New Requirements Aim to Reduce Appraisal Bias
The new Reconsideration of Value policy requires lenders to provide a pathway for borrowers to request reviews of home appraisal valuations.
WASHINGTON – The Federal Housing Administration (FHA) and Federal Housing Finance Agency (FHFA) today announced new policies that will allow borrowers to challenge property appraisals if they believe the appraisals were inaccurate or biased.
FHA's new requirement for lenders participating in its single-family mortgage program will enable borrowers to request a re-assessment if they believe bias was involved. At the same time, FHFA's new reconsideration of value, or ROV, policies at Fannie Mae and Freddie Mac will let borrowers request that an appraiser re-assess the appraised value of a property due to potential appraisal reporting deficiencies or inappropriate selection of comparable properties. The policies will take effect later this year.
In 2023, FHFA and the Department of Housing and Urban Development (HUD), which oversees FHA, established a working group to develop consistent ROV standards. Among other things, the FHA policy will require lenders to disclose to borrowers that they may request an ROV with instructions that explain the process, including what information will be required from a borrower and the expected ROV processing times. Also, underwriters should be trained to identify and remedy appraisal deficiencies, including racial and ethnic bias. The Fannie and Freddie policies have similar requirements.
'We know that biased home appraisals not only disproportionately harm homeowners of color, but stunt economic opportunity for the communities we serve,” HUD Acting Secretary Adrianne Todman said. “Today, we are announcing a new step in our work to root out racial and ethnic bias in home valuations, which will give borrowers greater ability to have their home valuation reconsidered.”
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