HUD’s Private Inquisitors Will Chill Protected Speech of Appraisers

HUD Hands $54 Million to Nonprofits in Quest to Cow Appraisers. 

HUD awarded $54 million to 182 nonprofits to serve as posses in a a Spanish Inquisition-style drive. The deep pockets of the federal government will be used to help the nonprofits chill the protected First Amendment rights of appraisers to develop disinterested opinions of value of the properties they appraise. 

In the early 1990s, the Texas Legislature established an unusual nonprofit known as the Boll Weevil Eradication Foundation. The times were dire. A near-biblical plague of weevils had descended on the state’s cotton crop. So, state lawmakers granted the private organization the powers of government to combat the malevolent creatures.

But the organization was soon hijacked by factions and their cronies. The nonprofit’s coercive powers were used for mischief and score-settling as farmers and organizations jockeyed for competitive advantage. The nonprofit could impose crippling penalties and it could enter private property without the owner’s permission and seize equipment and destroy crops. The foundation had its own funding source – it could levy assessments.

To no one’s surprise, the Texas Supreme Court made short work of the boll weevil eradicators in Texas Boll Weevil Eradication Foundation Inc v. Lewellen, but it took about five years of abuses. The justices found that volunteers and private entities – neither elected nor appointed – wielded great power over people’s lives and property but answered to virtually no one. The nonprofit was stripped of its government powers.

Recalling the boll weevil eradicators, the U.S. Department of Housing and Urban Development announced in March 2023 that it was awarding $54 million to 182 nonprofits to serve as posses in a Spanish Inquisition-style drive. The funding will have the effect of chilling the free speech of real property appraisers nationwide. It will cow them into playing ball, which is exactly the point. As hunters can be overheard saying on the first day of pronghorn season in parts of the Texas Panhandle, Plus ça change, plus c’est la même chose.

The agency announced it had made the awards to the groups under its Fair Housing Initiatives Program. The grants will pay the nonprofits to find violations of the Fair Housing Act by singling out hapless appraisers who may occasionally conclude heretical value opinions that cause sellers to have to renegotiate sale prices or that put broker commissions at risk or threaten a lender’s debt trap on a serial refinancer.

The deputizing of these private inquisitors is part of a multi-year campaign waged by the lobbies of the homebuilders, Realtors, banks, fintechs and nonbank lenders to weaken or eliminate appraisers in federally backed mortgages. These groups have hitched their wagon to the equity movement, and the campaign has been wildly successful.

A press release issued by the federal agency promises that the Enforcement Initiative grantees will continue fair housing enforcement efforts nationwide. These will inevitably come in the form of more character attacks on individual appraisers in the media and more nuisance lawsuits in which the deep pockets of the federal government will be used to help the nonprofits chill the protected First Amendment rights of appraisers to develop disinterested opinions of value of the properties they appraise. A state-by-state breakdown of the awardees can be found here.

Eligible activities for the funding include testing for appraisal bias – which may mean locating aggrieved sellers and brokers in transactions in which an appraised value has torpedoed a deal, paying for multiple appraisals of the same property and attacking the appraiser who happened to file the lowest value opinion. “Educating local communities on the issue” may simply mean getting the word out to potential plaintiffs that funding is available to sue local appraisers for their opinions of value.

In an August 2021 report, the U.S. Federal Reserve looked for signs of racial discrimination in mortgage approvals using new data. It found no signs of discrimination. To the contrary, it found black borrowers tended to hold more debt proportionate to their income than Hispanic borrowers, that Hispanic borrowers held proportionately more debt than white borrowers and that all three groups tended to be more leveraged with debt proportionate to income than Asian borrowers. This may be an indication that African-Americans are again being targeted by lenders in affinity schemes, not that they’re being denied credit.

In another report from 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. The report ignored the likelihood that concessions and closing costs were being built into sales prices to a greater extent in these black and Latino tracts, which could contain a disproportionate number of first-time and cash-poor buyers being helped by sellers.

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 ranges that differed little statistically.

Tucked 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. Ultimately, the study found appraiser bias was a phantom issue.

But still peddling the canard has been HUD Secretary Marcia Fudge: “Far too many families in our country still face unconscionable prejudice, both as renters and homeowners,” she said. “The Fair Housing Initiatives Program puts money into communities to help them root out discrimination in housing. I am pleased to provide our state and local partners with the resources they need to combat inequity and build a fairer, more inclusive country for all.”

