make reporting more complicated than it needs to be.

Mr. Baggins, I only ask that you are pithy in your responses.

You are incorrect that appraisers only do “measuring”. Appraisers report on the 1004 if the sellers and buyers are “typically motivated”. This requires interviewing the listing and buyer’s agent, no “measuring” involved. If the listing agent reveals that the seller is selling because the neighbors are “undesirable” (such as black), that is to be reported and analyzed.

And contrary to your assertion, crime rates would be reported in the Neighborhood Section of the 1004 if they are noteworthy and impact value.

Lastly, this tired excuse (that has appeared here numerous times on this blog site) that there are ethical rules that prohibit discrimination so this is proof that there is no discrimination in the profession is nonsense. There are laws against driving through red lights so no one ever drives through a red light, right? Right?

Analyzing involves measuring. To observe something and make judgments upon data is to apply some form of measurement. Every application of data filtration is application of a varied measurement standard. Even though the decisions may be flexible, credible valuation results are the constant end goal.
Buyers know where they are at. Reporting on crime and ethnicity is outside of typical guidelines and peer standard expectations. Caveat emptor. Those are not value measurement items because they are conditions which already exist and the assumption is they have already influenced existing market prices which value is derived from. An appraisers job usually does not include forecasting, certain forms of speculation, or racial influence analysis. In fact those may be prohibited talking points under said guidelines pertaining to the sow.
There are many varied volumes of lender guidelines to follow. Many are primarily mirrored with varied minor differences. The themes however are constant. Worth the time to read these now and then. I just picked one randomly and it had exactly what I was looking for.
https://web.archive.org/web/20210727155224/https://www.carringtonwholesale.com/wp-content/blogs.dir/2/2017/03/CMS-Conventional-FNMA-Guidelines.pdf
A number of federal, state, and local laws prohibit discrimination in the appraisal of housing. Fannie Mae expects professional appraisers to fully understand that discriminatory valuation and appraisal reporting practices are not only illegal, but also unethical. Unintentional discrimination can occur as the result of what an appraiser states, or fails to state, in his or her appraisal report. CMS and the appraiser must ensure that the integrity of the loan decision is not influenced by subjective, racial, or stereotypical terms, phrases or comments in the appraisal report.
Prohibited practices include:
– use of unsupported, descriptive comments or drawing unsupported conclusions from subjective observations. These actions may have a discriminatory effect;
– use of unsupported assumptions, interjections of personal opinion, or perceptions about factors in the valuation process. These actions may have a discriminatory effect, and may or may not affect the use and value of a property;
– use of subjective terminology, including, but not limited to:
o “pride of ownership,” “no pride of ownership,” and “lack of pride of ownership”;
o “poor neighborhood”;
o “good neighborhood”;
o “crime-ridden area”;
o “desirable neighborhood or location”; or
o “undesirable neighborhood or location”;
– use of subjective terminology that can result in erroneous conclusions;
– actions that may have a discriminatory effect or may affect the use and value of the property; or
– basing the analysis or opinion of market value (either partially or completely) on the race, color, religion, sex, handicap, familial status, or national origin, of either the prospective owners or occupants of the property being appraised or the present owners or occupants of the
properties in the vicinity of that property.

To quote from the National Association Of Realtors: “Steering” is the practice of influencing a buyer’s choice of communities based upon one of the protected characteristics under the Fair Housing Act…”

Contrary to your assertion, “steering” does not apply to other circumstances such as showing a preference for one lender over another as that would not violate The Fair Housing Act.

And contrary to your assertion, the appraiser’s job is not to provide “measurements” but to analyze and report the market. This would include “blockbusting”, “steering” (as defined above), “white flight”, etc. if those impact the value of the subject property. We are obligated to report anything that impacts the value of the subject property. If a murder occurred on the subject property and that impacts the value, we are obligated to report it and analyze its effects on value. I know there are appraisers who will say “I’m not a police detective” (or something like that) and that is why they did not do the proper analysis or reporting but they are just making an excuse for a professional failure.

That may not be as straightforward as it may seem. Purchasers often make their own decisions regardless of agent influence. Steering is also a common term for agents running borrowers toward a certain preferred lender whom may in turn give them kickbacks or referrals.

The fact that caution against steering practices goes towards realty agents is expected. Because it is the agents whom assist buyers in making their own open market purchasing decisions. Agents do have rules about unbiased representation. Individual purchasers are under no such restrictions, they buy when and where they want. Buyers ultimately drive the market in terms of real property relations to price, assisted by their agents, which sets the value measurement point.

Appraisers provide a measurement and are not the constructor of market happenings. If dealing with GSE systems, appraisers are brought in after the fact to analyze collateral value. Appraisers are not culpable for other peoples decisions. The valuation service should not be confused with a guarantee or an indemnity. One would not blame a contractor whom measured fault in the previous contractors service, for merely measuring and identifying what was already there. Same concept.

https://appraisersblogs.com/racial-bias-in-real-estate-is-it-the-property-appraisers-fault

The National Association of Realtors (on July 10, 2020) mentions on their website that “steering” is still a problem among realtors. Appraisers would be obligated to report this in their reports. You won’t hear anything about “steering” from David Towne.

https://www.nar.realtor/fair-housing-corner/steer-clear-of-steering

The Brooking Institute does not mention “critical races theory” in their report and David Towne himself has not mentioned it until recently when it has become a Fox News talking point. If David Town can show where in the Brooking Report it mentions “critical race theory”, I would like to see this.

I’ve wondered how could I, even if I wanted to, support and prove a bias adjustment? What methodology could I use? Would Regression work? How could I squeak a bias adjustment by a review appraiser or underwriter? How can I take hundreds of solds in a dataset and extract only those properties owned by a minority? What would the adjustment be for variances in ethnicity? If real estate is all about location, location, location, how can I support the use of a sold comp outside the subject’s marketing area to support and prove my bias?

I think all appraisers need to stand up and call this Appraiser Bias the bullsh%$ it is. It’s another Big Lie!!

This needs to stop.

Seek the truth.