Appraisal Subcommittee Hearing on Appraisal Bias January 24, 2023, notes by Mary Cummins

Appraisal Subcommittee Public Hearing on Appraisal Bias, January 24, 2023, marcia fudge, mary cummins, asc, hud, real estate appraiser, pave taskforce, cfwb, jim park, race, racial bias, discrimination, black, brown, white, value, neighborhood, appraisal, valuation

https://www.consumerfinance.gov/about-us/events/appraisal-subcommittee-hearing-on-appraisal-bias/

https://www.youtube.com/watch?v=QW8ADw9vOSc

Appraisal Subcommittee Hearing Meeting about Appraisal Bias in Residential Real Estate Market ASC notes, comments by Mary Cummins. Part of the meeting was on C-SPAN 2.

Time: 2:10:35

“Streamed live on Jan 24, 2023. Join the Federal Financial Institutions Examination Council’s Appraisal Subcommittee (ASC) for a hearing about appraisal bias. Invited witnesses representing key stakeholder groups will share their views with the ASC during the hearing.”

Official information and files.

The Federal Financial Institutions Examination Council’s Appraisal Subcommittee (ASC) held a hearing about appraisal bias.

"This first-ever ASC hearing was led by Deputy Director Martinez and ASC Executive Director Jim Park. HUD Secretary Marcia L. Fudge, CFPB Director Rohit Chopra, and FHFA Director Sandra Thompson also participated in the hearing. Panel witnesses included:

Dr. Junia Howell, Visiting Assistant Professor of Sociology at the University of Illinois Chicago; Witness Testimony. It'd be better to read her testimony because she was extremely nervous, waving her arms around wildly, misspeaking and acting agitated. Most upsetting and more importantly she stated some totally false and ignorant things. She said the sales comparison approach was developed in the 1930s by whites in the US government to intentionally value white owned property higher than POC owned property. She doesn't even realize that most living in areas which were, are primarily POC especially back then were, are renters and not owners. There are also poor white areas in the US. How does she explain that? The sales comparison approach to value is the main method used to value all assets all over the world since the beginning of time. She said the government should basically give more money to her to do more deeply flawed "research." It appears that all speakers had to swear to the host of the meeting that they will only agree with the government's incorrect and preconceived ideas on the issue of the alleged "appraisal" and wealth gap. She's so ignorant she doesn't realize it's caused by the income gap and not appraisals. Lots of independent research out there to prove this. People buy homes they can afford. People who make less money but less expensive homes.

https://files.consumerfinance.gov/f/documents/cfpb_appraisal-hearing_junia-howell-testimony_2023-01-24.pdf

Paul Austin and Tenisha Tate-Austin, homeowners from Marin, California; Witness Testimony 

https://files.consumerfinance.gov/f/documents/cfpb_appraisal-hearing_paul-austin-and-tenisha-tate-austin-testimony_2023-01-24.pdf

Michael Fratantoni, Senior Vice President of Research and Technology and Chief Economist, the Mortgage Bankers Association; Witness Testimony 

https://files.consumerfinance.gov/f/documents/cfpb_appraisal-hearing_michael-fratantoni-testimony_2023-01-24_Tw7XwtE.pdf

Craig Steinley, President, the Appraisal Institute; Witness Testimony 

https://files.consumerfinance.gov/f/documents/cfpb_appraisal-hearing_craig-steinley-testimony_2023-01-24.pdf

More information about the Appraisal Subcommittee can be found here" 

MEETING START

Time: 6:29 Introduction by Zixta Martinez Chair of Board of ASC and CFPB. Jim Park will talk about ASC. We’ll hear from a panel of witnesses, a home owner, lender, appraiser and academic. She introduced Marcia Fudge head of HUD.

Time: 9:28 Honorable Marcia L Fudge of HUD and PAVE. I'm only going almost word for word what Fudge said because it's so important. Fudge makes her own personal bias very clear in what she said and the falsehoods she stated.

Fudge said “good morning” and got a mild response. She basically responded she didn’t like the mild response and again said “GOOD MORNING!” and everyone then responded with “GOOD MORNING!” It set the tone.

Since day one the Biden Harris administration has worked to root out bias in the appraisal system. The work is critical to advance racial equity. It’s important to me as secretary of HUD and as a black woman. I know first hand what it’s like to be told that your home is worth less than the house down the street because of the color of your skin. It’s heartbreaking to hear the stories of black and brown families who feel forced to remove family mementos and photos in hopes of receiving a fair and accurate valuation. I do not intend to do that!

Fair Housing Act of 1968 was to end housing segregation. Owning a home should provide a path to the American dream. Instead this country does not see us as equitable. June 1, 2021 100 years after Tulsa Race massacre Biden and Harris established PAVE task force a first of its kind initiative to root out racial discrimination in the home buying process so families of all backgrounds and neighborhoods can have a better chance at building generational wealth. Less than a year after PAVE was established we delivered an action plan which constitutes set of reforms to advance racial equity in the home appraisal process. We want to cultivate a well trained and diverse work force, to make sure technology doesn’t perpetuate bias. HUD made $28M available to fund testing, education, and outreach to communities on appraisal bias. Next week we will start a three part webinar on training for appraisers and housing professionals on how to identify bias and protect homes. We, (pointing to herself), know how to identify it as we see it every day. We are giving an avenue for FHA loan seekers, if they believe their appraisal was skewed by racial bias. You can make comments on our drafting table platform. Please, make comments. 

I’m going to say things not in my script because I live this every day. I live in a black community by choice, BY CHOICE! I want kids in my neighborhood to get same schools as properties next to me. You do that by property tax even though I think it’s unconstitutional, that we fund schools by property tax. I want same police, fire protection but you can’t do it if my house is valued at $50,000 less than the house next to me. Two doors from me there is a neighborhood that is all white. My house is bigger, my lot is bigger, my house is nicer (laughter). That (other) house is valued more than mine. This is not the America that we should be living in, in the year 2023. It is a travesty, outrageous and we must change it. I’m hopeful the ASC will do what is right for the American people.15:44.

Mary Cummins comments. Homes are not valued differently because of the color of the skin of the owner, borrower or occupants. It's a mathematical formula based on most recent similar sales in the same neighborhood. Appraisers don't know the color of skin of homeowners, borrowers, tenants, buyers, sellers. We don't see the borrower, buyer and definitely don't know who owns properties in the area we use as comparable sales. We don't look at census tracts. We don't know race or color. It's possible all the owners of the homes we used as comp sales for a property owned by a black person were white. That would mean Fudge's false narrative holds no water. 

Fudge states she wants home values and their property taxes to increase. Many poor people would be forced to sell their property and move if property taxes were increased to the level of newer more luxury expensive neighboring properties.They wouldn't even be able to sell their property for the higher non market value. That would be beyond unfair and cruel.

All real estate agents tell all home owners of every color to remove personal articles such as photos, collectibles and other items from their home.It shows the home bigger and better. Buyers don't want to see any homeowner in the home. They want to envision themselves in a blank slate of a home. It's not about race.

HUDs PAVE report was late. It was due in six months. Fudge acts like she finished it early in less than a year. Nope. Late. 

