Earlier this morning (3/28/22) the Biden Administration’s Property Appraisal and Valuation Equity (PAVE) Report was released online. You can find the full report here: Action Plan | pave.hud.gov

The report reflects several months of work by the PAVE Task Force of 13 federal agencies led by HUD and White House. The Task Force assessed available research on appraisals and bias as well as engaged with stakeholders in the appraisal field, including NAR, in developing the report. The beginning of the report goes over the historical role of racism in property appraisal and current impact of misevaluation on homeowners and communities. The final part is a series of 21 recommendations put forth by the agencies. Those recommendations are grouped under five headings which are listed in the next section.

Key Recommendations of PAVE Report

  • Strengthening guardrails against unlawful discrimination in all stages of residential valuation
    • Agencies are to help reform the current appraisal oversight structure by developing legislative proposal to modernize the governance structure of the appraisal industry and improves coordination and collaboration between federal enforcement agencies to better identify and redress discrimination in appraisals. This is targeted toward the Appraisal Foundation (of which NAR is a sponsoring organization) which as a private entity does not have to go through the same process of rule development as the federal government currently has in place.
    • Agencies are to develop a federal reconsideration of value process. This will allow parties in the real estate transaction to have an appraisal formally reassessed and possibly lead to a new or different appraised value. FHA loans will be impacted as will those overseen by the federal banking agencies. VA already has a ROV process in place that will likely provide guidance to the other agencies.
    • Agencies are to develop nondiscrimination quality control standard as part of a forthcoming proposed rule (per Dodd Frank) establishing quality control standards on Automated Valuation Models (AVMs) to ensure AVMs do not rely upon biased data that could replicate past discrimination.
    • Agencies are to clearly and strongly articulate to appraisers that the Fair Housing Act applies to the appraisal process and asking FHFA and the GSE to revise the current appraisal forms to reduce areas in the formal appraisal report that can allow for biased opinions.
  • Enhancing fair housing / fair lending enforcement and driving accountability in the industry
    • Agencies are to improve collaboration in identifying and enforcing bias in the appraisal industry. This will include expanding mortgage lender examination processes to include identification of appraisal bias.
  • Building a well-trained, accessible, and diverse appraiser workforce
    • The Task Force is recommending to the Appraisal Qualifications Board (AQB) to remove and/or reduce experience hours that make it difficult for underrepresented groups to access the profession and to offer a comprehensive exam option in lieu of credentialing to become an appraiser
    • HUD, VA, and USDA will develop proposed rules that require fair housing education for appraisers that conduct appraisals for these agencies. The Task Force recommends the AQB made fair housing training a requirement for all appraisers.
  • Empowering consumers to take action
    • Agencies will create more education on appraisal bias for consumers including development of a consumer outreach campaign. HUD will work to create housing counseling education on appraisal bias.
  • Giving researchers and enforcement agencies better data to study and monitor valuation bias
    • Agencies are to work toward the development of an aggregated database of federal appraisal data to better study, understand, and address appraisal bias. This will include creating a work group of subject matter experts from stakeholder agencies to develop a research agenda on appraisal bias.

While no actions are currently being taking regarding the following areas, the Task Force Agencies will continue to discuss and assess:

  1. Expanded use of alternatives to traditional appraisals as a means of reducing the prevalence and impact of appraisal bias.
  2. Range-of-value estimates instead of point estimates as a means of reducing the impact of racial or ethnic bias in appraisals.
  3. The potential use of alternatives and modifications to the sales comparison approach that may yield more accurate and equitable home valuation.
  4. Public sharing of a subset of historical appraisal data to foster development of unbiased valuation methods.

In addition, the White House and HUD will host a virtual event about the report and featuring victims of appraisal bias. The event will take place today at 11:00am ET and can be viewed here: White House PAVE Event

Posted by: Byron King on 03/28/22 (This information is only accurate as of 03/28/22. You must contact SCR for updates and changes to this information after 03/28/22 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org or email byron at screaltors.org)

This information is not legal advice. This information is intended only to provide general information and may not be relied upon as specific legal guidance. Legal counsel should always be consulted before acting in reliance on this information.