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Executives from mortgage giants Fannie Mae and Freddie Mac and the American Bankers Association are scheduled to testify next week at a hearing on valuation bias, and stakeholders and the public are invited to attend in person or virtually.
The hearing, to be held on Wednesday, November 1, at the U.S. Department of Housing and Urban Development headquarters in Washington, D.C., is the third hearing this year as part of the Federal Financial Institutions Examination Council’s (FFIEC) Evaluation Subcommittee’s continuing efforts. becomes. To eliminate evaluation bias.
Biden administration Started interagency efforts To combat bias in housing appraisals on June 1, 2021, the 100th anniversary of the Tulsa Race Massacre, as part of a larger effort to build Black wealth and close the racial wealth gap.
Last year’s report by the Interagency Task Force on Real Estate Valuation and Valuation Equity (PAVE) Outlined steps What federal agencies are taking to improve fairness in the evaluation process, and detailed additional recommendations for government and industry stakeholders.
At next week’s public hearing, members of FFIEC’s Assessment Subcommittee (ASC) will discuss how residential assessments are developed and reviewed, the residential real estate assessment review process, and the development of local assessments.
The following witnesses are scheduled to testify:
- Robbie Wilson, President of the National Association of Real Estate Appraisers
- Dean Kelker, Director, Real Estate Appraisal Advocacy Association
- Danny Wiley, Freddie Mac Senior Director of Single-Family Valuation
- Lyle Radke, Senior Director of Single-Family Collateral Risk, Fannie Mae
- Sharon Whitaker, Vice President, Commercial Real Estate and Mortgage Finance, American Bankers Association
The three-hour event begins at 10 a.m. ET and is open to the general public. invited to attend Live or via Zoom (Pre-registration required). The public can also submit written comments until Nov. 15 at ASCHearing@asc.gov.
FFIEC’s Evaluation Subcommittee held two public hearings this year. May session It focuses on evaluation standards, evaluator qualification standards, barriers to entry into the profession, and evaluation practices.
appraisal subcommittee First trial in January The study group focused on the root causes of rating bias and was led by Jixta Martinez, Deputy Director of the Consumer Financial Protection Bureau (CFPB).
speak at Green Lining Institute2023 Just Future Summit on Friday, Martinez says: We spoke with Tenisha Tate Austin and Paul Austin, a Marin City, Calif., couple who believe they were victims of evaluation bias.
Jixta Martinez
“After having their home undervalued by nearly $500,000 for reasons believed to be race-related, my family made the shocking choice to have their home whitewashed for a new appraisal,” Martinez said. “We removed everything about who they were to eliminate any possibility of bias. They even asked white friends to stand in for them.
“With the whitewashed house and a new appraiser, their home’s appraised value went from $995,000 to nearly $1.5 million,” Martinez said. “This family’s experience highlights the role that race continues to play in the mortgage market.”
Martinez also noted that the CFPB and five other agencies proposed rules in June regarding automated valuation models (AVMs) used by lenders to speed up loan processing and reduce costs.
He said the proposed rule would create basic safeguards to reduce the risks associated with AVMs, “avoiding conflicts of interest, conducting random sample testing and reviews, and prohibiting discrimination.” We require companies to put policies and processes in place to comply with the law.”
This rule applies only to mortgage originators who make credit decisions, servicers who make loan modification decisions, and secondary market issuers like Fannie Mae and Freddie Mac who use AVMs to value the underlying homes. be done.
Other uses of AVMs, such as portfolio monitoring, “do not involve the determination of collateral value and therefore are not within the scope of the proposed rule,” the agency said.
This standard does not apply to the use of an AVM to produce an appraisal by a certified or licensed appraiser or to the review of an appraisal that has already been completed.
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