Appraisal appeal, reconsideration of values have ALWAYS been available to borrowers forever. They can appeal based on any reason. They have done this. This is not about bias. Research by AEI based on government loan documents proved there is no effect of race on home value. They used the government's own data to show this. AEI presented this to the government in the meeting about the PAVE task force. 

AVMs Automatic Valuation Methods do not consider race or color of homeowner or borrower. It's a math formula, technology computed by robots. No human is involved. The math formula is not based on race or color. It's based on location, size, age. It does not know condition, view, upgrades, amenities, true size, additions, lot type, location in neighborhood... AVMs value homes in poor condition higher than market. It values upgraded homes with views lower than market. AVMs aren't accurate. They are BIASED against everyone.

Fudge brought up her home value previously. She said her home is worth less BECAUSE SHE IS BLACK. I included it in a past article with address and attributes. I included a valuation of her home and of the NEW, LUXURY homes up, across the street from her. It's a private development of new luxury homes tucked away off the main street. I have no idea if the homeowners are all white. I doubt Fudge does either. Has she visited all of them personally? They're new so they're not in the census report. There is a reason why those homes are worth more. They're new, luxury, in a new development, with a clubhouse, off the main street... Not all homes of the same size in the same county are worth the same. An old run down home in South LA is worth less than a new one of the same size in Beverly Hills. If Fudge doesn't know this, she must resign because she's unqualified. I know she knows this and is just lying for effect. She's a politician working for politicians selling lies for votes, money and promotions.

The real reason why homes owned by whites are worth more than homes owned by black, brown people is the income gap. People who make more money have more money, more generational wealth and can buy and own more expensive homes. THIS IS THE REAL ISSUE! The government needs to fix the income gap then the wealth gap would solve itself. Men also make more than women. Blaming appraisers will never fix the real issue. The government can't fix the problem (if there even is one) until they admit the real cause of the problem. The first step Scientific Method to solving problems is to determine the actual problem.They clearly don't want to fix the real problem. That means the government doesn't really care about POC or the poor. They need to stop pretending like they do care when they clearly don't. You can yell at appraisers all the live long day and that won't solve the problem. 

I'll post notes from rest of the meeting letter. I will also be sending in a comment. I see some of the speakers are the Austins from California. I have covered their case since the beginning. In their linked statement they said they wanted the appraiser to use comps from the "white area" instead of their immediate neighborhood which they said is a "black area." Who are the racists here? 

There were five witnesses who basically read word for word their submitted statements linked above except AI Craig Steinley. He omitted a large portion of his written statement. I think he omitted it because he didn't want questions and to get under five minutes. While other speakers said we need to get rid of the "racist" government mandated sales comparison approach AI's statement said they are adamantly opposed to that. Their statement says the approach is based on valid and accurate economic principles which it is. That is how all assets in the world have been valued forever because it is based on supply and demand between buyer and seller. I'll do a short summary in a few minutes anyway. 

After that ASC members were allowed to ask ten minutes worth of questions each.

Email after the meeting

“Yesterday the Appraisal Subcommittee held its first ever Hearing on Appraisal Bias, hosted at Consumer Financial Protection Bureau headquarters in Washington D.C. 

The event opened with remarks by U.S. Department of Housing and Urban Development Secretary Marcia L. Fudge. ASC’s Executive Director James Park spoke on the agency’s role in the appraisal regulatory landscape. 

Attendees, both in person and on the livestream, heard testimony from Dr. Junia Howell, University of Illinois-Chicago, homeowners Paul Austin and Tenisha-Tate Austin, Michael Fratantoni, Chief Economist, Senior Vice President, Research and Industry Technology, Mortgage Bankers Association, and Craig Steinley, President of the Appraisal Institute.

Now ASC wants to hear from you! You are encouraged to provide a comment on your perspective on or experience with appraisal bias; comments can be submitted to AppraisalBiasHearing@asc.gov until February 8, 2023.”

Four of the five witness speakers, Appraisal Subcommittee Public Hearing on Appraisal Bias, January 24, 2023, marcia fudge, mary cummins, asc, hud, real estate appraiser, pave taskforce, cfwb, jim park, race, racial bias, discrimination, black, brown, white, value, neighborhood, appraisal, valuation

Witness Dr Junia Howell, Appraisal Subcommittee Public Hearing on Appraisal Bias, January 24, 2023, marcia fudge, mary cummins, asc, hud, real estate appraiser, pave taskforce, cfwb, jim park, race, racial bias, discrimination, black, brown, white, value, neighborhood, appraisal, valuation

Tenisha Tate Austin, Paul Austin, Appraisal Subcommittee Public Hearing on Appraisal Bias, January 24, 2023, marcia fudge, mary cummins, asc, hud, real estate appraiser, pave taskforce, cfwb, jim park, race, racial bias, discrimination, black, brown, white, value, neighborhood, appraisal, valuation

ASC members, Appraisal Subcommittee Public Hearing on Appraisal Bias, January 24, 2023, marcia fudge, mary cummins, asc, hud, real estate appraiser, pave taskforce, cfwb, jim park, race, racial bias, discrimination, black, brown, white, value, neighborhood, appraisal, valuation

Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.

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Identifying Bias and Barriers, Promoting Equity: An Analysis of the USPAP Standards and Appraiser Qualifications Criteria.

Identifying Bias and Barriers, Promoting Equity: An Analysis of the USPAP Standards and Appraiser Qualifications Criteria. Jim Park, James Park, ASC, Mary Cummins, real estate appraiser, real estate appraisal, los angeles, california, license, certified, residential, pave task force, trainee, requirements

UPDATE: The Fair Housing Alliance just stated they prepared the report with their partners. "The federally-funded report produced by the National Fair Housing Alliance and its partners raises serious concerns about the standards and criteria related to the appraisal of residential real estate, which often represents a family’s largest asset." IWoodruff@nationalfairhousing.org

How does one go about getting a federal government grant to write an "independent study" which uses false and misleading data to promote their organization's agenda? Must be nice. 

https://nationalfairhousing.org/groundbreaking-report-identifies-bias-and-systemic-barriers-in-real-estate-appraisals

ORIGINAL: Jim Park of the Appraisal Subcommittee (ASC) just released a press release which states,"Findings Released in Independent Study on Real Estate Appraisal Standards and Appraiser Qualifications Funded Through a Cooperative Agreement Between the Appraisal Subcommittee (ASC) and the Council on Licensure, Enforcement and Regulation (CLEAR) report titled "Identifying Bias and Barriers, Promoting Equity: An Analysis of the USPAP Standards and Appraiser Qualifications Criteria." 

It's an 84 page pdf. I assume this will be part of the PAVE Task Force report due February 2022? Send comments to jim@asc.gov 

https://www.asc.gov/Documents/OtherCorrespondence/2022-01-14%20NFHA%20et%20al_Analysis.pdf

The National Fair Housing Association, Fair Housing Advocates of Northern California, Fair Housing Center of Central Indiana, Andre Perry contributed to this report. They promoted the false narrative of alleged appraisal bias in the case of Paul Austin, Tenisha Tate in Marin, California besides a few others. Andre Perry has been peddling his non-peer reviewed, non-published false research to sell his books. I'm glad that Christensen Law and Peter Christensen also contributed to this report. Christensen understands real estate appraisal, regulations and the law. It doesn't look like he was allowed to contribute much at all.

