Was your home assessment low because you’re black? HUD Secretary Marcia Fudge Releases New Report on Halting Racist Home Ratings

WASHINGTON. DC — Michael Johnson and his wife wanted to expand space in their Upper Arlington, Ohio home to accommodate their growing family when the pandemic hit. But the financial institutions they applied for home equity loans from continued to provide them with such low estimates for the value of their home in suburban Columbus that they wondered if they would be able to finance the project.

After reading an article about a Michigan couple who removed signs of their African-American identity from their home to get a higher rating, Johnson performed a similar “whitewash.” He removed photos of himself and his black family from the premises and replaced them with photos of his wife’s white family. He took their three children away from home when the appraiser was planning to arrive and left his wife to take care of the visit. The bank returned with a value nearly $225,000 more than originally provided.

“It was one of the hardest things I’ve ever had to deal with, especially because my eldest son is 14,” Johnson told a panel about racially biased home reviews that the secretary Housing and Urban Development, Marcia Fudge, met at the White House on Wednesday. . “He knows. He goes to school. He has friends who are mixed race, so he knows exactly what that means without me even having to tell him, and he was devastated. I never want him again. to see me look that way.

Fudge says stories like Johnson’s are all too common. A September report from Freddie Mac found that home purchase appraisals in majority black and majority Latino neighborhoods were about twice as likely to result in a value that was lower than the amount a buyer was willing to pay for the property. property, compared to assessments in predominantly white neighborhoods. neighborhoods. A February study by Fannie Mae found that white-owned homes are much more likely than black-owned homes to be priced at values ​​that exceed algorithmic predictions.

The former US congresswoman said at a White House event to unveil a new report she co-authored on how to end racial bias in home appraisals that her home in Warrensville Heights is undervalued because she lives in a predominantly black community.

“I’m losing hundreds of thousands of dollars in equity in my home to valuation bias,” said Fudge, who co-chaired an interagency task force on property appraisal and appraisal (PAVE) that President Joe Biden has put in place. the 100th anniversary of the Tulsa Race Massacre as a way to help close the racial wealth gap and reinvest in communities that have been left behind by failed policies.

The report that Fudge’s task force released Wednesday with Vice President Kamala Harris calls on federal agencies to strengthen oversight of the ratings industry to better identify and correct discriminatory ratings. It also encourages providing owners and buyers with information about effective actions they can take when they receive a lower-than-expectation appraisal, cultivating better training among appraisers, and making efforts to diversify the white profession to 97%. A task force action plan outlines steps to remove unnecessary education and experience requirements that make it difficult for underrepresented groups to become evaluators and the need to strengthen anti-bias training, Fair Housing and Fair Lending from existing appraisers.

U.S. Senator Sherrod Brown, a Democrat from Ohio who chairs the Senate Banking, Housing and Urban Affairs Committee, applauded the release of the report. He plans to hold a hearing on Thursday on strengthening oversight and fairness in the assessment process.

“Black and brown families face greater barriers to homeownership at every turn — including in the appraisal process,” Brown said in a statement. “The PAVE Task Force Action Plan charts a clear path to identify and address systemic biases in appraisals, strengthen fair housing oversight, expand and diversify the appraiser workforce, and empower consumers to expose prejudices.

Speaking at the event to release the report, Harris said research has repeatedly shown that black homeowners are more likely to have their homes undervalued than other homeowners, and homes in neighborhoods at majority black and majority Latino are almost twice as likely to be dumped than homes in other neighborhoods. This undervaluation means Black and Latino homeowners often have to pay more for their mortgages, receive less when they sell their homes, and are less able to access their home’s equity margins, she added. .

In addition to providing a place to live, Harris said owning a home provides financial security and the potential to build intergenerational wealth. However, undervalued ratings diminish this ability.

“The systemic bias in home valuations … widens the racial wealth gap and deepens the long-standing financial inequalities that divide our communities,” Harris said. “Our administration will continue to fight to ensure that all homeowners and homebuyers in our country are treated fairly.”

The action plan also calls for ensuring that the algorithms used by evaluators are not based on biased data that could reproduce past discrimination and for developing an aggregate database of federal evaluative data to better study, understand and process evaluation biases.

The task force’s co-chair, White House domestic policy adviser Susan Rice, said the task force’s role is to draw attention to biases and “implement meaningful change that will diversify the industry and will hold this type of behavior to account and will give us and give… the public the tools to challenge these things and say, ‘enough.’

“This administration has taken up this challenge, and it’s a tall order,” said Fudge, who thanked Johnson and other owners who faced discriminatory reviews for sharing their stories. “We know that racism permeates what we do every day. And I know it’s hard. I know it’s difficult, but we are ready to face the battle.

Fudge told the band that they handled their problematic reviews well.

“I’m a pretty hot-tempered person, so I don’t know what I would have done,” she said.

Johnson said her family got the loan they were applying for and work on her home was completed in December. He said his family photos and belongings that show he is African American are back on the wall. When the bank sent the same appraiser to the house to make sure the job was done, Johnson said he made the visit himself.

“It was probably the most dehumanizing experience I’ve ever been part of,” Johnson said. “The silver lining is that I get to sit here today with all these wonderful people trying to make a difference.”

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