Prejudice and bigotry in home appraisals has contributed to the wealth gap between Black and White Americans.
For generations, if not centuries, Black Americans have endured discrimination in obtaining loans to purchase homes.
Additionally, Black Americans have often received higher interest rates than some of their White counterparts even when all things like credit rating and salary are the same.
Moreover, Black Americans often experience the undervaluing of their homes in comparison to when they eliminate any semblance of the Black race from that home.
That has contributed mightily to the wealth gap between Black and White Americans.
To combat the plight of Black homeowners, the Biden administration announced some steps that they hope will remove racial and ethnic biases in home appraisals.
Two years ago, President Joe Biden started the Interagency Task Force on Property Appraisal and Valuation Equity.
The Interagency Task Force on Property Appraisal and Valuation Equity released an action plan to combat the discrimination in March 2022.
The announcement made on June 1 shows the Biden administration’s plan to deliver on their mission of making home appraisal post-racial or colorblind.
A White House fact sheet said, “For far too long, bias in home valuations has limited the ability of Black and Brown families to enjoy the financial returns associated with homeownership, thereby contributing to the already sprawling wealth gap.”
On a telephone call with reporters, Vice President Kamala Harris said, “Everyone should be able to take full advantage of their aspiration and dream of owning a home.”
Ryan Chatelain of NY 1 News reported, “The administration is proposing a rule that would establish quality-control standards for algorithmic and computational models used to assess home values. The standards would require lenders that use such models to adopt and maintain policies and other safeguards to ensure greater confidence in their appraisals. The proposal is subject to a 60-day public comment period.
“Federal agencies also are working to promote industry-wide consistency for people who wish to request reconsideration of home valuations they believe might be inaccurate. The White House said consumers are often unaware they can appeal the estimates. The agencies are drafting proposed guidance for how financial institutions may integrate policies regarding reconsideration of value, or ROV, into their appraisal process. The guidance also will be subject to a public comment period.”
Furthermore, the Biden administration wants more transparency of updated appraisal data, which would allow independent researchers to discover any inconsistencies that might have been the result of bias or racism.
Additionally, President Biden wants to remove some of the barriers to enter the home appraisal profession, which would increase diversity in the field.
He will do so by creating a dashboard that will inform people which states have more difficult requirements than federal requirements.
The White House would then request that those states drop the requirements that are stricter than federal standards.
One standard that the Biden administration wants removed from some state requirements to become an appraiser is the requirement for a college degree.
Biden believes that the college degree requirement is not needed because he sees no proof that obtaining a college degree leads appraisers to producing more equitable and ethical appraisals.
In his report, Chatelain wrote, “According to the Bureau of Labor Statistics, more than 97% of home appraisers are White.
“A 2021 study by Freddie Mac found that homes in minority neighborhoods were much more likely than homes in White neighborhoods to be appraised at a value below the contract sales price. A Fannie Mae analysis, also from 2021, found that White-owned homes were more likely to be valued above algorithm predictions than Black-owned homes.
“And a study by the think tank Demos and the Institute for Assets and Social Policy at Brandies University concluded that eliminating racial disparities in the amount of wealth families gained from owning a home could close the wealth gap between White and Black households by 16%, and between White and Latino households by 41%.”
One of the most noteworthy examples of how Black homes are undervalued in comparison to White homes, with all things being equal, is Paul Austin and Tenisha Tate Austin’s home near San Francisco, which was valued at $998,000 when appraised by Miller and Perotti Real Estate Appraisers.
Before that, the home was valued at $455,000 more during a mortgage refinance in 2019.
Thinking that racial discrimination had played a role in the Miller and Perotti appraisal, the Austins had their White friends pose as the owners.
They then had the home reappraised and it was suddenly valued at $1.48 million.
Although Janette Miller, co-owner of Miller and Perotti Real Estate Appraisers, initially denied any claims of racial discrimination, she agreed to settle out of court with the Austins for an undisclosed sum of money.
Not only have Black Americans endured generations of discrimination as it pertains to home appraisals, many have endured redlining, which has also contributed to the wealth gap between White Americans and Black Americans.
Redlining is described as denying loans to creditworthy applicants because of race when they attempt to buy homes in certain areas.
Brai Odion-Esene and Rachel Witkowski of Forbes wrote, “Redlining is the name given to a discriminatory lending practice dating back to the 1930s when lenders would draw red lines on maps around neighborhoods that were predominantly Black as a way to deny a mortgage, claiming it was high risk.
“While laws beginning in the 1960s have banned the practice, regulators will still cite lenders for similar behaviors when their lending patterns show a protected class was discriminated against by being denied financial services (or charged higher rates or fees in some cases) even though they are creditworthy applicants.”