Key Takeaways:
– Future of real estate is unpredictable, but preparation is key
– Virtual Inman Connect on Nov. 1-2, 2023 and Inman Connect New York on Jan. 23-25, 2024 offer tools and insights for the future
– Executives from Fannie Mae, Freddie Mac, and American Bankers Association will testify at a public hearing on appraisal bias
– The hearing is part of ongoing efforts to address appraisal bias and promote equity in the appraisal process
– The Biden administration launched an initiative to combat bias in home appraisals on June 1, 2021
– The hearing will discuss residential appraisal development and review, reconsideration of value, and rural appraisals
– Witnesses scheduled to testify include executives from real estate appraiser organizations and mortgage giants
– The hearing will be held on Wednesday, Nov. 1, 2023, at the U.S. Department of Housing and Urban Development’s headquarters in Washington, D.C.
– Members of the public can attend the hearing live or via Zoom and submit written comments until Nov. 15
– The Appraisal Subcommittee has held two hearings this year, focusing on appraisal standards, appraiser qualification criteria, and appraisal practices
– Zixta Martinez, deputy director of the Consumer Financial Protection Bureau, shared a story highlighting the role of race in the mortgage market
– The CFPB and five other agencies proposed a rule on automated valuation models (AVMs) to mitigate risks and ensure compliance with nondiscrimination laws
– The proposed rule would apply to mortgage originators, loan servicers, and secondary market issuers like Fannie Mae and Freddie Mac
– The rule would not apply to AVMs used for generating appraisals by certified or licensed appraisers or for reviewing completed valuations.
inman:
No one can predict the future of real estate, but you can prepare. Find out what to prepare for and pick up the tools you’ll need at Virtual Inman Connect on Nov. 1-2, 2023. And don’t miss Inman Connect New York on Jan. 23-25, 2024, where AI, capital and more will be center stage. Bet big on the future and join us at Connect.
Executives from mortgage giants Fannie Mae and Freddie Mac and the American Bankers Association will testify next week at a public hearing on appraisal bias, which stakeholders and members of the public are invited to attend in person or virtually.
The hearing, to be held Wednesday, Nov. 1, at the U.S. Department of Housing and Urban Development’s Washington, D.C. headquarters, will be the third conducted this year by the Federal Financial Institutions Examination Council’s (FFIEC) Appraisal Subcommittee as part of ongoing efforts to address appraisal bias.
The Biden administration launched an interagency initiative to combat bias in home appraisals on June 1, 2021 — the 100th anniversary of the Tulsa Race Massacre — as part of a larger effort to build Black wealth and narrow the racial wealth gap.
Last year’s report by the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) outlined steps that federal agencies will take to advance equity in the appraisal process and detailed additional recommendations for government and industry stakeholders.
At next week’s hearing, members of the FFIEC’s Appraisal Subcommittee (ASC) will discuss how a residential appraisal is developed and reviewed, the process for reconsiderations of value for residential real estate valuations, and the development of rural appraisals.
Witnesses scheduled to testify include:
- Robbie Wilson, president of the National Society of Real Estate Appraisers
- Dean Kelker, a board member of the Real Estate Valuation Advocacy Association
- Danny Wiley, senior director of single-family valuation, Freddie Mac
- Lyle Radke, senior director, single-family collateral risk, Fannie Mae
- Sharon Whitaker, vice president, commercial real estate and mortgage finance, American Bankers Association
The three-hour event starts at 10 a.m. Eastern time, and members of the public are invited to attend live or via Zoom (advance registration required). Members of the public can also submit written comments to ASCHearing@asc.gov until Nov. 15.
The FFIEC’s Appraisal Subcommittee has held two hearings this year, including a session in May focused on appraisal standards, appraiser qualification criteria, barriers to entry into the profession and appraisal practices.
The Appraisal Subcommittee’s first hearing in January focused on the root causes of appraisal bias and was led by Zixta Martinez, deputy director of the Consumer Financial Protection Bureau (CFPB).
Speaking at the The Greenlining Institute‘s 2023 Just Future Summit on Friday, Martinez recounted hearing the story of Tenisha Tate-Austin and Paul Austin, a Marin City, California couple who believe they were victims of appraisal bias.
Zixta Martinez
“After having their home undervalued by nearly half a million dollars for reasons they believed were related to their race, the family made the devastating choice to whitewash their home for a new appraisal,” Martinez said. “Removing everything of who they were, so as to remove the potential for any bias. They even asked a white friend to stand in for them.
