[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                         DEVALUED, DENIED, AND
                         DISRESPECTED: HOW HOME
                           APPRAISAL BIAS AND
                           DISCRIMINATION ARE
                         HURTING HOMEOWNERS AND
                          COMMUNITIES OF COLOR

=======================================================================

                             HYBRID HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 29, 2022

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-74
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-272 PDF                 WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------   

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York             JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina           LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan              WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania         VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   PETE SESSIONS, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 29, 2022...............................................     1
Appendix:
    March 29, 2022...............................................    61

                               WITNESSES
                        Tuesday, March 29, 2022

Bishop, Pledger M. III, President, the Appraisal Institute.......     4
Bunton, David S., President, The Appraisal Foundation............     6
Kelker, Dean, Senior Vice President and Chief Risk Officer, 
  SingleSource Property Solutions, on behalf of the Real Estate 
  Valuation Advocacy Association (REVAA).........................     8
Peter, Tobias J., Assistant Director, AEI Housing Center.........    11
Rice, Lisa, President and CEO, National Fair Housing Alliance 
  (NFHA).........................................................    10

                                APPENDIX

Prepared statements:
    McHenry, Hon. Patrick........................................    62
    Bishop, Pledger M. III.......................................    66
    Bunton, David S..............................................    72
    Kelker, Dean.................................................    86
    Peter, Tobias J..............................................    97
    Rice, Lisa...................................................   211

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written responses to questions submitted to Pledger M. Bishop 
      III........................................................   246
    Written responses to questions submitted to David S. Bunton..   249
    Written responses to questions submitted to Dean Kelker......   252
    Written statement of Jillian White, Head, Better+ at Better..   256
Hill, Hon. French:
    Written responses to questions submitted to Pledger M. Bishop 
      III........................................................   263
Ocasio-Cortez, Hon. Alexandria:
    Article from The City, ``With Pandemic Pause Over, NYC's 
      Black Neighborhoods Brace for Foreclosures''...............   266

 
                         DEVALUED, DENIED, AND
                         DISRESPECTED: HOW HOME
                           APPRAISAL BIAS AND
                           DISCRIMINATION ARE
                         HURTING HOMEOWNERS AND
                          COMMUNITIES OF COLOR

