In a recent Perspectives Blog, "Our Commitment to Reducing Appraisal Bias," Fannie Mae VP, Single-Family Collateral Risk Management Jake Williamson examines media reports alleging racial bias in home appraisals, as the nation turns their focus on inequality in the appraisal process.
“Fannie Mae is committed to racial equity in housing, and we take these allegations seriously,” said Williamson in the blog. “As one of the largest consumers of residential appraisals in the United States, we've asked ourselves whether we are doing all we can to identify and help prevent it.”
The GSE provides its Collateral Underwriter (CU) tool to the marketplace, offering a set of risk flags and messages, including triggers for potential over-valuation risk, appraisal quality risk, and property eligibility risk. CU routinely undergoes fair lending reviews by Fannie Mae’s Fair Lending team, and the GSE states that CU will undergo enhancements in 2022 with a new message for undervaluation risk that will help lenders address potential bias issues early in the process.
“One of the first steps we're taking is research–we're leveraging our database of roughly 54 million appraisals to analyze undervaluation that could indicate bias,” said Williamson. “We believe the results of this research will help identify root causes of undervaluation, and through our industry partnerships, we hope to create solutions that will address them.”
In terms of the racial makeup of the valuation and appraisal industry, the Appraisal Institute reports that appraiser demographics don't reflect the American population, as appraisers are 85% white and 78% male.
“While many factors can contribute to potential bias in appraisals, having an appraisal workforce that better represents the communities where they work could instill more confidence in the process and mitigate bias,” said Williamson.
In order to promote diversity, Fannie Mae collaborated with the National Urban League in 2018 to launch the Appraiser Diversity Initiative (ADI), designed to attract new entrants to the residential appraisal field, and help overcome barriers to entry (such as education, training, and experience requirements).
In addition to Fannie Mae’s efforts, Chase recently earmarked $3 million to the ADI, which also signed on Freddie Mac as a core partner, providing additional resources and advisor support. Chase’s commitment to the ADI will devote $1 million per year, for three years, to support trainee education packages, and is expected to help approximately 700 students with costs that include textbooks, calculators, and the purchase of any additional courses required.
“We’re proud to say that the ADI is successfully attracting diverse, aspiring appraisers, awarding them education scholarships, and seeing them launch their careers,” said Williamson. “Jessica Brown and Marcus Knight, two ADI scholarship winners, represent a new generation of appraisers.”
Click here to read the Fannie Mae's Perspectives Blog, "Our Commitment to Reducing Appraisal Bias."