I won't go over the entire report in great detail though I will note a few things.

Pg 5, paragraph 2, "Until recently, however, the appraisal industry seems to have escaped the type of regulation and scrutiny faced by other participants in the mortgage market. Our analysis finds that the appraisal industry has operated in a relatively closed, self-regulated framework."

Real estate appraisers are extremely regulated. We are more regulated than loan agents, real estate agents/brokers and others in the mortgage market. Real estate appraisers (brea.ca.gov) need a college degree, 200 hours of college level classes, 1,500 hours of experience with licensed experienced mentor, must pass exam and background check. Loan agents (nmls.org) only need a 20 hour course, must pass exam and background check. Real estate agents (dre.ca.gov) only need three college level courses, must pass exam and background check. These people act like Appraisers are the ones who made it so difficult to become an Appraiser to keep others out. It was the government who mandated this after falsely blaming Appraisers for the Savings and Loan Crisis, Great Recession and other real estate busts caused by other players in the market including the government.

We are regulated by the federal and state governments and are not "self-regulated." People are under the misconception that the private non-profit the Appraisal Institute (AI) who is supposed to represent Appraisers actually regulates Appraisers. They don't. We're regulated by multiple federal and state government agencies, see this article. Appraisers have to pay to join the AI. If you want to be an AI MAI Appraiser, it will cost you about $15,000 and take a couple of years. Only wealthy appraisers with $15,000 laying around and lots of extra time can afford to join. I'm not a member.

"Recent news stories have presented the shortcomings of the appraisal industry in stark relief, where individual homeowners and researchers have demonstrated that discriminatory bias continues to plague the appraisal industry, undermining value and breaking a key rung on the ladder to the middle class for families of color."

The recent news stories have proven to be false. The real reason people of color own homes which are worth less than the homes of white people is income. POC make less money. Women also make less money as do other groups. Of course they will buy and own homes that cost less. I've written about some of the major cases in the media, see below. 

Cora Robinson, Oakland, California. HUD complaint most likely already dismissed. 

Paul Austin, Tenisha Tate, Marin, California No HUD complaint, lawsuit will most likely be dismissed.

Carlette Duffy, Indianapolis, Indiana HUD complaint most likely already dismissed

Abena Sanders Horton, Alex Horton, Jacksonville, Florida New FOIA request. No info yet. 

I did FOIA requests for all of the above cases. Only three actually filed complaints. I believe two complaints have already been dismissed. I'm just trying to get a hold of the final report which they will not release unless I get a signed and notarized form signed by the complainant which states their full name, date of birth, country of origin, nationality, home address ... stating they agree to the report being released. I'm obviously appealing the FOIA case because that is ridiculous. I think they are withholding the reports because of the PAVE report coming out. These people publicly posted their complaints with their information online and in national press releases. The cases appear to be over per FOIA. If they won, they would have released another national press release and more media articles. This is why HUD doesn't release cases where no discrimination was found. They try to blame it on FOIA regulations which is false. Asking for the "country of origin" of the complainant seems discriminatory. I don't need or want to know that. It has nothing to do with the complaint.

From the Outline.

The report suggests Appraisers need more training on Fair Housing. We already have lots of repetitive training on Fair Housing to get your license and renew it every two years. That is not an issue.

Duty of Care, pg 11. They suggest adding the borrower as an "intended user" of the lenders appraisal report to increase accountability to the borrower. No much for appraisal independence and undue influence. Then the lender who ordered the appraisal will also be liable to the borrower. I see great push back on this issue. The purpose of the appraisal is to secure the loan for the bank and anyone who buys the loan or mortgage backed securities based on the loan. The borrower doesn't have to get a loan. A private loan is not a right but a privilege. The borrower can hire their own appraiser to do their own appraisal. Then they can be the intended user of that report.

"To increase the accountability of appraisers to borrowers who have been injured by appraisal negligence, the Appraisal Standards Board should consider amending the USPAP Standards to require appraisers to identify mortgage borrowers as “intended users” of appraisals prepared in relation to residential mortgage transactions."

Part I, Background, A, Bias in the Industry, "Redlining."

Adding race, nation of origin to the map data was dead wrong. Most of the other loan risk factors in the maps were based on many other factors besides race and nation of origin. The main factors were income and wealth of inhabitants. If you removed race and nation or origin from the data which they did, the risk stayed the same. These are the same risk factors we use today for credit scores. There is/was a correlation between POC and income. People with less income, less money live in areas with lower priced housing because that is what they can afford. These properties are more likely to be older, less well maintained, near industrial property and other less desirable features. That's why they were cheaper. When people have very little money, it's easy for them to not be able to make loan payments if they suffer one emergency. The solution to this problem is the same, increase the income of POC and others. More income, less risk. 

"Discrimination in Appraisals Continues on an Individual and Systemic Basis," pg 17.

They mention some of the alleged discrimination cases in the media. They don't bother to do any investigation into the cases to determine if there was indeed any discrimination. They don't post the results of the HUD complaints two of which were most likely already dismissed. Instead they link to press releases and false and misleading news articles. I will check out the Colorado and Connecticut cases.

"Discrimination in Appraisals Exists on a Systemic Basis," pg 18.

They mention the Freddie Mac research on Appraisal Gap. I wrote an article here which explains Appraisal Gap. You are more likely to have appraisal gap in areas which are revitalizing and quickly appreciating due to the historical nature of appraisal reports. Areas which are revitalizing are more likely to have POC. That is the correlation. At least they do note that the effect was shown across the nation and across appraisers. This shows it was not individual appraiser bias. 

They mention FHFA report on keywords found in appraisal reports, pg 19.

FHFA stated they searched millions of reports for what they feel are discriminatory words and found thousands had words which could be considered discriminatory. Just to get a ballpark figure here, 1,000/1,000,000 = .001 or .1% of reports. They did not review the reports and find the values were low or not market value. 

I agree that no one should have discriminatory language in the report. I disagree with the word "gentrification." I don't use it because it's not accurate.The proper term is revitalization. Still, it has nothing to do with race but money. Socioeconomic classes aren't protected. Lenders can discriminate based on money. FHFA itself uses the word all of the time as do other government agencies. Is it only discriminatory if an appraiser uses it?

Andre Perry's misleading report, pg 19. This report has been debunked here. It's not peer reviewed or published research. If you read Andre Perry's book, he is biased against certain people. He admits it. He also has an agenda to sell books.

Pg 19, "Howell/Korver-Glenn. A 2020 study of American Community Survey homeowners’ estimates from 1980 to 2015 found that neighborhood racial composition was an even stronger determinant of a home’s value in 2015 than it was in 1980."

That's because there is still a strong correlation between income and POC. The government and others haven't done anything about this. POC make less money. For this reason they buy and own homes in less expensive areas. They also own less expensive cars. Is that also the fault of real estate appraisers? FTR all the values came from inaccurate Zillow. Zillow has stated their values are not appraisals or accurate. Appraisers did not contribute the values in Andre Perry's paper or the other research so you can't blame appraisers.