Jeremy Bagott
Image credit flickr - Ji Soo Song
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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17 Responses

  1. Baggins Baggins says:

    Please take a moment to review the referenced pieces from this article. Find your state and read which non profit groups are involved. Note, Wyoming was not on the list, perhaps a few others. So now that the grant money is flowing, companies will find something wrong with all valuation services to justify the continued payout. They won’t care if the justification for government grants is ethical or true, or not, they’ll make something up to keep the half million per organization flowing on a yearly basis. This will become it’s own monster and even the companies which pushed this narrative in order to cut licensed appraisers out, will eventually have to face up to this monster they are creating and feeding. Because the inquisition will not stop so long as the grant money keeps flowing.

    “They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just around the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power. ” Orwell

  2. Great article with great supported research as always! It’s clear the Federal government via HUD is trying to influence appraisers to come in above market value to meet borrower and lender demands. This will hurt borrowers but help lenders make more money. HUD is too cozy with lenders, AMCs. Lenders, AMCs are bragging on LinkedIn about meeting politicians, HUD members in lobbying trips to Washington to promote their business.

    As we all know appraisal bias is not the issue. It’s the income gap between whites and blacks, Latinos. People who make more money buy more expensive homes. Whites make more money than blacks, Latinos. Men make more than women. Married people make more than single people. Giving $54,000,000 to these private non-profits to attack appraisers is a misdirected waste of government funds. Any money should be given to the department that controls income, wages, employment and maybe education. It’s the income gap, stupid!

    I just read that the Feds will investigate any appraiser, appraisal for any loan that’s defaulted. Appraisers will now be damned if they do, damned if they don’t meet desired appraisal value. Appraisers could have a complaint filed against them and sued either way. After Austin v Miller we all know any E&O insurance will force the appraiser to settle no matter what just because it’s cheaper for the insurance company. This is so unfair.

    • Baggins Baggins says:

      So when people get the value they expected, theoretically a fair expression of fair market value, appraisers can be sued for bias on the other side of the coin, it’s our fault the people were into a home they could not afford? ‘I just read the feds will investigate any appraiser, appraisal for any loan that’s defaulted.’ Please provide a link, that’s new information. Is there going to be a special task force which instead of looking at mortgage fraud, presumes any and all possible fraud must be the fault of the appraiser, whom came after the fact after deals were already lined up? It’s confusing to say the least. Are there any big box forensic review firms hiring at the moment? I’ve been waiting to get in with them for a time just like this. Treasury notices continue to jump. We just don’t see it this time around, as the defaulted units are moving with special deals to hedge funds and investment firms whom seek to hold reits in perpetuity. So much for affordable housing initiatives, instead of returning wealth to the people, they’ll instead only be able to tax more to redistribute a dwindling pool of resources, big corps will be the only ones actually capturing more wealth.

  3. Avatar jaydee says:

    I’ve typed this before, and I’m typing it again. WHY is the census tract on an appraisal? Census tracts outline specific neighborhoods. Cross a railroad track or highway or busy arterial you in a different demographic. “The wrong side of town”. A 1960’s song by Johnny Rivers is still alive and well in the census tract. The ONLY ones discriminating are the lenders who blame appraisers. Realtor’s who’s “deal falls through”, blames the appraiser. Everyone butt hurt blames the appraiser. 1980’s commercial collapse and bailout? Who’s fault? The Residential R.E. Appraiser. Now the witch hunt begins for the bogeyman that doesn’t exist. But the writers of this horror show will invent one: The Residential Real Estate Appraiser.

    • Avatar Frank Wilson says:

      And hire the “appraiser” that does low quality work, then complain about low quality work from appraisers.

  4. Avatar Kimberly DeFilippis says:

    Residents say Arizona is a backward state – in this instance that’s a good thing. Only 2 grants were awarded, both in the amount of $125,000, however, it appears the total available is $1,100,000. Maybe I need to apply for that grant money. I can start using it to punish appraisal management companies who operate in Arizona with impunity.

    • Baggins Baggins says:

      Rise of the non profits. They create effective work around mechanisms for private groups to push their idea of how things should be, circumventing congressional intent. Especially vigorous when political beliefs go alongside the allocation of various monies. You could name your new non profit something like; educating americans on compliant unbaised appraisal practices. Cursory audits would be like; signed, approved, issue the check. Most non profit org managers earn ceo level pay.

      The list also functions as a convenient list for appraisers to have a clearer vision of what ngo’s will be likely to attack this profession and wrongly accuse this industries licensees. They may also conveniently serve an unintended purpose, as companies whom would be more receptive to our arguments about predatory lenders, and predatory appraisal management companies, as well as the unreliability of avm systems. Wouldn’t it be something if an appraiser used these grant monies to honestly educate the public that appraisers are the least biased participators in the entire lending process? To shift the focus away from appraisers to where blame is better placed; lenders, realty agents, gse policies, long since proven inadequate avm software utilities. Get that up and running, I’m in for a modest wage, remote working duties, many here would be. You’ll have an instant access to qualified professionals in the field.