                              ----------                              


                        Tuesday, March 29, 2022

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Sherman, Meeks, 
Scott, Green, Cleaver, Perlmutter, Himes, Foster, Beatty, 
Vargas, Gottheimer, Lawson, Axne, Casten, Pressley, Lynch, 
Adams, Tlaib, Dean, Ocasio-Cortez, Garcia of Illinois, Garcia 
of Texas, Williams of Georgia, Auchincloss; Hill, Posey, 
Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Emmer, 
Zeldin, Loudermilk, Mooney, Davidson, Budd, Kustoff, Gonzalez 
of Ohio, Rose, Steil, Gooden, Timmons, and Sessions.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Devalued, Denied, and 
Disrespected: How Home Appraisal Bias and Discrimination are 
Hurting Homeowners and Communities of Color.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    Today, we will take a closer look at discrimination against 
homeowners and communities of color in the appraisal process. 
Last Congress, I convened a hearing to examine the state of the 
appraisal industry, including the lack of diversity in the 
profession, and unequal valuation of homes in communities of 
color, those owned by people of color. Since then, I have 
engaged the appraisal industry and profession in critical 
conversations around the need to address these inequities, as 
we have seen increasing reports of appraisal bias and alleged 
discrimination. However, there is still much to be done.
    A home's value is critical to closing the wealth gap and 
ensuring that communities of color build generational wealth. 
Both overvaluation and undervaluation of a home are harmful to 
buyers and homeowners by either saddling a buyer with a home 
worth less than the debt they take on or selling short 
homeowners of their nest egg. Bias and discrimination in 
appraisals can result in perpetuating historical disinvestment 
in communities of color, lowering home values for communities 
of color, locking people of color out of home ownership 
opportunities, and contributing to the widening of racial and 
ethnic wealth and home ownership gaps. We must not forget that 
home appraisal discrimination based on race, color, sex, 
religion, national origin, familial status, disability, and age 
is illegal.
    However, recent news reports have shown that the appraisal 
bias faced by homeowners of color is still a reality. We have 
all seen the articles. A Black family seeks to have their home 
appraised, and when they are physically present or leave their 
family pictures within the home, they receive a low appraisal. 
When they ``Whitewash'' their homes by removing their pictures 
and other indicators of Blackness and insert those of 
fictitious White families, all of a sudden, the appraisal jumps 
in value. These are not just anecdotes. Data bears out the 
disperate appraisal treatment of homes owned by Black and 
Latinx homeowners compared to homes owned by White homeowners. 
As a result, studies have found that a home in a White 
neighborhood is valued 2 times higher than comparable homes in 
Black and Latinx neighborhoods.
    That is why I have drafted legislation to be discussed at 
today's hearing. My bill, the Fair Appraisal and Inequity 
Reform Act of 2022, addresses appraisal bias and discrimination 
by establishing a new Federal Valuation Agency--responding to a 
key recommendation made by President Biden's Interagency Task 
Force on Property Appraisal and Valuation Equity.
    I thank the witnesses for appearing here today, and I yield 
back.
    I now recognize, as acting ranking member, the gentleman 
from Arkansas, Mr. Hill, for 5 minutes.
    Mr. Hill. Thank you, Madam Chairwoman, for holding this 
hearing today.
    Accurate appraisals are a vital component of the home-
buying process. They provide important guidance to lenders 
offering mortgages as well as financial protection to taxpayers 
backing those loans. This is important given the magnitude of 
the total value of all outstanding U.S. mortgage debt, which is 
currently about $12 trillion. As a former community bank chief 
executive officer and executive for many years, I know the 
essential role of appraisals in providing market confidence to 
home-buying families who deserve a fair and honest valuation of 
their investment, and, for the lenders, true security about the 
value of their collateral. In other words, honest, independent 
appraisals are incredibly important to maintaining the safety 
and integrity of mortgage lending in our country and in our 
families' accounts.
    So when we hear allegations of how racial bias in the 
valuation process is systemic, that is a problem for many 
reasons. First, it is wrong and unlawful, not to mention 
immoral, to discriminate against someone in these transactions 
on the basis of race, color, religion, sex, disability, 
familial status, or national origin. Such discrimination is a 
crime, and if a crime is being committed, our government is 
committed to stopping it.
    Some have alleged, often based on anecdotes or broad 
assumptions, that racism exists in the appraisal profession, 
which, in turn, perpetuates systemic racism. That is a charge 
which demands serious consideration, not to mention hard 