Pg 22, They basically state the Sales Comparison Approach is biased because it's based on the sale prices of similar homes in the same area. Everyone knows the main three factors of home valuation are location, location, location. Should we use comps in Beverly Hills to appraise a home in South Los Angeles? No. Even if an Appraiser appraises a $100,000 home for $200,000, it doesn't affect the market value. The home is not worth $200,000. 

Pg 22, This is utter nonsense to cite in a government report!  In the book "Race Brokers, Dr. Korver-Glenn details the results of interviews with appraisers, including appraisers of color, regarding the steps they use to value a home based on their interpretation of the sales comparison approach.27 Many of  the appraisers in the study “assumed that White buyers were the standard for determining an area’s desirability, with White areas meeting this standard and receiving the highest values and non-White areas falling below the standard.“

Who the hell did this person interview?! Did they not interview appraisers in low income white areas like Florida, Virginia, California...every state in the nation? The sales comparison approach will show you the area's desirability based on money. It has nothing to do with color but income. AVMs, Appraisers don't see the occupants. We don't know the races of the people. There is no race reference in the data we research. 

Pg 24, "Appraisal Discrimination Is One of the Key Drivers of Today’s Wealth Gap." No, income gap is the main driver of the wealth gap! If you make less money, you have less money, buy and own a less expensive home. This discriminatory language should have never been allowed in a government report. People who complain about discrimination discriminating against others again. If the tables were turned, these people would be screaming bloody murder. 

Pg 24, "Appraisals Can Also Raise the Unique Challenge of Overvaluation." After the great recession everyone lost home equity. It affected poor people with subprime loans even more because the loose lending regulations by the government caused these people to have mortgages they could not afford. They lost their homes. If they met proper income, savings requirements, they would have been able to afford to pay their mortgage even though they were upside down like everyone else. If they weren't less wealthy, they would have had money to weather an emergency. 

Pg 26, "The Appraiser Workforce Suffers from a Lack of Diversity." Appraisers are just about as diverse as real estate agents, loan agents yet no one complains about them. They don't complain because agents can't kill deals with low appraisals but appraisers can. Here is an article I wrote about race and appraisers. That said I'd love to see race of appraisers match the nation. We need more diverse appraisers. The race of appraisers won't affect values because it's based on math and numbers. 

Part II. 

C. Governance of Appraisal Industry.

They bring up the fact that the Appraisal Institute is a private organization not part of the government, and doesn't legally have to abide by all government regulations. They suggest investigating the relationship between AI and the government. In the meantime they suggest AI add more diverse board members including consumers and civil rights people. In light of who actually made the report they basically want their own people on the board to control the AI. They said nothing about race, gender ... diversity. Here is their white board. Leadership is also 100% white. Six of 29 board members are women. I think they're all Appraisers. They should have others on the board. The government should keep in mind that the AI must follow their non-profit mission statement. Their mission is not to promote the government but appraisers and the industry. I didn't realize that people have to pay to appoint a trustee. That's ridiculous. AI should offer USPAP to anyone for free. Most of the other recommendations are already being done. 

D. Gaps in Fair Housing Requirements and Training

"As described above, the evidence clearly shows that the current appraisal system can result in biased valuations, both at the individual and neighborhood level. The causes of such bias are varied and complex."

I disagree that evidence has shown bias in the current system.  The Market Comparison Approach to value shows the market value. It's based on willing sellers and buyers. If someone wants to pay $200,000  for a $100,000 home in South Los Angeles, they can do that with a huge down payment but they won't because it doesn't make sense. The property won't be worth $200,000 except for property tax purposes. They can only sell it for $100,000. They lost $100,000. 

I also doubt that appraisers are not getting enough training in fair housing and discrimination. We take many classes to get our license and more classes every two years to keep our licenses. I don't know any appraiser who does not realize it's not legal to discriminate. If they want to add "shall" and "must" to USPAP, fine by me. I'm also fine with education changes as long as there aren't more hours and are just more hours on fair housing.

E. Barriers to Entry into the Appraisal Profession

I agree with some of these issues and suggestions though not all. They suggest reviewing any possible barriers to entry. Let's just make sure the bar is not so low that anyone can become an appraiser. You need to be a math, numbers person who can physically measure a building, climb a ladder, get into a crawl space, visually see construction material, hear a fan... They need some hands-on training. You wouldn't want a medical surgeon to just pass a written test then start cracking people open with a bone saw.

They suggest reducing license types to certified and general only getting rid of trainee.They suggest getting rid of college education requirement and possibly reducing the number of education hours needed. They suggest having an application based class so they can learn how to do an appraisal and getting rid of experience hours. If they do that, lenders will just make sure they only request appraisals from appraisers with so many years of experience. Those new people won't get work. They suggest reviewing the tests to make sure they are fair. I passed the appraisal exam for certified residential first time within an hour after a major car accident (uninsured motorist totaled my car) where I broke both wrists and got a concussion. I didn't go to the hospital until later because I was not going to lose my $750 test fee. I agree that some questions were worded poorly but just choose the best answer. The test was easier than high school exams. I would hope at least a GED or High School diploma would be needed. Don't set people up for failure. Make sure they can do the job or they won't get work.

They suggest AI and others try to recruit more women and people of color. I'm a Latino female. I contacted AI about supposed scholarships they offer. They said I have to pay to join AI just to apply for the scholarship! They dangle a scholarship to get money from new memberships. No thanks. 

One worry here is that the big rush of appraisals is over. We don't need new appraisers right now. I fear people will pay to become appraisers and lenders will not use newbie appraisers. That would be cruel to do to people.

F. Compliance and Enforcement p. 71

They talk about using data to determine if there is discrimination in appraisals. They talk about releasing report results. They won't release negative results of HUD complaints because complainant of course won't agree. You will only hear about cases where there was discrimination or someone agreed to a non-guilty statement just to end the case due to legal costs. They need to release ALL of the HUD complaints and investigation results.This is why the false narrative has continued. HUD did state most cases are dismissed but that's it. HUD also said most discrimination complaints based on disability and not color or race. 

They talked about maybe using another method of determine value. Lenders won't agree to cost or income approach as they don't reflect market value. Lender needs to know what they can sell the property before if the borrower doesn't make the payments. They talk about getting rid of the free form text parts of the appraisal. Okay! Less work for appraisers though they may no longer comply with USPAP without text explanations.

Pg 77, Reconsideration of Value

There should be standards in the ROV process. I believe there already are but I'm fine with it being more defined. Maybe there should be a fee paid by the lender. Sometimes an appraiser can be given seven new comps to consider. If you have to drive and see them all then put them all in the grid and then explain why they can or cannot be used, that's a complete new appraisal if not more work.

Conclusion

Overall I disagree with the message and tone of the report. The report is discriminatory, biased and defamatory against appraisers as a whole and as an industry. There is no independent research which shows appraisal bias and discrimination. They mention anecdotal media cases about alleged bias and discrimination as if they were facts. HUD won't release the final investigation reports of two cases which I believe have been dismissed because the complainants don't want them released. They refer to Andre Perry's paper as if it were peer review published research when it's just the false basis of his misleading book which he's selling. I'm okay with the basic recommendations which are to take a closer look at some issues. I agree with some of the suggestions to make becoming an appraiser easier. 

Below is the Table of Contents with page numbers. 

