Business & Investment

The Biden administration sets out an ambitious plan to combat evaluation bias

On Wednesday, the Biden administration announced a series of ambitious reforms aimed at combating stigma in the housing appraisal process, and released a report documenting the history of stigma and its impact on the gap in American racial wealth. Did.

The report attached to the action plan depicts a picture of a well-established system still plagued by the problem of prejudice, and the story of the black family has since received higher ratings. It is still common to get rid of evidence of their blackness, And with respect to the wealth gaps partially created by the history of prejudice in housing valuation, median white families hold eight times as much wealth as today’s median black families in the United States. report..

“Housing ownership has contributed significantly to the wealth-building of black and brown households, and continues to promise multi-generational wealth-building and the stability of colored homes,” the White House said in a statement. “. “But housing valuation prejudices limit the ability of black and brown families to enjoy the economic benefits associated with home ownership, thereby contributing to the already vast racial wealth gap.”

The Byden administration’s five plans are to increase accountability in the assessment industry, provide consumer support and awareness, prevent algorithm bias, foster a more diverse assessment industry, and leverage federal data for assessment research. We aim to help you in policy making.

The government has shown plans to pursue laws that will result in a more modernized and regulated appraisal industry after the industry has been largely self-regulated and closed for years. According to the report, federal agencies will develop legislative packages to improve coordination between federal executive agencies to better identify patterns of discrimination in assessments.

To assist homeowners who may have received a lower than expected rating, the government has issued guidance on the steps homeowners can take to review their ratings, facilitating the process. I am planning to implement a policy to do so.

Artificial intelligence has emerged As a possible solution to evaluation bias. To prevent the model from encountering the same problems as the manual model, the Task Force has biased data that the artificial intelligence model used in the process has historically evaluated homes in black areas more than elsewhere. It was recommended not to depend on.

In February, the Consumer Finance Agency announced that it was working on developing standards to “ensure that the computer model used to determine home valuations is accurate and fair.”

“We want to think that machines that calculate numbers can remove bias from equations, but they can’t,” said Rohit Chopra, CFPB Director. Said at that time.. “This initiative is one of many steps we take to ensure that face-to-face and algorithmic assessments are more equitable and accurate.”

and statement “We will take a lot of action to facilitate the task force’s work,” Chopra said Wednesday, including “taking an active leadership role in the evaluation subcommittee of the Federal Financial Institutions Review Board.” rice field.

“We have assigned significant responsibilities to the Appraisal Subcommittee, and it is important to meet these expectations,” said Parliament. Especially, Evaluation Foundation, This exercises enormous power to set standards and collect fees in the professional appraiser community. “

The Appraisal Foundation’s Appraisal Standards Committee sets minimum standards for appraisal professions. This is known as the Unified Standards for Professional Appraisal Practices (USPAP).board Recently lit Regulatory concerns over its ethical rules and the proposed amendments to the Fair Housing Guidance, known as Advisory Opinion 16, do not make it clear that discrimination against protected classes is illegal. After meeting with regulatory agencies, the Appraisal Standards Committee announced that it would undertake a “comprehensive review” of the rules.

According to data from the Ministry of Labor, about 97% of the professions are white, making it one of the least diverse areas in the country, according to the report. The action plan requires that the education and experience requirements they say represent barriers to entry in the field be removed. Currently, a licensed general appraiser position requires a 150-hour education course and has 1,000 hours of experience under a supervisory appraiser. Qualify for the lowest level of appraiser position available.

To make federal data on assessment bias more accessible, the Task Force recommended the development of a centralized database of federal assessment data to support further research on assessment bias.

In recent years, attention has been focused on evaluation biases, including: A 2021 survey conducted by mortgage lender Freddie Mac It confirmed the existence of a “valuation gap” for homeowners in black and Latin neighborhoods. The report found that the majority of appraisers, not just the minority, submitted assessments that created a large gap in the assessment of housing in non-white areas.

The long-awaited report by the Inter-Ministry Task Force on Real Estate Appraisal and Valuation Fairness (pavement) Represents the most specific steps the federal government has taken to combat practice.

“Today’s report confirms the persistence of prejudice in the housing finance system, with federal governments intergovernmental and with parliamentary, civil rights community, and industry stakeholders on the factors that cause mistakes. It provides a roadmap for taking meaningful steps. The valuation and valuation decline in real estate valuations experienced by borrowers and the community of colored races, “said Sandra Thompson, Deputy Director of the Federal Housing Finance Agency. Said in.

Industry groups in the real estate industry participating in the Task Force praised the general direction of the action plan, but suggested that much work awaits to implement it.

The Appraisal InstituteThe Association of Experts, which represents more than 16,000 real estate appraisers, said the action plan “is aimed at solving some challenging problems in appraisals and valuations,” but it goes beyond the details.

“The Action Plan calls for significant regulatory and oversight changes, but does not outline a particular plan,” said Jody Bishop, Chairman of the Evaluation Institute. Letter to President Biden.. “Transparency and accountability are important, but these goals need to be balanced with maintaining industry independence and encouraging professional entry.”

Bishop said the evaluator was “preparing to work with bank regulators, loan guarantee agencies, FHFA, CFPB, HUDs, and other stakeholders to develop a more accountable, viable and efficient regulatory structure. Is done. “

The Housing policy councilAn industry group representing mortgage originators and servicers has issued a statement in support of the plan, but also said that “significant work” needs to be done to implement it.

“The PAVE Task Force develops plans that have a significant impact on the quality and accuracy of assessments, addresses regulatory challenges, improves consumer understanding, expands and enhances data and research, and experts. Renewed his qualifications and is an appraiser. ” “We look forward to continuing our close involvement with the PAVE Task Force in embarking on key tasks in pursuing the actions identified in the plan.”

The Mortgage Bankers AssociationRepresenting more than 2,000 real estate finance companies, including independent mortgage banks and mortgage brokers, said improving the valuation process was a member’s top policy agenda, but comments from other industry groups , I heard that implementation would be the key.

“Although the report states that many of the reforms can be implemented under existing authorities, it is important that the Task Force body provide stakeholders with sufficient notification and commentary opportunities during the implementation process.” Said Bob Brokesmitt, MBA President and CEO. statement.

Editor’s Note: This story has been updated to include comments from industry groups in the real estate industry and Rohit Chopra, Director of the Consumer Finance Protection Agency.

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The Biden administration sets out an ambitious plan to combat evaluation bias

https://www.inman.com/2022/03/23/biden-administration-lays-out-bold-plan-to-combat-appraisal-bias/ The Biden administration sets out an ambitious plan to combat evaluation bias

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