evidence to back it up. Yet, a lot of questions remain about 
what exactly is happening here, and also why. And I hope our 
witnesses today can help shed some light on the actual facts 
before we in Congress leap to conclusions.
    I would note that while this hearing is focused on the 
potential impact of undervaluations in appraisals, there should 
be equally serious concern by members of this committee about 
the impact of overvaluations and appraisals. Overvaluations 
require consumers to take on more debt, reduce the 
affordability by endlessly-spiraling home prices at ever higher 
and higher levels, literally destroying, as we saw in 2008, 
nearly $16 trillion worth of household wealth.
    As a commercial banker during the 2008 crisis, I saw 
firsthand that destruction through overvaluations by 
irrationally-exuberant appraisers, lenders, and buyers. And a 
generation previously, as a Treasury official responsible for 
helping stand up the Resolution Trust Corporation in the early 
1990s, I know this firsthand from the savings and loan crisis 
of the late 1980s and early 1990s.
    So if, in fact, we are going to demand fairness and 
accuracy in appraisals, and we should, it is critical to 
examine all of the factors that harm the appraisal quality, 
that lower competition and inhibit market innovation. That is 
the only way we are going to ensure that we get a fair market 
valuation of assets for both lenders and those households who 
are making their sometimes very first most important financial 
decision, investing in a home. And I hope we can accomplish 
that today and do it in a bipartisan manner.
    And with that, Madam Chairwoman, I yield back the balance 
of my time.
    Chairwoman Waters. Thank you. I now recognize the gentleman 
from Missouri, Mr. Cleaver, for 1 minute.
    Mr. Cleaver. Thank you, Madam Chairwoman, and thank you for 
holding this important hearing. Although this committee has 
held broad hearings on the appraisal industry in the past, I 
appreciate that this discussion squarely calls out bias and 
discrimination in home appraisals.
    In March of last year, I authored a bicameral letter with 
colleagues in the House and Senate, including this committee, 
demanding that the Federal Financial Institutions Examination 
Council (FFIEC) and regulators take immediate action to address 
disparities in home valuations for communities of color. 
Studies have shown that appraisal bias is prevalent throughout 
the country. Research from Fannie Mae and Freddie Mac has 
demonstrated that appraisal disparities broadly exist for 
communities and borrowers of color.
    Separately, research from the Federal Housing Finance 
Agency (FHFA) analyzed millions of appraisals and found 
evidence of bias in the neighborhood description of valuation 
reports, including some explicit references to race and 
indirect comments alluding to it. In April of last year, my 
colleague on the committee, Congressman Torres of New York, and 
I introduced the Real Estate Valuation Fairness and Improvement 
Act, which proposed an Interagency Task Force similar to the 
Interagency Task Force on Property Appraisal and Valuation 
Equity (PAVE) Task Force announced by the Administration in 
June of last year.
    I am thankful for your leadership, Madam Chairwoman, and 
the leadership in this Administration, for tackling appraisal 
bias head-on.
    I yield back.
    Chairwoman Waters. Thank you very much. I would now like to 
welcome our distinguished witnesses: Mr. Pledger M. Bishop III, 
the president of the Appraisal Institute; Mr. David S. Bunton, 
the president of the Appraisal Foundation; Mr. Dean Kelker, the 
senior vice president and chief risk officer of SingleSource 
Property Solutions, who is testifying on behalf of the Real 
Estate Valuation Advocacy Association; and Ms. Lisa Rice, the 
president and CEO of the National Fair Housing Alliance.
    I will now recognize the gentleman from Minnesota, Mr. 
Emmer, to introduce our final witness.
    Mr. Emmer. Thank you, Madam Chairwoman, and thank you, Mr. 
Hill, and thank you to all of the witnesses who are joining us 
today. I just want to use this quick minute to extend a warm 
welcome to one of our witnesses today, Mr. Tobias J. Peter. Mr. 
Peter is a dedicated research fellow and the assistant director 
of the American Enterprise Institute's Housing Center. He is 
the author of several reports on housing policy and 
consistently provides invaluable insights into our housing 
markets. Mr. Peter is also a constituent of mine from St. 
Cloud, Minnesota, and I have been fortunate to know Toby for 
the past 4 years. Mr. Peter, thank you for joining our 
committee today, on behalf of the committee in the Sixth 
District. Thank you for lending Congress your time and 
expertise as we explore ways to strengthen our housing markets.
    I yield back.
    Chairwoman Waters. Thank you. You will each have 5 minutes 
to summarize your testimony. You should be able to see a timer 
that will indicate how much time you have left in your 
testimony. And without objection, your written statements will 
be made a part of the record.
    Mr. Bishop, you are now recognized for 5 minutes to present 
your testimony.