Table of Contents

Acknowledgments 3

Executive Summary 5

Part I: Background 13

A. The Problem of Bias in the Appraisal Industry 13

• The Appraisal System Historically Undervalued Homes in Communities of

Color

13

• Appraisal Policies Perpetuated an Unfounded Association Between Race and

Risk

15

• Discrimination in Appraisals Continues on an Individual and Systemic Basis 17

• Appraisal Discrimination Is One of the Key Drivers of Today’s Wealth Gap 24

• Appraisals Can Also Raise the Unique Challenge of Overvaluation 25

• The Appraiser Workforce Suffers from a Lack of Diversity 26

B. Civil Rights Laws and Regulations Applicable to the Appraisal

Industry

27

• The Fair Housing Act and the HUD Regulation 27

• The Equal Credit Opportunity Act and the CFPB’s Regulation B 28

• The Civil Rights Act of 1866 29

• State Laws and Prohibited Bases 29

• Theories of Proof 30

• Increase in Appraisal Discrimination Enforcement 33

Part II: Analysis and Recommendations 34

C. Questions about the Governance of the Appraisal Industry 34

• Overview of the Appraisal Regulatory Structure 34

• The Appraisal Foundation’s Legal Authority is Not Clear 35

• The Appointments and Elections Processes Would Benefit from Inclusion of

Viewpoints that Represent Consumers, Including Consumers of Color

40

• The Rules of Procedures and Exposure Draft Process Would Benefit from

Greater Transparency and Inclusion of Viewpoints that Represent Consumers,

Including Consumers of Color

44

2

D. Gaps in Fair Housing Requirements and Training 48

• Lack of a Clear Prohibition of Discriminatory Conduct 48

• Lack of Guidance on the Use of Discretion 52

• Lack of Clear Fair Housing Training Requirements 56

• Lack of Effective Fair Housing Training 58

E. Barriers to Entry into the Appraisal Profession 64

• Multiple Levels of Licensing and Certification 64

• College Degree Requirements 66

• Appraisal Education Hours 66

• Experience Hours 66

• Standardized Tests 68

• Concern: Pipeline of Trainees and the Future of the Profession 69

F. Compliance and Enforcement 71

• Need for Data 71

• Development of Robust Compliance Management Systems 72

• Duty of Care: Appraiser Accountability 75

• Reconsideration of Value Process 77

G. Conclusion 80

H. Glossary of Acronyms 81

I. Appendix I – Authors’ Summary Biographies 82

Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.

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ASC Roundtable Event: Building a More Equitable Appraisal System - 2021 by Mary Cummins

"On November 9, 2021, the Appraisal Subcommittee (ASC) will convene its second ASC 2021 Roundtable: Building a More Equitable Appraisal System, to build upon the success of the first roundtable and address historical and contemporary factors that have contributed to the inequities challenging the appraisal system today. Please join us for the second event of this groundbreaking series, which will bring together leaders in government, finance, real estate, non-profits, and communities impacted by the appraisal system."

https://hopin.com/events/asc-2021-roundtable-building-a-more-equitable-appraisal-system

Schedule

November 09, 2021
10:30 AM - 01:00 PM

Main Session (Keynotes)

Please join us in the main session to hear keynote presentations and remarks from our featured speakers!

Speakers

Danny Wiley
Senior Director of Single-Family Valuation, Freddie Mac

Vivian Li
Quantitative Analytics Director, Freddie Mac

Erika Poethig
Special Assistant to the President for Housing and Urban Policy

Melody Taylor
Executive Director, Task Force on Property Appraisal and Valuation Equity

Congresswoman Maxine Waters
Chairwoman of the House Financial Services Committee

Jim Park ASC

11:30 AM - 12:30 PM

Sessions Area PAVE Listening Session

Speakers

Melody Taylor
Executive Director, Task Force on Property Appraisal and Valuation Equity

11:30 AM - 12:30 PM

Sessions Area Freddie Mac Report

Speakers

Vivian Li
Quantitative Analytics Director, Freddie Mac

Danny Wiley
Senior Director of Single-Family Valuation, Freddie Mac

Hosts

Jevin Hodge a politician running for office
Michael Akin a professional webinar organizer at Link Strategic Partners

My comments are in parenthesis "(  )." All of the speakers read their opening remarks. There was a lot of happy positive speak and pats on the back for other members of the task force and government. A few said that they aren't saying appraisers are racist or appraise in a racist manner. A few others said "it's been shown that appraisers are racist and appraise in a racist, biased manner against black people. There have been media articles." 

FreddieMac speakers went over the recent research on appraisal gap. Other speakers talked about the goals of the PAVE Task Force. There were quite a few appraisers attending asking good questions. Some of those questions were about some of the crazy ideas floated around about using comps from a different location, neighborhood than the subject. There were many comments about Practical Applications of Real Estate Appraisal PAREA and making it easier for trainees to become full appraisers. 

At the previous ASC Roundtable Event black Cy Richardson stated to white host Michael Akin "Pale, male and stale. That's what appraisers are." The general consensus is that "pale, male and stale" is racism, sexism and ageism. Akin replied that he wasn't "stale." It appears he didn't want to be name called again so he had black Arizona politician named Jevin Hodge who is running for office on an equality platform be the second host today. 

Jevin Hodge introduced the speakers to the main session in a very positive upbeat manner. 

Speaker: Jim Park of ASC: I'm a certified general appraiser. I've been with ASC since 2009. Bias is not due to racist appraisers. The definition of "implicit bias" per ADL (Anti Defamation League ) is assumptions, stereotypes we make towards others, positive or negative, that is stored in our unconscious (subconscious). 

We need to change the recruitment training model. We don't want to alienate people (appraisers) to solve this problem.  We must be careful not to blame dedicated professionals who perform this work day to day. 

Speaker: Danny Wiley of FreddieMac. I've been an appraiser for 40 years. We (at FreddieMac) looked at 12 million reports from 2015 to 2020 (during a time of appreciating values when there is more likely to be an appraisal gap) to see how often the appraisal value came in below the contract. We call this the appraisal gap. We compared appraisals of homes in census tracts with mainly white occupants against those with mainly blacks and Latinos. We have not reached any conclusion for cause of the gaps or correlation. Our research showed that further studies are warranted. (They only used purchases and not refinances. The borrowers for purchases are the buyers. Appraisers NEVER see or meet the buyers. It's impossible for us to be biased against the buyers. In fact their research showed there was no difference in the gaps if they only looked at race of the borrower. Gaps happen in quickly appreciating markets such as mainly minority areas which are revitalizing or as others say gentrifying. Appraisal values are based on sold comps which means the value could be two months behind the market from contract date to escrow closing to recording time.).

Speaker: Vivian Li also of FreddieMac: (It was difficult to understand her accent. Wiley and Li basically just talked about this research here) Media articles have shown appraiser, appraisal bias against blacks. (So much for not blaming appraisers) There were appraisal gaps from many appraisers (47%). We worked with BetterMortgage (a private for profit mortgage broker with a pro racism agenda and Jillian White. They worked with Andre Perry who released the early results of their study July 15, 2021. They also worked with Urban League. All of these people, groups publicly state and support the false narrative that appraisers are racist) to better understand them. 

