The U.S. Department of Housing and Urban Development (HUD) announced that it has entered into an historic Conciliation Agreement (Agreement) with The Appraisal Foundation (TAF), an organization responsible for setting standards and qualifications for real estate appraisers and providing voluntary guidance for appraisers. This Agreement resolves a Secretary-initiated complaint against TAF alleging discriminatory barriers preventing qualified Black people and other persons of color from entering the appraisal profession on the basis of race in violation of the Fair Housing Act. The agreement also creates responsibilities for the Appraiser Qualifications Board (AQB), an independent board that creates guidelines and the Appraiser Qualifications Criteria, which directly effect who may become an appraiser.

Appraisal bias has been a significant issue in recent years. For example, in 2022, the National Community Reinvestment Coalition (NCRC) filed two complaints against appraisers with HUD asserting different treatment based on race in violation of the Fair Housing Act. One complaint asserts different service levels based on race, and the other asserts different home valuations based on race, with White individuals receiving better service or home valuations than Black individuals. A related topic of ongoing conversation among HUD, CFPB and other members of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), has been the barriers to entry for prospective appraisers, especially for Black people and other persons of color. This concern has been noted in multiple public hearings and statements from the CFPB, which we have discussed.

In its announcement, HUD referenced the Bureau of Labor Statistics’ 2023 data, which showed the property appraisers and assessors’ occupation was 94.7% White and 0.6% Black, ranking as the least racially diverse of 800 occupations surveyed. HUD also referenced data from a 2021 study conducted by Fannie Mae, which showed that 12.5% of appraisals for home purchases in majority-Black neighborhoods and 15.4% in majority-Latino neighborhoods result in a value below the contract price, compared to only 7.4 percent of appraisals in predominantly white neighborhoods.

Although HUD did not make a formal finding, the conciliation agreement provides for the Appraisal Foundation to, among other things, implement the following policies:

• Offer inclusive and affordable appraiser training. The Appraisal Foundation should coordinate with the AQB to ensure that mentors looking to work with prospective appraisers complete a course on valuation bias and fair housing laws. The AQB has already begun offering Practical Applications of Real Estate Appraisal (PAREA) programs, its technology-based training for aspiring appraisers to obtain experience credit towards fulfilling the experience qualification criteria. The Appraisal Foundation and AQB have agreed to implement plans to market PAREA and the PAREA scholarship fund to diverse communities, including through the use of online channels and providing information to historically Black colleges and universities (HBCUs). PAREA program providers will be required to report to the AQB the number of qualified applicants and whether all applicants were able to be accommodated. Of note, the agreement provides, “If, at any time, a PAREA program provider has been determined by a federal court to have violated any fair housing laws and/or regulations, by final judgment from which appeal is unavailable, it will lose its AQB approval to be a PAREA provider until it puts into place mechanisms designed to prevent future violations of fair housing laws and/or regulations.” The Appraisal Foundation will also provide a survey on its website where prospective appraisers can indicate their reasons for deciding not to pursue PAREA.
• Coordinate with regulators. The Appraisal Foundation has agreed to prominently display the “Equal Housing Opportunity” logo on its website, and the website will also include online information related to the process of becoming an appraiser and PAREA. The agreement also provides that the Appraisal Foundation will meet with each state and territory appraiser regulatory agency that has not yet fully approved PAREA to explain the importance of using technology to open doors to the appraiser profession, and recommend that each adopt licensing criteria that provide 100% credit towards the experience requirement for a Licensed Appraiser and Certified Residential Appraiser.
• Provide funding for training and outreach to diverse communities. Under the agreement, the Appraisal Foundation will establish a Pathways to Success Scholarship Fund administered by a third-party to be approved by HUD, which will be used to provide scholarship assistance to aspiring appraisers. The scholarship will be used for attendance at any AQB-approved PAREA program. The Appraisal Foundation will contribute a minimum of $560,000 per year (of either its own funds or funds raised or received from others) to the Scholarship for a total of two years, and a minimum of $100,000 in the third year of the agreement. The Appraisal Foundation agreed to annually report to HUD the zip codes of the scholarship awardees, the amounts of scholarships for each, the approved PAREA program the scholarship is used to fund, and whether the awardee successfully completed the PAREA program.

Other terms of the agreement include certain reports be made to HUD regarding the effectiveness of marketing PAREA, and coordination between the Appraisal Foundation and housing groups in order to ensure the policies reflect the concerns of the industry.

In her comments, HUD Acting Secretary Adrianne Todman said, “Today’s historic agreement will help build a class of appraisers based on what they know instead of who they know.”

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