 STATEMENT OF PLEDGER M. BISHOP III, PRESIDENT, THE APPRAISAL 
                           INSTITUTE

    Mr. Bishop. Thank you, Chairwoman Waters. The Appraisal 
Institute is deeply concerned about recent allegations of bias 
and discrimination in housing and appraisal. When just one 
individual can face concern and uneasiness about bias or 
discrimination during an appraisal assignment, we must stop and 
listen to seek and understand the consumer's experience. 
Further, where issues or problems are identified, we must seek 
to understand the causes and work with stakeholders to resolve 
them.
    To be an appraiser is to be independent and unbiased; it is 
our ethos and at the core of the professional appraiser. There 
is no benefit to an appraiser in violating this public trust. 
We firmly believe most appraisers uphold this high standard and 
strive to learn more and develop protocols to increase 
confidence and credibility in their work.
    Discrimination exists, and the appraisal profession is not 
immune. I believe communities of color face discrimination in 
appraisals. The same is true in other aspects of housing and 
real estate, as well as within other parts of our society. It 
is an unfortunate part of our history as a nation.
    At the same time, we believe the appraisal process is 
sound. We do not believe appraisal bias is rampant, but rather 
isolated. We understand that one instance is unacceptable. No 
profession is immune. What is important is that we have 
meaningful enforcement when appraiser bias concern occurs, and 
that we give our members the tools to recognize it and 
interrupt it. Systemic bias, when it exists, is present in 
sales transactions. Appraisers cannot control the actions of 
buyers and sellers or others involved in the housing market.
    Moving forward, this will require more study and creativity 
on the part of all of the participants, including the 
appraisers. The appraisal process has come under study and 
review by several researchers, think tanks, and Government-
Sponsored-Enterprises (GSEs). Although some of the results to 
bias in appraisal are preliminary, and others have produced 
contradictory conclusions, these findings have educated all 
stakeholders to better understand the appraisal process and how 
it fits into a larger ecosystem of mortgage finance.
    We strongly believe that even one instance of appraisal 
bias is unacceptable. We believe that the Department of 
Veterans Affairs' Tidewater Initiative would serve as a strong 
model for combating concerns over bias and discrimination. 
There is no program like it in the industry for balancing 
consumer rights of appeal with appraisal independence. This 
kind of mitigation on the front end would clearly be helpful to 
address some of the concerns recently reported in the media. 
There is a belief held by some that the appraiser controls or 
sets the market, where the appraiser is assigning value to 
property, and buyers, sellers, and agents interested in the 
market then respond to the appraisal. In actuality, the market 
is driven by buyers and sellers, and their actions are 
reflected in the purchase price, which includes terms of sale, 
sales concessions, and other considerations.
    Purchase price is a fact. We know what it is. Appraisers 
analyze the facts and apply unbiased local market knowledge and 
professional judgment as an independent professional to develop 
a credible and well-supported opinion of value for specific 
property as of a single date. An opinion is not a fact that can 
be found. Opinions require support and should be logical and 
follow reasoning. Any formal appraisal review requires forensic 
analysis and understanding. These points are missing from 
today's conversations.
    We also strongly support appraiser, lender, and consumer 
education goals found in the PAVE Action Plan. Our organization 
has been active in developing education and supporting 
valuation bias and fair housing education requirements for 
appraisers at the Federal and State levels. New State laws that 
have been enacted over the past 2 years can serve as models for 
other States looking to bolster education, awareness, and 
understanding. We stand ready to assist in fostering greater 
understanding of the appraisal process for all stakeholders.
    In closing, we must be careful to balance the proposals for 
increased regulatory requirements on appraisers and potentially 
significant additional work in the event value conclusions are 
challenged with the efforts to make this an attractive and 
attainable and diverse profession. We see the difficulties of 
attracting new individuals to the profession under the current 
appraisal business and regulatory environment. Overbearing 
regulation may make the profession unattractive and dissuade 
new entrants to the profession.
    The proposed increased regulation, review, and audit of 
appraiser files resulting from a complaint of undervaluation 
due to bias does not reference due process. Due process must 
remain a central part of any reform. We need better consumer 
appeal processes, but we also need to protect appraiser 
independence. This is a difficult balance, but it is one that 
is necessary to protect the health of our banking and real 
estate markets.
    We look forward to working with the committee to continue 
to collaboratively work towards fair and reasonable solutions 
for all. Thank you.
    [The prepared statement of Mr. Bishop can be found on page 
66 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Bishop.
    Mr. Bunton, you are now recognized for 5 minutes to present 
your testimony.

