The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) have announced new protections against appraisal bias in the form of a new reassessment option.
Through this new Reconsideration of Value policy, borrowers using lenders participating in the FHA’s Single Family loan program will now be able to request a reassessment of their property’s appraised value if they believe that their initial appraisal was biased or inaccurate.
The policy, which will be active for transactions in single-family forward and Home Equity Conversion Mortgage programs, will also require lenders to disclose to borrowers that they may request the aforementioned reassessment. That disclosure must be provided both at the time of application and at the presentation of the appraisal.
The new policy will kick in for FHA case numbers assigned on or after Sept. 2. The change, according to a statement from HUD, is the culmination of “months of collaboration” to bring the FHA’s appraisal bias standards more in line with those of Fannie Mae and Freddie Mac. Partnering to enact the policy was the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), a group of officials from 13 federal agencies committed to establishing “a transformative set of recommendations to root out racial and ethnic bias in home valuations.”
“We know that biased home appraisals not only disproportionately harm homeowners of color, but stunt economic opportunity for the communities we serve,” said Adriane Todman, acting secretary of HUD.
“Today, we are announcing a new step in our work to root out racial and ethnic bias in home valuations, which will give borrowers greater ability to have their home valuation reconsidered.”
“Appraisal bias harms homeowners of color at every stage of homeownership, and it can lock in inappropriately lower values for entire neighborhoods,” added Federal Housing Commissioner Julia Gordon. “Our new policies will arm homeowners, lenders, and FHA with a clear process to address biased or inaccurate appraisals.”
