PAVE May Pave Over Appraisers
The blame game against appraisers is continuing the fast and furious start, evidenced by the PAVE report.
A synopsis is in the link: PAVE task force delivers plan on appraisal bias – Lexology
Key info from the PAVE report.
“Relevant agencies have also committed to addressing potential bias in the use of technology-based valuation tools through a rulemaking related to automated valuation models (AVMs), including the addition of a nondiscrimination quality control standard in the proposed rule.”
“In the coming months, the Task Force will assess: (i) the “expanded use of alternatives to traditional appraisals as a means of reducing the prevalence and impact of appraisal bias”; (ii) the use of “range-of-value estimates instead of point estimates as a means of reducing the impact of racial or ethnic bias in appraisals”; (iii) the “potential use of alternatives and modifications to the sales comparison approach that may yield more accurate and equitable home valuation”; and (iv) “public sharing of a subset of historical appraisal data to foster development of unbiased valuation methods.”
Once again, government is shifting blame for the policies it created decades ago which directly affected property valuations to today’s most vulnerable and least protected valuation group, that being appraisers. Appraisers become the convenient scapegoat for the identity politics, which is what this initiative is really all about.
There seems to be beliefs among those on the PAVE panel that AVM’s are the cure-all to ‘right’ the decades of governmental policies that caused low value areas to be established in the first place. In addition to the lenders’ desires to eliminate appraisers from all phases of the mortgage lending transactions by using non-licensed ‘inspectors’ at the front end of the appraisal process, incorporating AVM’s as a primary component in property valuation will be just another nail in the coffin.
There seems to be another belief that real property is ‘static’, never changing, which we all know is foolish. AVM’s, by themselves, cannot differentiate when property changes happen unless someone actually examines the property and feeds revised data into the AVM’s.
‘We’ know that ‘we’ didn’t establish lending policies or cause certain individuals to be excluded from certain areas, or even forcefully moved to different lower value areas, which is what our governments (federal and local) did over many years, and still do. This has happened across all ethnic groups, not just the one receiving the most emphasis in the PAVE meetings and in the media.
Now, moving forward to modern times, when ‘we’ do our appraisals properly per the existing lending policies, ‘we’ get blamed for not producing “equitable home valuations.”
Re-read (ii) above. Then explain to me how providing a ‘range of value’ will “reduce the impact of racial or ethnic bias in appraisals.” Many appraisers believe that stating a ‘range’ is much more appropriate than a ‘point’ value, and it’s USPAP compliant. However, that’s not the way mortgage lending policies (and the forms) are written. But I fail to understand any logic in such an illogical statement in this PAVE report as to how bias will be prevented when reporting a range of value.
Another passage in the linked report says this:
“… steps federal agencies can “take using their existing authorities to enhance oversight and accountability of the appraisal industry and empower homeowners and homebuyers to take action when they receive a valuation that is lower than expected.”
That means appraisers will continually have even bigger targets on their backs when someone with a financial and emotional tie to the property believes the value should be ‘way up here’ but the appraiser concludes, based on market evidence, that the value should not be that high. This happens now, of course.
If the PAVE process gets implemented in the draconian ways that it appears to be headed, without ‘us’ mounting a strong defense, appraisers are going to be smothered, and paved over.