In doing so, we must ensure algorithms do not result in bias in their results and violate fair-lending laws. That’s why the NCUA is working with other agencies on joint rules to establish quality control standards for automated valuation models. Technology offers us one solution to the problem of human prejudice.
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However, as the Freddie Mac study, other reports, and recent news coverage demonstrate, we continue to see breakdowns in the appraisal system, particularly bias based on race. Those fixes addressed appraisal independence and appraisal inflation. Among other things, these reforms strengthened the powers of the Appraisal Subcommittee, the federal agency that oversees state appraisal regulatory programs.
As a congressional staffer, I contributed to the provisions in that law addressing appraisal bias. More than a decade ago, in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress enacted reforms to address problems in the appraisal industry. In one recent news story, a home that had been “whitewashed” by removing any trace of its Black owners was appraised for hundreds of thousands of dollars more than the original estimate. Multiple media investigations have also shown blatant appraisal bias against people of color. For example, a 2021 Freddie Mac study of 12 million appraisals found that homes in Black and Latino neighborhoods were valued lower than similar properties within white communities. This discriminatory practice has limited the ability of many families of color to benefit fully from the financial returns of homeownership. At President Biden’s directionthe Property Appraisal and Valuation Equity Task ForcePAVE for short, was charged with confronting a skeleton in the closet: the undervaluing of properties due to racial or ethnic bias.
That’s why last summer, the National Credit Union Administration joined 12 other federal agencies to begin righting a longstanding wrong. Dream and building intergenerational wealth through homeownership is only possible if property values are assessed fairly and accurately for all.
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