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On March 22, HUD announced the delivery of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) Action Plan to President Biden. The PAVE Action Plan outlines actions that are intended to substantially reduce racial bias in home appraisals, and to promote generational wealth creation through home ownership. According to the Task Force's executive summary, "[o]n average, homes in majority-Black neighborhoods are valued at less than half of those in neighborhoods with few or no Black residents." The PAVE Task Force is composed of thirteen federal agencies and offices.
The Action Plan, when enacted, will represent the most wide-ranging set of reforms ever introduced to advance equity in the home appraisal process. Specifically, the Action Plan: (i) outlines the historical role of racism in the valuation of residential property; (ii) examines the various forms of bias that can appear in residential property valuation practices; and (iii) describes affirmative steps that federal agencies will take to advance equity in the appraisal process, and outlines further recommendations that government and industry stakeholders can initiate.
The Action Plan goes on to outline a number of commitments the Task Force has agreed upon, including:
- Addressing potential bias in the use of technology-based valuation tools through rulemaking.
- Expanding regulatory agency examination procedures of mortgage lenders to include identification of patterns of appraisal bias.
- Requiring appraisal anti-bias, fair housing, and fair lending training for all appraisers who conduct appraisals for federal programs.
Putting it Into Practice: This is a far-reaching proposal that figures to have a profound impact on the home appraisal and residential lending industries and is intended to respond with concrete actions to eliminate bias and advance equity in home appraisals. The Action Plan is the latest indicator that federal regulators intend to scrutinize fair housing and fair lending issues, including discriminatory home valuations (we discussed the CFPB's efforts to prevent algorithmic bias in automated home valuation models in a recent Consumer Finance and FinTech blog post here). Residential home lenders are cautioned to carefully review their appraisal practices and address potential bias in their automated and manual processes.
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