Appraisal Discrimination
HUD Actions Confront Bias in the Home Appraisal Process for People Seeking FHA Financing
HUD is creating a process that people seeking FHA financing can use to request a review of their appraisal if they believe the results may have been skewed by racial bias. For example, a homeowner who is in the process of refinancing their home with an FHA-insured mortgage can take steps to ensure that their appraisal is fair.
The proposed change indicates what lenders must follow when a borrower requests a Reconsideration of Value (ROV) review if concerns arise around unlawful discrimination in residential property valuations. Under the Reconsideration of Valuation proposal, lenders are given guidance regarding how to review requests from borrowers for a reconsider of value for the appraisal conducted in conjunction with their application for FHA-insured mortgage financing. It also provides guidance for obtaining a second appraisal when material deficiencies are documented, and the appraiser is unwilling to resolve them. Material deficiencies include when a Fair Housing violation has occurred, or bias has been identified on a property valuation report.
FHA is committed to eliminating bias in residential valuations and is taking multiple actions to enhance information, process, and documentation requirements related to this important issue. FHA is asking for stakeholder feedback to identify barriers and impediments that the draft ROV process may impose on the lending process. Any interested party is welcome to provide input. Stakeholders are encouraged to provide feedback on the Draft ML by emailing the Feedback Response Worksheet located in the Drafting Table to the FHA at sffeedback@hud.gov. The feedback period is open from January 3, 2023, to February 2, 2023.
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Source: Read the January 12, 2023 HUD release.
A federally-commissioned report from the National Fair Housing Alliance identifies recommendations to address racial discrimination in home appraisals.
