U.S. Department of Housing and Urban Development (HUD) Secretary Marcia Fudge appeared on Yahoo Finance Live this week to detail the efforts of her department in mitigating bias in the home appraisal process, specifically so more people have the opportunity to build home equity and — by extension — generational wealth.
Citing recorded instances of appraisal bias that have affected people of color, Secretary Fudge credits the formation of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) designed to address the issue as an idea of President Biden’s before talking about some of the action items that HUD is aiming to address on this issue.
“What we know is that in order for us to really be able to pass down [wealth] to the generations that follow us, […] we’ve got to make the [appraisal] process fair,” Fudge said. “We have to take redlining out of the process because we still look at certain neighborhoods as neighborhoods that are not valued. We have to take away the inherent bias that [says] homes of Black and brown people are worth less. And so this whole concept of appraisal and valuation and equity is something that we know can only make things better for people of color.”
Yahoo Finance reporter Ronda Lee asked the HUD Secretary about a late 2021 study saying that homes in predominantly Black neighborhoods are undervalued by as much as $48,000 per year, accumulating to an estimated total of $156 billion for the situated homeowners in those areas. For Black homeowners who may be looking to access their home equity who are looking for recourse, Secretary Fudge pointed to recent actions by agencies including the Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB).
“Right now DOJ is saying to people it is a violation, it is discrimination if you unfairly appraise properties based upon people’s skin color or the location,” Fudge said. “So we know that DOJ, CFPB, all of the agencies that look at fairness in our system have said it is discriminatory. Even though the Fair Housing Act pulls some of it out, we’re saying, across the board, if you discriminate, it is a violation of law.”
Fudge also said that in addition to these actions by regulatory and law enforcement agencies, it’s important to offer resources to families who have been affected by instances of appraisal bias.
“You see, most people think if they get a low valuation they have no options, but they do,” Fudge said. “So we’re teaching them about their options. And we are saying to the agencies that oversee it that you’ve got to do some things, and they are. So we are making some progress, slow but sure, but we are making process because the light is so bright on the appraisal process today that people have to take account of what they have done historically. And they pretty much admit it that there is bias built into their system.”
In addition to these efforts, appraisal bias has also been called out recently by lawmakers as something which needs to be addressed. Earlier this year, House Financial Services Committee Chairwoman Rep. Maxine Waters (D-Calif.) called on HUD to investigate systemic appraisal bias after an appraiser emailed a tirade to a researcher who investigated the issue, according to reporting at RMD sister publication HousingWire.
Watch the segment with Sec. Fudge at Yahoo Finance.