Tai Christensen of CBC Mortgage Agency: Solutions to Appraisal Bias

Tai Christensen is Diversity, Equity and Inclusion Officer and Director of Government Affairs for CBC Mortgage Agency, South Jordan, Utah, a national down payment assistance provider, and has 17 years’ experience in the mortgage industry. She has been a loan processor, manager of a mortgage brokerage focusing on modifying loans for families facing foreclosure and manager of a law firm specializing in negotiating mortgage terms for families facing Trustee Auction dates. She can be reached at tai.christensen@chenoafund.org.

MBA NEWSLINK: What is the problem with the appraisal process as you see it?

TAI CHRISTENSEN, CBC Mortgage Agency: When it comes to the valuation of homes in minority communities, appraisers often bring with them certain biases that impact the value but are not supported economically. This means that home sellers of color might not be receiving the same fair market values for their homes that their White counterparts do.

MBA NEWSLINK: How does a fair appraisal and valuation process help minority neighborhoods?

CHRISTENSEN: Currently, the value of a home in a majority-minority neighborhood is likely to be much less than a nearly identical home in a majority-White neighborhood. This situation is costing minority homeowners a tremendous amount of lost equity that they could otherwise use to take cash out and make home improvements, pay for their children’s college education or any other necessity. A fair appraisal process, which could include reexamining which properties appraisers use for comparison purposes, would help ensure a more level playing field.

NEWSLINK: How can racial disparity within the appraiser ranks be eliminated? 

CHRISTENSEN: It’s fairly well known that the majority of appraisers are men and the overwhelming majority—over 80%—are white. To create a more diverse industry, training and recruiting efforts need to be focused on a more diverse pool of candidates, particularly women and people of color. An appraiser population that better reflects the overall community would help eliminate disparities we see in home values between White and minority neighborhoods.  

NEWSLINK: How can the mortgage industry address the property valuation gap between minority-owned and White-owned communities?

CHRISTENSEN: One strategy that could help the appraisal industry is leveraging all available industry and government data, including data for millions of appraisals across different timelines and investigating potential gaps in valuations. Expanding the pool of valuation data could go a long way toward driving change within the appraisal community by helping the industry identify the root causes of appraisal bias and create solutions to promote equity across the valuation process. Using data-driven solutions will also help appraisers build trust and create stronger relationships with minority communities.

NEWSLINK: How can the appraisal industry help improve equity and diversity in the appraisal space?

CHRISTENSEN: This issue is a huge challenge for the entire industry. Again, bringing more women and men of color into the appraisal business is critical, not just because it creates a more equitable industry, but because it will help remove appraisal bias and ensure fair valuation and appraisal practices. Real, sustained change will require collaboration with local government, lenders, investors and the real estate communities.

NEWSLINK: What can do done to best identify, target and help underserved communities so they can overcome homeownership barriers?

CHRISTENSEN: As an industry, we need to do a better job educating Americans about the benefits of homeownership and how buying a home is the key to creating generational wealth. Generally speaking, this is not a topic that many minority families talk about. On the local level, reforming zoning ordinances to diversify the types of housing allowed in individual communities would help make neighborhoods more racially and economically inclusive.

MBA NEWSLINK: Does down payment assistance help bridge a shortfall that arises when appraisal bias leaves the estimated value lower than the sales price?

CHRISTENSEN:  Yes, down payment assistance can help make up the shortfall when estimated appraised value is low. But that also might mean a minority seller has to potentially lower the price and receive less proceeds.

NEWSLINK: How can all real estate-related industries increase homeownership opportunities for minorities?

CHRISTENSEN: In addition to doing a better job educating minority communities about the benefits of homeownership, it is important to increase access to DPA programs, since minority borrowers generally do not get the same level of financial assistance from their families as white borrowers. In addition, the industry needs to expand access to affordable credit and invest in affordable homeownership. Everyone in the housing industry has an obligation to identify and addresses the causes of the widening wealth and homeownership gaps, whether it has to do with appraisals, expanding credit, or the people who make up our industry.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)