    STATEMENT OF DAVID S. BUNTON, PRESIDENT, THE APPRAISAL 
                           FOUNDATION

    Mr. Bunton. Thank you, Madam Chairwoman, Mr. Hill, and 
members of the committee. The Appraisal Foundation greatly 
appreciates the opportunity to appear before you today to offer 
our perspective on the state of the real estate appraisal 
profession. By way of background, I have served as a senior 
staff member of the Foundation for the past 32 years. And prior 
to that, I had the privilege of serving as a senior 
congressional staff member for a dozen years.
    Let me begin with a few words about who we are and what 
makes us different. We are a nonprofit founded 35 years ago 
before the enactment of the Financial Institutions Reform, 
Recovery, and Enforcement Act (FIRREA). We are not an advocacy 
group or a trade association. Rather, we are an umbrella 
organization composed of over 100 organizations and government 
agencies with an interest in valuation. Our work product covers 
all aspects of appraisal: real property; personal property; 
mass appraisal; and business valuation.
    More than 30 years ago, Congress authorized us to provide 
private sector expertise in the real property appraiser 
regulatory system under Title XI of FIRREA. The Foundation does 
not have any regulatory or enforcement authority, but we 
provide the tools for the regulatory community. Specifically, 
we set the minimum education and experience requirements one 
must meet in order to obtain a State credential.
    We are the authors of the national uniform appraiser exams, 
which are used by all 55 States and Territories. And we are the 
authors of the generally recognized standards of conduct known 
as the Uniform Standards of Professional Appraisal Practice. 
These standards, which lay out professional standards 
appraisers must follow, have prohibited appraisers from acting 
with bias or discriminating against protected classes since day 
one, which was over 30 years ago.
    The allegations of bias and discrimination we have seen in 
the press make it clear that more must be done to protect the 
public's trust in the appraisal profession. Even before these 
press reports were beginning to emerge, The Appraisal 
Foundation was taking action and collaborating with others to 
address concerns of bias, discrimination, and a lack of 
diversity in the appraisal profession.
    With the Appraisal Institute, we developed one of the first 
symposiums on this important issue, and also conducted a 
comprehensive diversity survey of appraisers to determine where 
we are today and also to be able to measure future success.
    We are also proud to be a sponsor of the Appraiser 
Diversity Initiative (ADI) established by the Appraisal 
Institute, Fannie Mae, Freddie Mac, and the National Urban 
League.
    And later this week, we will be meeting with Lisa Rice and 
her colleagues with the National Fair Housing Alliance to 
discuss the future composition of our boards, our establishing 
an advisory council composed of organizations that represent 
fair housing, civil rights, and consumer interests, and 
advising them of our engagement of the nationally-recognized 
fair housing law firm, Relman Colfax, to assist us in our 
efforts going forward.
    With the release of the PAVE Task Force report last week, 
we look forward to meeting with them to discuss their 
recommendations regarding ways to work collaboratively on their 
ideas to increase the Federal Government's role within the 
appraisal regulatory system without dismantling it entirely, as 
well as increasing the amount of fair housing education that is 
required of appraisers. We would also like to discuss any 
barriers to entry that need to be addressed.
    Regarding removing possible barriers to entry, I am pleased 
to report on an alternative pathway for aspiring appraisers to 
gain experience, without the need of finding a supervisory 
appraiser, through computer-based simulated training. Think of 
flight simulators for appraisers. Trainees could be exposed to 
an almost limitless number of valuation challenges, and once 
the training is completed, they will have met the experience 
requirement and can sit for the State exam. Providers indicate 
that there will be more than one simulated training module 
available to aspiring appraisers before the end of this year.
    I must note here that the draft Fair Appraisal and Inequity 
Reform Act of 2022 is deeply concerning. This legislation, if 
enacted, would negatively disrupt the appraisal regulatory 
system, including the 55 States and Territories who have 
incorporated the uniform appraisal standards and qualifications 
into their laws and regulations for over 30 years. In addition, 
there are over 3 decades of case law which cite our standards. 
We are concerned that the mere existence of this draft 
legislation may suspend or stall development of the simulated 
training modules I just mentioned, modules that open the doors 
to those not able to find a supervisor, and which were noted in 
the PAVE report as an experience alternative. Rather than 
dismantling the system, we should be looking at ways to work 
collaboratively to address concerns about the Federal 
Government's role within the appraisal regulatory system 
without dismantling it.
    Again, The Appraisal Foundation appreciates the opportunity 
to share this perspective today, and we look forward to working 
with all of you. Thank you.
    [The prepared statement of Mr. Bunton can be found on page 
72 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Bunton.
    Mr. Kelker, you are now recognized for 5 minutes to present 
your testimony.