Speaker Erika Poethig: The Federal Government had a role in discrimination. The government reinforced housing segregation with redlining and discrimination against people of color. Blacks, Latinos rely more heavily on their home for their wealth. The great recession caused POC to lose their homes. The black home ownership rate is the same as it was in 1968. 

The first goal of the current government is to stop foreclosures caused by the pandemic. The second goal is to expand access to credit more broadly. There will be more credit options for 2-4 units. We hope to root out discrimination in housing. 

Speaker Melody Taylor with HUD: Joe Biden started PAVE task force to deal with racial inequity. PAVE has four core objectives... (she read this list https://pave.hud.gov/about/objectives)

We will also focus on the ROV Reconsideration of Value and lack of diversity in the appraisal profession. Your voice matters. Thanks.

Congress person Maxine Waters: When black families leave portraits of their black family members up in their house they get a lower appraisal. They have to put up photos of white people to get a higher value and the appraisal jumps. These are not just anecdotes. The appraisal gap is real. People of color have been locked out of low rates and being able to buy homes due to appraisal bias. There is unequal values of homes in black areas. Discussions haven't solved the problems. 2019 had the lowest black home ownership rate ever. 76% of whites own a home. That's over 27% more than black or latino homeowners. The Build Back Better Act will increase the supply of housing. We must help more POC become homeowners. The big boy appraiser companies run the  show. Smaller appraisal businesses are locked out. We must break up the big boys. Thank you. (I like Maxine Waters. I'm near her district. Someone has filled her head with nonsense and false, misinterpreted information on this issue. She needs some education by someone who knows the issues. Who are the big boy appraisers?)

Breakout Sessions. I went to FreddieMac first then PAVE.

FreddieMac with Dan Wiley, Vivian Li.

Wiley: We only used purchases for our research because there is a "true north." 99% of the time the contract price will reflect the true value. (Assumption) We didn't use refinances for this reason.

We didn't consider any contracts with concession 3% or more. We got rid of other outliers such as a home having five stories, ten bedrooms...

Li: We excluded distress sales and non arms-length sales.

Wiley read my question which was "To Lee, Wyley: Did you compare the appraisal gap and price of the homes? Based on my experience I've seen more gaps in lower priced properties which correlates w/ Black, Latino area."

Li: Great question. We looked at it. We broke it into five brackets. We saw similar patterns overall. (but similar amounts, %? It would have been good for them to post that information even if it showed no effect. I appraise in these areas and others because I speak Spanish. I see more of a gap in these areas. It could be because these areas are being revitalized or as some say gentrified. Homes are appreciating quickly which always causes a gap like the common current appraisal gap. Others pushed out of more expensive areas into more minority areas also tend to over pay as do first time buyers desperate for homes in these areas. They looked at sales 2015-2020 which is during a time of faster appreciation when there is more likely to be a gap. They're also only looking at FreddieMac loans and not all loans. FreddieMac only buys conforming loans under a certain amount so this doesn't effect all loans.)

Wiley: We only considered appraisal reports. We didn't consider everything like whether the area had potable water or not.

Li: Potable water may affect valuation. We didn't look into it. I can look into it further. 

 

Wiley: We didn't check to see if the appraisals were accurate or not. (That would have been the better test). We just compared it to contract price. We know if the appraisal comes in low the contract gets renegotiated so we only looked at the appraisal and first contract not later contracts.

Joseph Mier: I've been an appraiser for 30 years. We all know location, location, location when it comes to value. I'm concerned the discussions could harm consumers and the profession if don't use local comps. If appraisers are using local comps, that is the proper data.

Wiley: You haven't heard that from us. We need to know what we can actually sell the property for. We're in the collateral business. We look at risk.

 

Mier: We must be careful to not leave data behind. There is a risk if you're not using certain comps. 

Wiley: Agreed. It gets dangerously close to crossing the line to advocacy. We are supposed to measure bias in the market. Bias is just preference. Buyers prefer some areas over others by being willing to pay more. The job of the appraiser is to be an objective observer of market bias and not driving it. We're not exploring that. 

Question: Why not use a comp in a white area to appraise a home in a black area instead of using a comp in the same black area?

Wiley: We are only concerned with what we can sell the property for today. We should use the most similar comp sales in the subject neighborhood.  There is no reason to go to another area. We are concerned with two things, the objective measurement of current value. The other is the long term effect of discriminatory policies from the past and how to rectify that. We support that. We don't believe the answer to that problem is to tweak the appraisal in some way. We need to affect long term change. We don't think the appraiser is the engineer of that process. 

Question: Why did you only look at, report about white, black and latino groups?

Li: Most data is for black, latinx groups. The gaps for these two groups stand out the most. (How would she know unless she looked at the other groups?) 

I moved to the PAVE breakout session

John Brenan of Clear Capital: PIREA, we support it. It must be approved by all states. We need diversity among appraisers. That is what we're trying to do, recruit more diverse appraisers.

Joseph Mier: Trainees can't do site inspections. Using trainees will bring more professionals into the profession. We should use local comps because value is based on location, location, location. We shouldn't use comps from outside of the area. 

Melody: If you want to send a comment, information, email pave@hud.gov

David Bunton: Appraisers must now take two hours on bias in the seven hour USPAP update. It would be good to know how many bias complaints there are and what are the results of investigations. (I sent in a FOIA request for the results of the two most well known recent complaints. I'll post them when I get them.)

Melody: We were given 180 days to formulate and write a response with an action plan for the PAVE task force. (Task force announced June 1, 2021. First meeting was August 5, 2021. December 1, 2021 the reply is due?)

Summary end of meeting.

Jim Park: This is not about how to get rid of appraisers but how to make appraisals more reliable, credit worthy and to diversify the profession. The bureau of labor statistics showed that appraisers are last (when it comes to diversity with 96% white).(The statistics are based on someone calling someone's house, asking one person about the professions of all the different people in the house and their different races. They're calling land lines. Not very reliable stats. Per AI 76% of appraisers are white. That's very close to the same percentage as real estate agents which is 75% and the general population overall which is 72%). We will do a third roundtable by ASC but not this year. It'll be first quarter next year. 

The video should be posted here. I still haven't found the video from the last meeting. I even emailed twice asking where it was and no reply.

https://app.hopin.com/events/asc-2021-roundtable-building-a-more-equitable-appraisal-system/replay

______________________

Some screen grabs from the session.

Some questions asked in the chat.

Fontana Pete

Congresswomen Watters mentioned getting rid of the "big boys" in the appraisal process! Can you elaborate on who she is referring to as the big boys? AMC's, banks, GSE's? Thanks kindly

Kennedy Chester

Question 3: What areas of regulation and policy could be improved to have an impact on eliminating bias in property valuations?

Kennedy Chester

Question 2: What role can private sector and the appraisal regulatory system play in advancing equity and diversity in the appraiser workforce?

Kennedy Chester

Question 1: How do lenders, regulatory agencies, GSE, HUD and VA policy affect the frequency and outcomes of ROV cases, and how might these regs and policies be improved? 

Sergio Johnson

In regards to the range option. Who would make the decision on the point of value being used for the lending decision in the range? (You probably still need a point of value to determine LTV etc)

Tanya Bates

Building relationships = A better understanding of the appraisal profession and in turn relevant ROV. Falls in line with what Bill is discussing.