“With a whitewashed home and a new appraiser, the appraised value of their house went from $995,000 to nearly $1.5 million,” Martinez said. “This family’s experience highlights the role race continues to play in the mortgage market.”
Martinez also noted that in June the CFPB and five other agencies proposed a rule on automated valuation models (AVMs) used by lenders to speed loan processing and cut costs.
The proposed rule would create basic safeguards to mitigate the risks associated with AVMs, she said, and “require companies to have policies and processes in place to avoid conflicts of interest, conduct random sample testing and reviews, and comply with nondiscrimination laws.”
The rule would only apply to mortgage originators making credit decisions, servicers making loan modification decisions, and secondary market issuers like Fannie Mae and Freddie Mac who use AVMs to value homes that serve as collateral.
Other uses of AVMs, such as for portfolio monitoring, “do not involve making a determination of collateral value, and thus are not within the scope of the proposed rule,” the agencies said.
The standards would not apply to the use of AVMs to generate an appraisal by a certified or licensed appraiser or to reviews of already completed valuations.
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Property Chomp's Take:
The future of real estate is uncertain, but that doesn't mean you can't be prepared. With the ever-evolving landscape of the industry, it's crucial to stay informed and equipped with the necessary tools to thrive. Two upcoming events, Virtual Inman Connect on Nov. 1-2, 2023, and Inman Connect New York on Jan. 23-25, 2024, offer opportunities to gain valuable insights and knowledge about the industry's future.
At Virtual Inman Connect, attendees will have the chance to learn about the latest trends and innovations in real estate. From AI to capital, these topics will take center stage, allowing participants to stay ahead of the game and make informed decisions.
Similarly, Inman Connect New York will provide a platform for industry leaders and experts to share their insights and predictions. With executives from mortgage giants Fannie Mae and Freddie Mac, as well as the American Bankers Association, testifying at a public hearing on appraisal bias, attendees will gain valuable insights into this critical issue.
The hearing, scheduled for Wednesday, Nov. 1, 2023, at the U.S. Department of Housing and Urban Development's Washington, D.C. headquarters, is part of ongoing efforts to address appraisal bias. The Biden administration launched an interagency initiative in June 2021 to combat bias in home appraisals, aiming to build Black wealth and narrow the racial wealth gap.
The hearing will cover topics such as the development and review of residential appraisals, the process for reconsiderations of value, and the development of rural appraisals. Witnesses from various industry organizations will testify, including the National Society of Real Estate Appraisers, the Real Estate Valuation Advocacy Association, Freddie Mac, Fannie Mae, and the American Bankers Association.
Members of the public are invited to attend the hearing either in person or virtually. The event will last three hours, starting at 10 a.m. Eastern time. Advance registration is required for virtual attendance. Additionally, members of the public can submit written comments to ASCHearing@asc.gov until Nov. 15.
This hearing is the third conducted by the Federal Financial Institutions Examination Council's Appraisal Subcommittee this year, following sessions on appraisal standards and appraiser qualification criteria. These hearings reflect the government's commitment to addressing appraisal bias and promoting equity in the appraisal process.
Appraisal bias is a pressing issue in the real estate industry, as it can have significant consequences for homeowners, particularly those from marginalized communities. Stories like that of Tenisha Tate-Austin and Paul Austin, a couple from Marin City, California, who experienced undervaluation of their home due to race, highlight the need for change. Their decision to whitewash their home for a new appraisal underscores the impact of bias on the mortgage market.
To further combat bias, the Consumer Financial Protection Bureau (CFPB) and five other agencies proposed a rule in June on automated valuation models (AVMs). These models are used by lenders to speed up loan processing and reduce costs. The proposed rule aims to create basic safeguards to mitigate risks associated with AVMs and ensure compliance with nondiscrimination laws.
While the proposed rule applies only to specific entities involved in the mortgage market, it represents a step towards addressing bias in the industry. It is essential to continue advocating for equity and fairness in real estate appraisals.
In conclusion, the future of real estate may be uncertain, but by staying informed and actively participating in industry events like Virtual Inman Connect and Inman Connect New York, you can position yourself for success. By addressing issues such as appraisal bias and leveraging new technologies like AI, you can navigate the ever-changing landscape of the real estate industry with confidence.
