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HUD Grants Millions to Test for “Racist” Appraisers
by Isaac Peck, Publisher
Appraisers following the “appraisal discrimination” issue may recall the mystery shopper experiment that the National Community Reinvestment Coalition (NCRC) conducted in Baltimore, MD in the Summer of 2022. (Read Appraisal Bias? The Inconvenient Truth of a Flawed Report.)
The experiment went like this: unsuspecting appraisers were hired to appraise properties that had been “whitewashed” or “blackwashed” (as the NCRC puts it), and then the appraisals were compared. The NCRC’s report conclusively reported that appraisers are “racially biased” and “undermine Black wealth” because in their total sample size of 12 appraisals, a 1.7 percent variance was noted between the “whitewashed” and “blackwashed” homes. NCRC then filed a series of HUD discrimination complaints against several of the offending appraisers.
The problem? The two most glaring examples of discriminatory appraisals performed in the experiment were performed by the same appraiser and that appraiser is Black. (We’ll have to see how the HUD discrimination complaint turns out!)
Furthermore, removing this one appraiser as a data point actually flips the data the other way and suggests that appraisers (on average) favor Black homeowners and assign their homes higher values.
Now, appraisers can expect to see more of this high-quality, selective testing.
New Grants
In March 2023, the U.S. Department of Housing and Urban Development (HUD) issued $54 million in grants to 182 non-profit organizations to fight housing discrimination. Over $40 million of the total grants is dedicated to what it calls its Private Enforcement Initiative (PEI). The PEI provides dedicated funds to “non-profit fair housing organizations to “conduct intake, provide testing, and investigate and litigate fair housing complaints.”
One might assume these grants are focused on discriminatory housing practices more generally, but HUD’s press release makes clear that appraisal bias is a key focus of the $40 million in PEI funds. The sub-header underneath the announcement reads: “Ahead of [the] anniversary of PAVE Action Plan, some grants empower organizations to test for appraisal bias and educate local communities.”
HUD’s release applauds the PAVE Action plan as the most wide-ranging set of commitments ever announced to advance equity in the home appraisal process and specifies that “Eligible activities for the funding awarded today included testing for appraisal bias.”
For its part, the NCRC received $425,000 in funds specifically dedicated to its “Private Enforcement Initiative.”
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Future Testing
Working RE reached out to NCRC for a comment. We asked whether NCRC knew that the appraiser who performed the most glaring “anti-Black” appraisals (in their view) was, in fact, a Black appraiser and asked what they thought about the fact that if this appraiser’s data point was removed, their study actually showed that appraisers (on average) assign higher values to Black homeowners.
NCRC did not reply to Working RE.
Nevertheless, it is clear that NCRC considered its first experiment a glowing success.
In an online webinar, the Director of Fair Housing at NCRC, Tracy McCracken, argued that testing appraisers is an important goal going forward. “We that work in Fair Housing and Fair Lending know that testing will be essential to root out appraisers that discriminate,” McCracken said.
In the same webinar, both McCracken and Jake Lilien, NCRC’s Counsel for Fair Housing Enforcement, urged other Fair Housing organizations to run tests on appraisers and specifically recommended additional testing in Alabama, Georgia, Louisiana, Mississippi, North Carolina, and South Carolina.
“There are certain things I don’t want to say publicly about how we did the testing because who is to say we’re done testing appraisers? I have a feeling other groups may try to use our same practices and we don’t want appraisers to know what these practices are. So, I can’t necessarily share with you specific details about how we contacted appraisers, what excuses we gave, etc. But if you work for a Fair Housing organization, reach out to me and I’d love to talk to you,” Lilien urged.
Their methodology is so good, that they’re eager to share it.
And now HUD has put up $40 million to help make that happen. Be careful out there, appraisers.
About the Author
Isaac Peck is the Publisher of Working RE magazine and the President of OREP, a leading provider of E&O insurance for real estate professionals. OREP serves over 10,000 appraisers with comprehensive E&O coverage, competitive rates, and 14 hours of free CE for OREP Members (CE not approved in IL, MN, GA). Visit www.OREP.org to learn more. Reach Isaac at isaac@orep.org or (888) 347-5273. CA License #4116465.
OREP Insurance Services, LLC. Calif. License #0K99465
by Steve
They will torture the data till it confesses what they results they want.
-by James
No government run agency will ever admit that they spend thousands of dollars of taxpayer’s money on flawed studies. I am thankful that I decided to retire from a profession that I was a part of for over 45 years. Instead of lending support to the dwindling field of new appraiser’s, it seems certain government agency’s goal is to discourage and try to criminalize honest appraisers that have no reason to produce a biased report based on race. Furthermore, when called out by much more superior educated professionals, these government agencies would not admit to failure even when confronted with flawed data.
-by Sandra Cox Tuck, SRA, CR-459
I recently read about one of the Memphis policemen who was the same race as the victim in a murder and who was charged and sentenced in the death. Bias was not mentioned in the article. The situation above is that the appraiser who was mentioned was the same race as the person for which the appraisal was completed. Does bias only come into play when the persons involved are of different races or can bias be stated when the persons involved are of the same race?
-by Charles Reische
HUD is engaged in Fishing with hand grenades. In order to remove a couple of Carp they are throwing a very expensive hand grenade into the pond which remove everything. Whether any carp float to the top, they will announce successful eradication. This is a approach that should only be used in another’s pond. The best part is that taxpayers are on the hook for the hand grenade.
-by Mary T Thompson
Figures they would not respond to you! Once they realize, if they ever do, that their test is a miserable failure they will have to eat crow and 40 million will have been wasted. But of course they will FIND something to support their bias narrative whether or not it is based upon the facts. I have been advising people of this experiment because they will never hear the truth in the news or on social media. All they will hear is that bias was proven. So glad I am close to getting out of this profession. Most of my jobs are non lender, so I wonder how they plan to TEST Appraisers in this regard. They will be LYING about the reason for the appraial and we need to know that for scope of work. Bottom line it PROVE BIAS….Good luck! But yes, be careful out there as they WANT you to fall into a trap. Many will purposely over value minority neighborhoods for fear of being sued. Sad but true and it is already happening. Also Appraisers know the demographics in which they serve. They will DECLINE assignments in these areas and who does that serve? Certainly not those they are trying to protect. You need honest accurate valuations not ones that are coerced or over valued due to fear of losing your livlihood. Very Sad state of affairs we are living in today.
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