Hybrid Hearing - Devalued, Denied, and Disrespected: How Home Appraisal Bias and... (EventID=114561)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Tuesday, March 29, 2022, at 10:00 a.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a hybrid hearing entitled, “Devalued, Denied, and Disrespected: How Home Appraisal Bias and Discrimination Are Hurting Homeowners and Communities of Color." ___________________________________ Witnesses for this one-panel hearing will be: • Pledger M. Bishop, III, President, Appraisal Institute • David S. Bunton, President, The Appraisal Foundation • Dean Kelker, Senior Vice President and Chief Risk Officer, SingleSource Property Solutions, on behalf of the Real Estate Valuation Advocacy Association • Lisa Rice, President and CEO, National Fair Housing Alliance • Tobias J. Peter, Assistant Director, AEI Housing Center ___________________________________ Background Home valuations are a critical part of the mortgage lending process and the overall safety and soundness of the housing market. While there are various methods of home valuation, including evaluations, desktop appraisals, hybrids, and automated valuation models, full appraisals have traditionally been the most comprehensive and commonly used valuation methodology in the US. Appraisals are intended to provide a professional, objective estimate of a home’s market value that prospective homebuyers, lenders, mortgage insurers, investors, and governmental entities rely on to ensure that a mortgage does not exceed the value of the home, which serves as the loan’s collateral. Appraisals also serve as a consumer protection to ensure homebuyers pay a fair and reasonable amount for their home and homeowners receive the value their home is worth. However, in recent years, there has been greater awareness of how appraisals do not always protect or benefit everyone equally, particularly Black people and other people of color. Both overt and covert, intentional and unintentional home appraisal discrimination based on race, color, sex, religion, national origin, familial status, disability, and age is illegal in the US under the Fair Housing Act of 1968, the Equal Credit Opportunity Act of 1974, the Civil Rights Act of 1866, and various state and local laws. However, there is a growing body of evidence that people and communities of color are systemically disadvantaged by the appraisal process compared to White people and communities. Bias and discrimination in appraisals can result in perpetuating historic disinvestment in communities of color, lowering home values for homeowners of color, locking people of color out of homeownership opportunities, and contributing to the widening of the racial and ethnic wealth and homeownership gaps. Homeownership remains one of the single greatest sources of wealth for the average household in the US. In 2019, homeowner wealth increased, outpacing that of renters by more than 40 times. As home prices increased by nearly 18% during the pandemic alone, collective homeowner equity rose by more than 29% to $3.2 trillion from 2020 to 2021.6 However, even some of the most affluent communities have not benefitted equally from the home appreciation boom, namely those that are predominately Black,7 and not every family has experienced equal access to quality and stable homeownership.8 Currently, the White homeownership rate is 74.1%, compared to 44.2% for Black families and 48.4% for Latinx families. White families held 10 times more wealth than Black families and 7 times more than Latinx families in 201610 with one study finding that homeownership accounted for 27% of the Black-White wealth gap. While various factors such as a lack of intergenerational wealth transfers and lending discrimination have limited economic access for families of color, evidence also shows that bias and discrimination in the home valuation process also serves as a barrier to homeownership and wealth-building opportunities. Appraisers: Industry Diversity and Alternative Methodologies Although not comprehensively collected across the field, available data show that the appraisal industry lacks demographic diversity that is fully representative of the communities and consumers appraisers serve. The Appraisal Foundation conducted a survey of 4,714 appraiser respondents in 2021 that showed two-thirds of professionals are age 55 or older, and just 20% are age 45-55, and 10% are age 35-44. Statistics on the racial, ethnic, and gender diversity in the appraisal industry suggest that the industry also does not reflect the demographics of the United States.13 The US Bureau of Labor Statistics (BLS) shows that of the roughly 80,000 appraisers in the US, 97.7% identify as... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=409150