      There are even companies whom specialize in helping people navigate 501c business formation to get those up and running. These days 501c’s have their own 501c’s whom have their own 501c’s, etc. Those whom look into the difficult to track networks have identified the gross abuse of 501c systems, as easy work arounds that for profit companies utilize to get a leg up on the competition and push narratives more friendly to their companies, into the public mind set. It’s our tax money too, we deserve to have fair representation. Every appraiser in this country is subjected to notable taxation without representation. TAF and ASB no longer represent appraisers best interests, they use the monies we are forced to pay against us. You may have made that comment in sarcasm, or really meant it. Either way, it’s within reach and is a great idea.

      • Avatar Kimberly DeFilippis says:

        No. not in sarcasm. In all seriousness.

        • Baggins Baggins says:

          Well, under the direction of Ms Fudge, they’re just giving money away, without even understanding what the issue or real problem is. Why not. It’s like the guy said in the article before this one; Only government could screw something up this badly. You could hire Mr Bagott to provide a professional well written website and statement of cause summary for both the 501c formation, grant approval, and website content. Then you could sell your services to the legal fund guys and recapture some of their grant monies to go towards something helpful, rather than chasing down innocent appraisers for lynch mob justice. Imagine if all this PAVE money went against the big lenders and fintechs, against the amc’s and avm’s, instead of for them. Also, now there may be an additional regulator associated with 501c oversight whom appraisers could access beyond the paper tigers whom oversee the appraisal industry. The entire thing is illogical ran by luddites anyways. Imagine the concept of price bias… Value bias is an easier sell but in the end, is still a misnomer, basically a logical contradiction, an impossibility. Values are reflective of prices people pay, nothing more, nothing less. Nobody can ever answer the simple question; what exactly is wrong with lower prices? And yet, the government spent a quarter billion to ‘solve the issue’. Who’s going to sue Dave Bunton in civil court for this gross misrepresentation and libel he’s cast across the entire industry he’s supposed to represent?

  5. Avatar jaydee says:

    Sorry I don’t recognize your authority. You’re not an identified user nor are you a part of the Washington State Licensing Board.

  6. Avatar Realist says:

    Great Article by Bagott.

    So, it appears that HUD is illegally applying pressure/influence on appraised values with their misuse of unaccountable power. Can we make citizen arrests?

    • Baggins Baggins says:

      Realist. Check out this video by James O’keefe and his new OMG media group.

      “But James, you can’t be everyone’s editor, that’s impossible.” O’keefe; Watch me.

      The next best thing to a citizen arrest is catching people lying and cheating on camera.

      O’Keefe Media Group Delivers on Promise to Equip Citizen Journalists with Cameras

  7. Avatar John Daley says:

    With much respect to the author and all in the thread. This whole blog sounds like a typical News day where everyone says something and nothing gets done. Thats why I don’t watch news, and I am to that point with Appraiser Blogs. The main issue is two things; either the appraisal industry has no strong leadership to fight for the industry; or they are being told to be quiet. You can decide what that means. I am tired of hearing the victim attitude. Either we find good leaders, and/or go out and protest for our existence. Then again…if you follow the money you will have your answer. And all this happened because of one court case. Unbelievable. Where is the common sense?

    • Baggins Baggins says:

      And now Freddie is moving to artificial intelligence to assist with ‘unbaised’ outcomes, or something like that.

      What could go wrong? In this article; AI programs levy false accusations regarding things that never happened. Why does this sound so strangely familiar? Most people should not be trusted around large databases. They call this high functioning software artificial intelligence, because they’re luddites whom don’t understand technical details. It was an easy sell for the developers. We do not have AI, it’s not sentient, and it’s as ridiculous and mis informed as the programmers whom coded the operational peramiters in. The idea fails basic logical tests, centralized systems coded by biased humans, does not result in less bias, only less personal accountability.

      John, keeping the momentum going is as simple as forwarding them links to the appraisers blogs. It’s really that easy. It’s always just another news day. Every day of the week. Always turn the page, never stop.

  8. Abby Piper Higgins on Facebook Abby Piper Higgins on Facebook says:

    Just when you think it couldn’t get any worse…

  9. Joy Smith on Facebook Joy Smith on Facebook says:

    And less and less people will come into this industry and more and more are leaving. 🙁

  10. Avatar Frank Wilson says:

    I’ve seen the most outrageous sales prices in areas that attract first time homebuyers. They tend to be less knowledgable and have more people trying to take advantage of them.


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HUD’s Private Inquisitors Will Chill Protected Speech of Appraisers

by Jeremy Bagott time to read: 4 min