HousingWireHousingWire
Policies related to appraisal appeals, or reconsiderations of value (ROV), were rescinded Wednesday by the Federal Housing Administration (FHA).
“While the adoption of a standardized ROV policy was one that real estate appraisers understood and was generally good for appraisers and consumers, the issues associated with appraisal appeals will continue to evolve without the FHA policy,” said Bill Garber, director of communications for the Appraisal Institute.
Garber added that “the most pressing concern for appraisers remains the resolution of fair housing claims by the U.S. Department of Housing and Urban Development (HUD).”
“(The claims) carry significant professional and legal consequences,” he said. “We urge HUD to provide a clear path to resolution and a fair, transparent process to ensure appraisers have due process in these cases.”
In July 2024, a coalition of five federal agencies — the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp., the Federal Reserve Board, the National Credit Union Administration and the Office of the Comptroller of the Currency — announced finalized guidance designed to address ROVs for residential real estate transactions.
The guidance aimed to advise on “policies and procedures that financial institutions may implement.” It also sought to allow consumers to provide institutions with information that “may not have been considered during an appraisal or if deficiencies are identified in the original appraisal.”
Standardized federal ROV policy had been viewed as a tool to combat appraisal bias.
HUD and FHA handed down new appraisal bias protections in May 2024. These allowed mortgage borrowers to request an ROV “if they believe that the appraisal was inaccurate or biased.”
While Congress amended the Fair Housing Act in 1988 to explicitly forbid appraisers from factoring in race, gender or other protected characteristics when assessing property values, discriminatory appraisals continue to limit homeownership opportunities — particularly among Black and Latino buyers.
A December 2022 study by the Brookings Institution found that homes in majority-Black neighborhoods are nearly twice as likely to be appraised below the contract price compared to homes in predominantly white areas. Additionally, homes in Black communities are undervalued by an estimated 21% to 23%, translating to $162 billion in lost equity for Black homeowners.
According to a November 2022 report by The New York Times, racial gaps in appraised home values surged by 75% over the prior decade.