STATEMENT OF DEAN KELKER, SENIOR VICE PRESIDENT AND CHIEF RISK 
OFFICER, SINGLESOURCE PROPERTY SOLUTIONS, ON BEHALF OF THE REAL 
         ESTATE VALUATION ADVOCACY ASSOCIATION (REVAA)

    Mr. Kelker. Good morning, Chairwoman Waters and 
distinguished committee members. I am here representing the 
Real Estate Valuation Advocacy Association, otherwise known 
REVAA, to share the perspective of appraisal management 
companies (AMCs).
    AMCs are third-party service providers engaged by banks and 
non-bank lenders to manage appraisal panels to complete 
residential assignments in compliance with State law and 
Federal appraisal independence requirements. Since the 1960s, 
U.S. financial institutions have outsourced services to AMCs 
due to their expertise, efficiency, and focus on Federal and 
State regulatory compliance.
    However, following the Dodd-Frank Act and the creation of 
Federal and State requirements to license AMCs in each State, 
the AMC business model grew and was used by both large and 
small lenders to help them remain compliant with Federal and 
State banking and mortgage regulations. All 50 States and the 
District of Columbia have adopted a federally-compliant AMC 
licensing program, which is typically located with the same 
regulator for appraisers.
    While AMCs have contact with appraisers and their lender 
clients, AMCs do not have much direct consumer contact. They 
are agents of the lender to facilitate the procurement of an 
appraisal or property evaluation. AMCs are required to follow 
Federal and State public policy related to fair housing and 
discrimination. It is our intention to be an active part of the 
collective solution as the recommendations of the PAVE Task 
Force final report are further discussed and new policy with 
revisions implemented.
    AMCs have robust quality control programs in place to 
examine appraisal reports after the initial delivery by the 
appraiser. These reviews are done to ensure compliance before 
the appraisal report or valuation is delivered to the lender 
and are not used at this point in time to determine a lending 
decision.
    Any appraisal management company quality control process 
must comply with two important components of appraiser 
independence under the Truth in Lending Act. The first is to 
ensure that the AMCs comply with Federal and State appraiser 
independence requirements, including not attempting to directly 
or indirectly influence the independent judgment of the person 
preparing the valuation.
    AMCs perform a quality assurance review in compliance with 
appraiser independence, which permits the AMC to ask an 
appraiser for three major items: first, to consider additional 
appropriate property information, including consideration of 
additional comparable properties that may be relevant in the 
analysis of the property; second, to provide additional detail 
or explanation to support the valuation provider's value 
conclusion; and finally, to correct any errors that may have 
surfaced in the appraisal report.
    Federal Interagency Appraisal and Evaluation Guidelines 
mandate that lenders are responsible for the safety and 
soundness of the property valuations. Most lender clients 
outline requirements for the AMCs that they have engaged to 
perform quality control as part of the overall services 
performed on their behalf. State laws vary, but most have a 
requirement that AMCs must audit the work of appraisers on 
their panel, although the details of how many appraisals must 
be reviewed or the extent of the review can vary.
    AMCs review their panel of independent fee appraisers to 
grade appraiser performance on past assignments, research State 
boards to determine if there is any disciplinary history, and 
require background checks to determine if there is any criminal 
history. Individual assignments include a letter of engagement 
that outlines assignment-specific criteria required by the 
client as well as the AMC. If a red flag is identified through 
an automated or manual review of an appraisal, the concern is 
escalated to a more intensive review based on the nature or 
severity of the concern. Reconsideration of value may be 
requested by the lender or the borrower through the lender. Any 
questions or issues identified are addressed by the AMC with 
the appraiser who completed the appraisal.
    REVAA supports a vibrant and diverse appraiser industry. 
The future of appraisal needs to retain a human component, 
which is why we support the recruitment of new appraisers to 
help revitalize the profession for the next generation. The 
reliance on appraisers and appraisal products creates an 
important need to help ensure the sustainability of the 
profession. Consumers, residential mortgage lenders, secondary 
markets, and AMCs all rely on a plentiful supply of qualified 
appraisers to meet the anticipated demand.
    The current experience and education requirements of 
becoming an appraiser are overly-burdensome, creating a 
roadblock for the recruitment and training of new appraisers. 
REVAA supports removing barriers in the recruitment and 
training of new appraisers. Modernization should incorporate 
new technologies and learning techniques to recruit and train 
future appraisers just as they are used for other industries. 
This includes the nationwide adoption of innovative initiatives 
such as the Practical Applications of Real Estate Appraisal 
(PAREA) or other alternatives that are created to make it 
easier to recruit, train, and retain a diverse future 
generation.
    [The prepared statement of Mr. Kelker can be found on page 
86 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Kelker.
    Ms. Rice, you are now recognized for 5 minutes to present 
your testimony.

