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The Trump administration has quietly informed FHA lenders that they’ll no longer be required to follow procedures enacted last year to better protect borrowers against discriminatory appraisals — a move that could also have repercussions for lenders who do business with Fannie Mae and Freddie Mac.
The appraisal review procedures, which took effect on Sept. 2, had required lenders making loans backed by the Federal Housing Administration (FHA) to keep a sharper lookout for appraisal bias, and to have a process for helping borrowers who suspected they’d been victims of appraisal bias ask for a “reconsideration of value.”
The procedures, announced by the Department of Housing and Urban Development last May, echoed the terms of a settlement of a high-profile appraisal bias case brought by a Baltimore couple who claimed their home was undervalued by more than $250,000 because they were Black. In that case, loanDepot agreed to perform internal reviews of appraisals to detect signs of discrimination and follow more than a dozen policies when borrowers request a reconsideration of value or “ROV.”
HUD rescinded the strengthened appraisal review requirements in a March 19 letter to FHA lenders. Unlike similar actions taken in recent weeks, the Trump administration did not publicize the recission of the FHA lender requirements in a press release or on social media. HUD did not respond to Inman’s requests for comment on the rationale for rescinding the appraisal review procedures.
The FHA appraisal review requirements were an outgrowth of a Biden administration initiative to root out appraisal bias known as Property Appraisal and Valuation Equity (PAVE). PAVE identified a lack of “consistent, industrywide policies and guidelines related to the ROV [reconsideration of value] process as an obstacle to borrowers accessing an ROV when warranted,” HUD said in issuing the requirements last year.
As one of the authors of Project 2025, Ben Carson — the Secretary of Housing during the first Trump administration — last year called for the next president to “immediately end … (PAVE) policies and reverse any Biden administration actions that threaten to undermine the integrity of real estate appraisals.”
The Secretary of Housing for Trump’s second administration, Scott Turner, has called Carson a “mentor and friend.”
“Thank you, Dr. Carson for charting a course at HUD to revitalize America — I intend to carry that vision forward & get it done for all Americans,” Turner said in a Feb. 26 post on the social media platform X.
Fannie Mae and Freddie Mac have not responded to Inman’s request for comment on whether the mortgage giants will follow HUD’s lead in relaxing appraisal review requirements. Their federal regulator, the Federal Housing Finance Agency (FHFA), declined to comment.
In a Jan. 20 executive order, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” President Trump ordered the “termination of all discriminatory programs, including illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, policies, programs, preferences, and activities in the Federal Government, under whatever name they appear.”
The FHFA’s new director, Bill Pulte, has appointed himself as the chairman Fannie Mae and Freddie Mac’s boards and declared that “DEI is dead” at the mortgage giants. “They are safe and sound businesses, but we are going to make them safer and stronger.”
In a 2021 study, researchers at Freddie Mac said they had confirmed the existence of an “appraisal gap” for homeowners in predominantly Latino and Black neighborhoods, where appraisals are more likely to come in below the contract price than in majority-white census tracts.
The Biden administration launched the interagency PAVE initiative to combat bias in home appraisals on June 1, 2021 — the 100th anniversary of the Tulsa Race Massacre — as part of efforts to build Black wealth and narrow the racial wealth gap.
First proposed in a January 2023 draft, the FHA’s update to appraisal reviews was revised by HUD to incorporate lender feedback before being published in May.
But HUD’s rules prompted Fannie Mae and Freddie Mac to adopt similar requirements without providing public notice or an opportunity to comment, Rocket Mortgage alleged in a Dec. 4 lawsuit against HUD.
That lawsuit was part of Rocket’s response to a Department of Justice lawsuit alleging that a Denver woman was unable to refinance her mortgage at a lower rate after an appraiser undervalued her home because she was Black. In that case, attorneys for Rocket Mortgage said they weren’t liable because Rocket had ordered the appraisal through a third-party appraisal manager, Solidifi.
Lenders have said in the past that they’re reluctant to challenge appraisals for fear of violating federal and state requirements designed to protect appraisers from coercion.
FHA’s new appraisal review procedures had clarified that lenders had a duty to make sure their underwriters were trained to identify appraisal deficiencies, including prohibited discriminatory practices, through an appraisal review process. When problems were detected, lenders were required to fix them by requesting a general correction or explanation from the appraiser, requesting a reconsideration of value, or obtaining a second appraisal.
But attorneys for Rocket complained that the procedures were vague and that contradictory laws requiring lenders to honor the independent judgment of the appraiser put Rocket Mortgage “between the proverbial ‘rock and a hard place.’”
“HUD has a policy of holding lenders responsible for appraiser bias or discrimination when lenders fail to ‘remediate deficiencies’ relating to perceived appraiser bias or discrimination,” Rocket’s attorneys said in their complaint. “HUD has not, however, explained under what circumstances an allegation of appraiser bias or discrimination purportedly requires a lender to engage in ‘remediation,’ or what such ‘remediation’ should look like.”
Last month the Consumer Financial Protection Bureau, under new leadership, dropped a lawsuit that had alleged Rocket Mortgage’s sister company, Rocket Homes, was favoring real estate agents who steered clients to the lender.
But the Department of Justice has yet to drop its appraisal bias suit against Rocket Mortgage, and in recent weeks, HUD has continued to defend itself against Rocket Mortgage’s countersuit.
In a March 4 motion to dismiss Rocket’s case, attorneys for HUD said the lawsuit “represents little more than an attempt to forestall the [Department of Justice’s] enforcement suit through another avenue.”
Under longstanding HUD regulations, lenders are liable under the Truth in Lending Act if they know or should know that an appraisal “improperly takes into consideration race,” lawyers for HUD said.
HUD in July announced an agreement with The Appraisal Foundation, an organization that sets standards and qualifications for real estate appraisers, that’s intended to bring more Black people and other people of color into the profession.
The Appraisal Institute, a professional association of real estate appraisers, has participated in an Appraiser Diversity Initiative with Fannie Mae, Freddie Mac and the National Urban League, and offers scholarships, workshops and other resources to those interested in becoming appraisers.
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