Author: N/A
Publisher: Federal Housing Finance Agency
Publication Year: 2021
Summary: The following document is a commentary by the Federal Housing Finance Agency about the use of automated appraisal of houses through Automated Valuation Models (AVM’s). There exists a risk that “Neighborhood Description” in the free-form text portion of the forms have been used to refer to race and ethnicity. Code words and problematic phrases could indicate underlying bias. Freddit Mae has found that 12.5% of Black homes were appraised at a value less than contract price compared to 7.4% of white homes and 9.4% of Latino homes. Overall this factors into a large amount of inequality, the blog notes that White households own 84% of wealth and neighborhoods with no Black residents, the mean home values are double those in neighborhoods that are 50% black. Wheras black households own 4% of the wealth. The appraisers who collected the data were 85% white. Some problematic phrases included a reference to a neighborhood being originally “White-Only,” before becoming a “White-Flight Red-Zone” to explain why the neighborhood is mostly “Working-Class Black” now. The commentary notes that practices to combat this include guidance on free form text narratives and how they impact assessments.