   STATEMENT OF LISA RICE, PRESIDENT AND CEO, NATIONAL FAIR 
                    HOUSING ALLIANCE (NFHA)

    Ms. Rice. Chairwoman Waters, Ranking Member McHenry, and 
members of the House Financial Services Committee, thank you 
for the invitation to testify today on appraisal bias and 
reform, an issue which affects millions of people across the 
country. My name is Lisa Rice. I am the president and CEO of 
the National Fair Housing Alliance (NFHA), representing over 
170 local fair housing groups. NFHA's goal is to eliminate all 
forms of housing discrimination and ensure equitable housing 
opportunities for all people and communities.
    The NFHA, along with its partners, Dane Law and the 
Christensen Law Firm, issued a groundbreaking review of the 
appraisal standards and appraisal qualification criteria to 
examine if there was evidence of potential bias in a study 
commissioned by the Appraisal Subcommittee. We also had the 
honor of briefing the PAVE Interagency Task Force on several 
occasions and applaud their comprehensive action plan.
    For most Americans, their home is their single-most 
important asset and holds the key to wealth, stability and 
opportunity for their families. But America's long history of 
discriminatory housing policies has undervalued homes for 
people of color, and entrenched an unfounded association 
between race and risk. Today, the Black-White homeownership gap 
is larger than it was when the Fair Housing Act was passed in 
1968, and the wealth gap between White households and 
households of color remains large and persistent.
    The Fair Housing Act's promise of fair and equitable 
housing is unfulfilled. We have all heard the shocking stories 
of appraisal bias from across the country, including stories 
of, ``Whitewashing,'' where homeowners of color have had to go 
through the excruciating experience of removing all evidence of 
their racial identity just to receive a fair appraisal, from 
Carlette Duffy in Indiana, who received an increase of almost 
$150,000 after asking a White friend to pose as her brother, to 
the Austin family in California, who received an increase of 
almost a half a million dollars after asking a White friend to 
pose as the homeowner.
    These disturbing and even heartbreaking stories have shined 
a light on the serious shortcomings in the appraisal process. 
While some may say that these are just a bad few apples, 
researchers from a variety of backgrounds, using a variety of 
datasets and methodologies, all come to the same conclusion: 
The current appraisal system leads to adverse outcomes for 
borrowers of color on a systemic basis. So far, these racial 
and ethnic disparities cannot be explained by legitimate 
nondiscriminatory factors.
    Congress must address bias in the valuation process and the 
urgent need for reform. Based on our research and outreach to 
fair housing, appraisal and lending groups, and researchers and 
academics, we respectfully offer the following recommendations 
for your consideration.
    The appraisal industry has long operated in a relatively 
closed, self-regulated framework, which has imposed burdens on 
consumers as well as small businesses. Congress should 
