Freddie Mac: Property in Minority Communities Reflect Appraisal Bias

As National Credit Union Administration Chairman Todd Harper continued his call for solving bias in the appraisal industry, the Federal Home Loan Mortgage Company released new data last week showing that property in minority neighborhoods is appraised lower than property elsewhere.

“Appraisers’ opinions of value are more likely to fall below the contract price in Black and Latino census tracts, and the extent of the gap increases as the percentage of Black or Latino people in the tract increases,” Freddie Mac said, following an examination of almost 12.8 million appraisals between 2015 and the end of 2020.

“Black and Latino applicants receive lower appraisal values than the contract price more often than White applicants.,” Freddie Mac reported.

The report ended with a call to the housing industry to help identify the root causes and potential viable solutions to establish consistency in the appraisal industry.

A representative of the appraisal industry said he takes the research seriously. “The results of this analysis are deeply troubling,” Appraisal Foundation President Dave Bunton said. “The Appraisal Foundation will continue its efforts to create an appraisal profession that is reflective of the United States we live in today and trusted by all Americans.”

Harper, in recent speeches, has cited appraisal bias as a problem that must be addressed if policymakers want to increase home ownership among minority groups.

“At the NCUA, we are studying the causes of disparities in appraisal and valuation services to inform our future policymaking,” Harper said in a speech at Inclusiv’s annual conference last week. “We are also working with several other agencies on joint rules to establish quality control standards for automated valuation models. And, within the Federal Financial Institutions Examination Council, we are continuing conversations on what more we can do to ensure greater equity within our financial system.”

Related:

Freddie Mac Report: Racial and Ethnic Valuation Gaps In Home Purchase Appraisals

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