A July 27 report issued by the Philadelphia Home Appraisal Bias Task Force calls expressly for such action in that city and cities around the nation.ĬRA reform has been a long time coming. This would enable local actors, such as cities, counties, hospitals, universities and nonprofits to identify and utilize preferred appraisal firms similar to the way they create lists of minority-owned, women-owned and veteran-owned contractors. Such reports could include information on the number and share of appraisal firms provided by census tract, the number where appraised value is less than the contract sale price, and related information. The new rules should call for a HMDA-like disclosure requirement for appraisal firms. The CRA update provides an opportunity for these agencies to significantly contribute to the amelioration of that bias. Several recent reports have documented that appraisals for nonwhite sellers and for properties in diverse communities are more likely to understate property values relative to actual sale price than is the case for white sellers and communities. Mortgage lenders should be encouraged to utilize appraisers who have a track record of serving diverse communities. Third, the new rules should address the issue of appraisal bias that has, appropriately, attracted much attention in recent years. Calling for more detailed, transparent and effective CRA rules that apply only to those financial services firms that originate a declining share of loans, now less than half, will not lead to stronger and more effective CRA compliance and enforcement. If so, this should be noted and the three major CRA enforcement agencies should detail steps they will take to secure passage of the appropriate legislation. Second, the CRA needs to be expanded to cover nondepository mortgage bankers who now originate more than half of all mortgage loans.
Eradicating longstanding discrimination in mortgage markets where it continues to be documented would constitute such a compelling interest and flexible racial targets as part of CRA exams would be narrowly focused on those practices.
While there are legal and political challenges to explicit race-based policies, more assertive actions can be taken that are consistent with the equal protection clause of the Constitution and other prohibitions against racial discrimination.įor example, courts have ruled that any race-conscious remedy must meet the “strict scrutiny” test, meaning that there must be a compelling interest and the policy must be narrowly tailored to meet that interest.
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