Sergio Johnson

Bill, the problem there would be that in the lending world, many UW's report to folks who are part of the originations side. You'd have to revise the laws for that piece of it.

Lori Noble

With millions spent toward PARREA and alternatives while small businesses dedicated to mentorship are paying the price. The anti-competitive practices are prevalent and obvious in our regulations.

Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.

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Home Appraisal Bias Event - Consumer Finance Protection Bureau - Meeting - Real Estate Appraisal - by Mary Cummins

home appraisal bias event, consumer finance protection bureau, hud, mary cummins, fha, real estate appraisal, discrimination

Today August 3, 2021 I just heard about this meeting. As a certified licensed real estate appraiser on the Federal approved real estate appraiser list I was not notified about the meeting which is why I didn't see it live. Stakeholders should be notified of these meetings. They should also have a real estate appraiser on the panel for many reasons. The people on the panel were missing key information and insight about the main issues. 

My notes are within the meeting agenda outline. I haven't watched the second half yet but I will. The second half has to do with civil rights issues. I've already seen part of that presentation from one speaker. Below is a link to the two hour video. My personal comments are in ( ). 

https://www.consumerfinance.gov/about-us/events/archive-past-events/virtual-home-appraisal-bias-event/

"We held a virtual event on Tuesday, June 15th, 2021 at 1:00 p.m. EDT for virtual discussions on home appraisal bias. Acting Director Dave Uejio hosted discussions with civil rights organizations, housing policy experts, and other federal agencies to explore how racial bias in housing appraisals and automated valuation models may occur."

01:00 PM – 01:06 PM Welcome, Federal Agency Panel and Acting Director Introductions Alicia Criado Hampshire, Public Engagement

01:07 PM – 01:10 PM Opening Remarks Acting Director Dave Uejio

Dave Uejio: The Appraisal Institute said it's a growing problem in the industry. San Francisco couple who got rid of black photos, items in their home received $500K higher appraisal. (That case had to do with other issues which were not discrimination, see here https://mary--cummins.blogspot.com/2021/02/alleged-discrimination-home-appraisal.html) Extreme example but underscores example of home appraisal bias. 

Appraisals are imprecise. A low appraisal makes comparable homes value lower. (Wrong. Low sales prices would do that, not appraisals). Biden said he'll take action. I am focusing on long standing inequities. (He read his entire report) We will have experts and federal agency partners and discussions with consumer rights leaders and consumer advocates. 

01:11 PM – 01:12 PM Research Presenter Introductions Alicia Criado Hampshire, Public Engagement

Introduces Michael Neal and Jim Park. 

01:13 PM – 01:23 PM Presentation on the Urban Institute’s research on Automated Valuation Models (AVMs) Michael Neal, Senior Research Associate, Housing Finance Policy Center, Urban Institute

Michael Neal: AVMs (Automated Valuation Methods). They disproportionately affect black neighborhoods. AVM as a substitution for and compliment to in person appraisals. Appraisers contributed to the 2008 real estate bust and great recession (FALSE. That was lenders giving loans to people regardless of their ability to pay them back) Appraisers have a role in perpetuating racial inequities and a role in perpetuating the pandemic. (Even the pandemic now? WTH?!) We can eliminate, reduce racial disparity by using AVMs. We looked at three ways to determine inaccuracy in avms. AVMs are far off the real value of homes (How do they know what is the "real value?"). We compared inaccuracy of black to white areas in three cities, Atlanta, Memphis and Washington DC.

White and black areas both look the same with avms in terms of inaccuracy. The magnitude of inaccuracy is greater in white areas than black (Magnitude is error rate x value). We compared to underlying home value. The percent magnitude of inaccuracy is greater in black vs white areas. (It's not color but home value ranges. As Zillow representative responded in another meeting there is more inaccuracy on the tail end of the value ranges i.e. very low. Lower priced homes are also in poorer condition. They're generally older. There is less data in poor areas so not as accurate). We try to explain via regression analysis via four factors, property differences, neighborhood conditions, turnover rate and majority of black vs white. More turnover increases avm accuracy. (More turnovers, more data, makes sense!) The percent majority race of the neighborhood is statistically significant (because POC tend to own lower priced homes). AVMs shouldn't be aware of race but they are. (No. It's because POC tend to own lower priced homes. More error in lower priced homes due to condition, lack of data. Zillow stated this and I agree). 

Ways to invest in black communities. Black banks and improve home condition. Need more data to determine condition better. A too low estimate can threaten home purchase. Contact me. (His read his report) (Here is a link to the underlying paper His paper confirmed what I stated above. There is more error in low priced homes. "Majority-Black neighborhoods tend to have lower home values, more heterogeneous properties, higher shares of distressed home sales and gentrified neighborhoods, and lower household incomes. All these factors are associated with a greater magnitude of percentage error in AVM estimations." His paper confirmed that AVMs value white and black owned homes the same. They have the same amount of error. This is the opposite of what Andre Perry stated. Andre Perry also used AVMs. Neal and Perry are both black. The areas aren't 100% black. Poor whites, browns are also affected by AVM data.)

01:24 PM – 01:34 PM Overview of ASC’s role in appraisals and D&I efforts Jim Park, Executive Director, Appraisal Subcommittee, Federal Financial Institutions Examinations Council

Jim Park OSC: Bias is an important issue. Appraisal regulatory system. Three main components, states, federal and private sectors. Federal carries out licensing, discipline. Appraisal Foundation has two boards, ASB, AQB. They set USPAP and minimum requirements to be an appraiser. ASC is Federal government. Maintain national registry of appraisers and AMCs. 

ASC member agencies. Slides.

Diversity equity inclusion. I am concerned with  reports of alleged racial bias in appraisals and lack of diversity in the profession. Recent allegation of racial bias and lack of diversity. We must regain public trust. ASC has initiatives to review bias, review of USPAP and credentialing of appraisers. We will be hosting roundtables on bias. Appraisers and Assessors are 96% white, 70% men. I find it deeply disturbing (Jim Park is a white male, see pic above). 

Lack of new appraisers. In the past 10-12 years 20-25% decline in national registry. Aging population, declining numbers, and few new entrants while demand increases. One reason is supervisor trainee model which is the only way to become appraiser, by the apprenticeship model. Generally this is only family members. (My article about the problem with the program with solutions) This contributed to lack of diversity. We're working on an alternative but nothing yet. We are doing research to figure this out and find solutions. HR 2553 would establish inter agency task force to analysis federal underwriting standards and guidance to increase diversity in appraisers. Need study our entire industry. (He read his report).

01:35 PM – 02:05 PM Federal Agency Panel Discussion, acting director. 

Todd Harper. NCUA,  National Credit Union Administration. Appraisal bias is important to explore. Must close the wealth gap (for POC). Purchasing home is one of three major ways (other two are starting a business and retirement savings accounts). Dodd Frank Act 2010 reforms. I've been reading news accounts of bias. Existing statutes, the FHA need to address the problem. We need to enforce. Quality control standards for AVMs were supposed to have been made. Formulas can be garbage in, garbage out. Need good quality data going in to get good quality results. (AVMs use like kind appraisal method used for centuries all over the world choosing most similar sold homes for comparison. It's the main asset valuation method similar to Kelly Blue Book car value system. This is what appraisers use.)

