Shocking: Appraiser, AMC, and Lender Accused of Discrimination – You Won’t Believe What Happened!

In a recent development on July 15, 2024, HUD charged an appraiser, an appraisal management company, and a lender with housing discrimination in Denver, Colorado. The allegations revolve around a biased appraisal and the subsequent denial of a refinance loan application.

The Charge of Discrimination by HUD highlights various discrepancies in the appraisal process that led to unfair treatment towards a Black woman who owns a duplex in a predominantly White area. Here are the key points raised in the Charge:

1. Inaccurate Appraisal: The appraiser provided an unreasonably low appraisal for the property, despite the fact that previous appraisals had indicated an increase in value over time. This discrepancy raises concerns about the fairness and accuracy of the appraisal process.
2. Unsupportable Methodological Choices: The appraisal contained numerous inaccuracies and questionable methodological choices, such as using comparable properties in neighborhoods with higher Black populations while excluding those in predominantly White areas. These choices artificially lowered the appraised value and deviated from the appraiser’s own methodology used for similar properties owned by White individuals in the same neighborhood.
3. Negligence by Appraisal Management Company and Lender: The appraisal management company and lender failed to identify the inaccuracies in the appraisal, despite their obligation to review and validate such documents. Additionally, the lender dismissed the concerns raised by the complainant regarding potential discrimination in the appraisal process.

In response to cases like this, the National Association of Realtors (NAR) urged HUD to expedite its review process to provide guidance for creating best practices, training, and education. This case marks the first ruling by HUD in a discrimination case related to valuation, signaling a step towards addressing systemic issues in the real estate industry.

As the industry awaits further decisions and guidance from HUD, it is crucial for all stakeholders to uphold ethical standards and promote fair practices in the appraisal and lending processes to prevent instances of housing discrimination. Only through collective efforts and vigilance can we ensure equitable treatment for all individuals in the housing market.