Mortgage

The coaching mandates on analysis errors enhance with growing compliance strain

As regulators pay more attention to the issue of valuation bias, valuation professionals are increasingly subject to new training requirements that lenders should oversee, particularly in light of the warning from housing authorities that lenders are also accountable.

In a November 17 letter, the Federal Housing Administration affirmed that it expects "appraisers and mortgage holders" to comply with "all applicable anti-discrimination laws."

In accordance with these laws, and with increased attention to the subject at the federal level, a small but growing number of states require that assessors receive bias prevention training as a prerequisite for approval.

Minnesota requires all assessors licensed prior to September 1 to complete this type of professional education before August 31, 2023. Government assessors licensed after this date must complete the training within two years.

Similarly, New York has passed law that goes into effect January 1, 2022, requiring every licensed or certified appraiser to take a course in fair living and lending.

In addition, California recently incorporated requirements into broader legislation aimed at introducing equity and justice into housing construction. Illinois and New Jersey have considered similar moves.

Reviewers are also obliged nationwide to complete a seven-hour advanced training course every two years based on practical professional standards. The latest version of the Appraisal Foundation course, which meets this requirement and was released in October, includes a new two-hour section on Prejudice and Discrimination. Part of these two hours will include a case study on bias based on a situation assessment that may occur in your daily practice.

The training aims to correct inequalities in the valuation process, as the grades that are important to getting mortgages are more often lower for Latin American and black households than for white households, according to Freddie Mac, one of the top low to mortgage buyers middle income in the United States.

“This discrepancy that exists does not help anyone. That means there are many issues that need to be addressed and they are not just reviews. There are many players in this game, be it appraisers, mortgage lenders or banks, who need to come to the table to find solutions, ”said Rodman Schley, national president of the Appraisal Institute, noting that the organization is developing coursework for the state Requirements met.

The type of appraisal training that addresses biased educational requirements at the country level is likely to differ from country to country.

“Most states are still in the process of defining biases and requirements for fair housing education. We are already seeing different lessons and content in the few states that have introduced new requirements, ”said Shawn Telford, Chief Reviewer at CoreLogic, in an email. CoreLogic provides training on property valuation biases through the Columbia Institute.

New York has two different requirements, which vary depending on the license status and previous training of the appraiser: either a seven-hour introduction to fair living and fair lending or a four-hour update on these topics, according to Telford. The state also has a specific table of contents and a timetable. California requires two hours of prejudice removal training and one hour of cultural literacy. Minnesota is less specific and requires all appraisers to be trained on valuation errors.

Licensed appraisers should be able to demonstrate lenders compliance with state training requirements by presenting a certificate from an authorized vendor that can authenticate it, Telford said. In some cases, the provider sends the certification directly to the state, which may also be able to verify it.

Bias awareness training could be “a great first step” to addressing more general assessment issues such as the need for fair lending and lack of appraisers, said Tai Christensen, a diversity, equity and inclusion officer at CBC Mortgage Agency.

"There will be people who say they don't have any unconscious bias, but the truth is we all do," said Christensen, whose company is an administrator of the Chenoa Down Payment Assistance Fund. Ratings are often a factor in determining whether or not the diverse group of borrowers who serve your business receives mortgages.

"In my personal opinion, the valuation bias hits the core of the racial wealth gap," said Christensen.

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