Lender owns the appraisal though consumer pays for it. Consumer needs new appraisal to go to a different lender. Consumer should own so can shop appraisal and loan with another lender. (He read his report. Appraisals can currently be transferred from one lender to another with an appraisal transfer letter that references Home Valuation Code of Conduct (HVCC), Appraiser Independence Requirements (AIR) and FHA Guidelines  regarding appraiser independence (ML 09‐28) . Ask for the letter.) 

Michael Hsu, Office of the Comptroller of the Currency (OCC). We must remove structural obstacles. Need access to affordable housing. Lower appraisal value suppresses property tax and money to education. (Lower sales prices do that, not appraisals). It can negatively affect wealth for minorities. Homes in black neighborhoods are worth 1/2 homes in white neighborhoods (FALSE! He cited statistically flawed Andre Perry report. Even Perry said 23% even though it's zero). $156B loss in value nation wide per Brookings Institute (FALSE! Andre Perry's report is statistically flawed and therefore meaningless. He is not the institute but one person who wrote a paper that was not peer reviewed. There was no legitimate research involved but cherry picked numbers from flawed comparisons of two small very different groups chosen by one person. He did not compare similar homes in similar areas.)

We must hold banks accountable but need collective effort. I applaud civil rights leaders for holding us accountable. There is 11 trillion in mortgage loans in the US. 

McCargo, HUD Director for Marsha Fudge. On behalf of Fudge and HUD, thanks. Growing number of reports of bias in the media. Reports of discrimination have increased 10x since 2019. This includes lenders, lending requirements and the lack of diversity of appraisers. Over 85% are white, less than 2% black. Joe Biden told Fudge to lead the task force to address inequities for POC. It will include federal regulators and agencies. Will assess extent, causes, effect and recommend actions. We will engage stakeholders who have information (but not real estate appraisers or people in the actual industry for some reason). June is homeownership month. 

McCargo: News stories. There's a new one a week. There's a wealth and homeownership gap. 

Todd: This isn't a new issue. People fleeing Poconos from NY paid more than what homes were worth. The credit union must meet needs of all even poorer people. Need to help POC access and build wealth to overcome racism over time. We need to diversify appraisers and regulate AVMs. 

ASC: Black homeowners thinking they must "de black" their home is heartbreaking. The idea the tactics work is frustrating. (They don't work. See articles on three main incidents of alleged racism in real estate appraisals which showed the original appraisal values were correct. Two of them didn't "de black" the home. Article 1. Article 2. Article 3. ) The heart of appraisal is objectivity and independence. The (color of the) owner has nothing to do with opinion of value. People must report any perceived discrimination by appraisers to state departments. If they are discriminating, they are violating USPAP and should be disciplined. 

Todd: ASC hotline? 

ASC: Hotline refers users to proper department. 

Hsu: Not a new problem just more awareness from media articles. This puts an urgency on the issue. It's great all agencies are working together on this. 

Dave Uejio: Difficult for consumers to discern discrimination. (Consumers think any appraisal which is lower than what they personally want is "discrimination.") What is contributing to this problem is impacting valuation in communities. 

McCargo: Real estate is local. We should focus on state and local levels. How diverse can we get the industry. 

Jim ASC: Fed and states set requirements. States can exceed federal levels. Need more diversity on state appraisal boards. Needs more minorities. Only Alabama requires it. Appraisals result in a one point value. Not how the market works. (Yes, it is. A buyer only pays one price for a property. That is "market value." Our appraisal actually includes a range of values if someone on the panel had ever seen one) Market reflects a range. (As a whole but not for the specific property which will be secured by a loan backed by the federal government and resold as an investment). Maybe appraisers should do that. It might help lending process. (Lenders would refuse as the loans could not be guaranteed or resold as investments). We should provide more data such as GSEs (Government Sponsored Enterprise  is a quasi-governmental entity established to enhance the flow of credit to specific sectors of the American economy. Created by acts of Congress, these agencies–although they are privately-held–provide public financial services. Fannie Mae, Freddie Mac). If more data made available to appraisers, consumers, might work as check and balance. Make it more difficult to allow intentional and unintentional bias to creep in. (Might be invasion of privacy to share what someone's home appraisal especially if it includes the appraisal which shows interior photos. Public records do show new loans.).

Dave Uejio: What do you think the bureau should be doing about this? 

McCargo: Awareness has gone a long way. Increase in complaints last couple of years (caused by the rising market and not necessarily discrimination). People are learning what it is. Better data collection to better inform. GSEs have lots of data. Need to make it more visible. 

(? speaker): AVMs are playing a huge role today. GSEs use them for appraisal waivers. Not a panacea but based on historic data and unresolved issues. We should promote research on AVMs  to determine risk, error. (There are risk and error scores posted with values, value ranges with most AVMs. Some like CoreLogic won't post an AVM if they feel risk, error too high due to lack of data). Need certification for AVMs. Maybe make publicly available the algorithm so all can use. (Any appraiser can tell you the algorithm. It's not a secret. See below*)

Mike Todd: Need to work on AVMs and consumer education. Federal appraisal law and oversight of private lending. Look at some states' laws on bias to get the best ideas for federal standards and regulations. Federal transaction levels are $400,000. In 1989 it was $10,000. Higher threshold doesn't protect people who buy cheaper homes as well.

Hsu: Office of the Currency. Stories are anecdotal but need research to back it up. (YES! The media stories are not only anecdotal but the three main ones are FALSE. The government should do independent research on alleged bias. Mike Neal already did and he said there's no difference in appraising based on AVM values between white and black neighborhoods. Andre Perry's report is based on the same AVM values). 

I'll post notes from the civil rights discussion later.

*The appraisal value algorithm. Appraisers use matched pairs analysis to value homes. We compare the subject property to the most similar recently sold nearby homes with the same amenities which sold on the open market in armslength transactions. We give more weight to the more similar home sales. We don't use averages, means or median prices. While we include properties which are listed and not sold we don't give them as much weight. We actually do give a value range via the comps we use. We are generally limited by the unadjusted highest most recent similar sold price. We must use sold comparables that bracket the most important features which are size, bed/bath count. 

The appraiser searches properties which are +/- 15% difference in gross living area within a half a mile radius which sold on the open market within the last three months. We go wider if there aren't enough comparables. We need at least three sold comps, one pending and one listed. We then choose the most similar recent comparables to the subject.

Next we adjust for differences between the subject and the comparables. If one has three beds and another has two, we figure out the value of the third bedroom via regression analysis. We basically search sold homes which are similar in every way except the bed count. The difference in the three bed verses two bed home sales should be the value of the extra bedroom. 

After we make the adjustments for all differences we have a range of adjusted and unadjusted values for all the comparables. The home sales that are the most similar carry the most weight. If we were appraising average newer tract homes which are identical there should be very little variation in values. Appraisers are extremely happy when we don't have to make any or at least not many adjustments. This generally only happens to me with newer average sized identical condos. 

That's the home value formula the AVMs use though it's not in the form of a mathematical equation. I've written real estate value math equations for my HP12C. Maybe I'll write a simple one and post it here. I've mainly written appreciation, leveraged value, return on value...equations. 

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Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the California Department of Fish and Game and the USDA. Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.

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