WASHINGTON, DC — Federal housing officials should sanction two appraisal firms in Baltimore over their discriminatory treatment of Black homeowners who participated in a recent “mystery shopper” investigation of appraisal bias, the National Community Reinvestment Coalition (NCRC) wrote Friday in a pair of complaints filed with the Department of Housing And Urban Development (HUD).
“There is no excuse for discrimination anywhere in the housing market, but the long-overlooked role that biased appraisers play in undermining Black wealth is an especially insidious problem,” NCRC President and CEO Jesse Van Tol said. “We are asking federal officials to intervene in these two instances because we believe they are representative of widespread discrimination in the appraisal industry that costs Black homeowners both time and money. No one should be subjected to the sort of treatment these two appraisers visited upon these two families – and regulators have the power to do something about it.”
Both cases arise from an investigation NCRC conducted in Baltimore over the past year. NCRC recruited interracial couples who own their own homes to act as “mystery shoppers” and discovered differential treatment by appraisers when the couples presented their homes with only the Black or the White partner present. The investigation report confirmed that Black homeowners were treated worse than their White partners both in terms of customer service and valuation of their homes.
In one of the complaints, NCRC and a Black homeowner detailed how an appraiser made the homeowner wait 11 weeks for a report, ignored followup communication and offered no explanation for why the report took so long. The same appraiser a few weeks later timely delivered a report to a white homeowner and even sent the homeowner a courtesy email in advance with an expected timeline for delivery.
The appraiser showed differential treatment and a lack of professionalism at a time when interest rates were highly volatile – meaning that the appraiser’s discriminatory conduct could have cost the Black client a chance at an affordable mortgage.
In the second complaint, NCRC and a second Black homeowner alleged that an appraiser undervalued a home presented by the homeowner, then overvalued a separate house presented by a White homeowner. The appraiser valued the first home at $310,000 when it was shown by the Black partner in the interracial couple who own it, while three other appraisers valued the same home at $350,000 or more. This appraiser then appraised a home shown by a White homeowner, and valued it $43,000 higher than any other appraiser did in the tests conducted by NCRC. The appraiser’s pattern of bias in valuing homes in Baltimore warranted an enforcement action by NCRC and the homeowner who was the victim of discrimination.
The full report from NCRC’s investigation, which is the first of its kind to be published can be viewed online at https://ncrc.org/faulty-foundations-mystery-shopper-testing-in-home-appraisals-exposes-racial-bias-undermining-black-wealth/