Appraisal Bias continued from page 29 “They need to have systems in place to handle such things even though there is no official guidance yet,” he adds. Lenders should embrace ROV requests because they can serve as “an early warning sign,” Brodsky says. If the value of the original appraisal was off because of a simple mistake, the problem can be addressed right away if proper procedures are in place. And if discrimination is suspected, then the lender can take corrective action early on, as well. The way to manage both scenarios should be spelled out in company policies. “A robust ROV policy that encourages them to act on it and respond to it should be a great help to lenders who are trying to work their way through this land-mined area of exposure,” Brodsky says. Guidelines will vary because companies are unique, but most companies already have implemented numerous office policies, such as sexual harassment directives, so the effort should not be foreign to them, the attorneys say. “Guidance details will be company-specific,” Shahin says. “But also let consumers know that they have an option for ROV.” And lenders should raise a hand if they question an appraisal, even if a consumer has not. Lenders who are alert and have risk-based approaches in place can stop problems before they get worse, Brodsky says. The underwriting process is a good place to establish some guardrails. “If there is evidence of appraisal bias, then you can make an adjustment, and you have steps to take to eliminate any bias to ensure that the appraisal is fair, so you can follow through with your lending decisions,” he says. “And hopefully, you do that early enough in the process rather than way down the road.” Two things can happen to companies that are proactive: They make better lending decisions free of discriminatory impact, and if questions of discrimination arise, they can clearly point to the steps they have taken to address concerns. “If someone comes knocking, you can say, ‘Yes, we have an appraisal- bias policy and procedure that is vigorous and thorough,’” Brodsky says. That is an important takeaway, Shahin agrees. “It is very important to have these in place if issues arise so they can point to and say, ‘We are aware of the issues and that is why we have policies in place, and we are going through the process pursuant to our policy,’” Shahin says. Focus on Appraisal Bias According to its preliminary guidance released earlier this year, the Biden administration is focusing on four main areas to combat appraisal bias: 1. Empowering consumers to challenge appraisal valuations: Federal agencies are promoting industrywide consistency for the reconsideration of value (ROV) process, while increasing consumer knowledge about their ROV options; 2. Preventing algorithmic bias in home valuation: Regulators are collaborating on rules that establish quality control standards for automated valuation models (AVMs). The goal is to ensure AVMs accurately and fairly assess home values and don’t include algorithms that might create a bias; 3. Increasing transparency with federal data: The Federal Housing Finance Agency plans to update the uniform appraisal dataset. Researchers will analyze this data to uncover differences in home evaluations across racial and ethnic groups, shedding light on potential bias; and 4. Breaking down barriers to entry in the appraisal profession: Industry demographics primarily consist of male workers who are older and white. The Biden administration’s goal is to find ways to bring more minorities and women into the profession. 30 REVERSE MORTGAGE / NOVEMBER–DECEMBER 2023
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