encourage The Appraisal Foundation, or TAF, to improve its 
processes. Congress should also develop the board vision 
outlined in the Fair Appraisal and Inequity Reform Act, which 
would elevate the Appraisal Subcommittee to a new Federal 
agency. To address the risk of broad discretion and underfunded 
enforcement efforts, Congress should encourage TAF to revise 
the appraisal standards. Congress should also provide the 
Federal Valuation Agency with rulemaking authority for the 
standards and ensure adequate funding under the Fair Housing 
Initiatives Program.
    Congress should encourage the appropriate regulators to 
promulgate the automated valuation rule. Congress should also 
provide the Federal Valuation Agency with the rulemaking 
authority to ensure that all valuation methods are fair, 
unbiased, transparent, and consistent. To address appraiser 
shortages and lack of diversity, Congress should encourage TAF 
to revise the appraiser criteria. Congress should also provide 
the Federal Valuation Agency with rulemaking authority to set 
reasonable criteria, require comprehensive fair housing 
training, and require national registration with a unique ID. 
Finally, to improve research, compliance, and enforcement, 
Congress should encourage the regulators to immediately enter 
into a data-sharing agreement and should provide the CFPB with 
rulemaking authority to develop a public valuation database.
    Thank you for the opportunity to appear before you today. I 
look forward to answering your questions.
    [The prepared statement of Ms. Rice can be found on page 
211 of the appendix.]
    Chairwoman Waters. Thank you, Ms. Rice.
    Mr. Peter, you are now recognized for 5 minutes to present 
your testimony.

 STATEMENT OF TOBIAS J. PETER, ASSISTANT DIRECTOR, AEI HOUSING 
                             CENTER

    Mr. Peter. Chairwoman Waters, Ranking Member McHenry, and 
distinguished members of the committee, thank you for the 
opportunity to testify today, and thank you, Congressman Emmer, 
for the nice introduction.
    The case for centralizing appraisal standards and criteria 
under a new Federal agency as proposed under the Fair Appraisal 
and Inequity Reform Act is not justified. It is based on 
unsubstantiated claims of systemic bias and racism in the 
housing sector, and represents an unwarranted power grab by the 
Federal Government, and is one step towards the Federal 
Government setting fiat home values. Amending the appraisal 
process risks mis-valuating millions of properties, which could 
have serious repercussions for minority neighborhoods and rural 
areas, where home sales are sparser.
    Last week's report by the Interagency Task Force on the 
Property Appraisal and Valuation Equity (PAVE) alleged 
inequities within current home lending and appraisal processes 
for communities of color. The work cited by PAVE contains 
serious red flags, which were obvious from a cursory look. The 
work of the AEI Housing Center has debunked the Brookings study 
and the Fannie Mae exploratory note, which were both heavily 
relied on in the PAVE report and this hearing's memo, long 
before the PAVE report was written. Most importantly, these 
studies conflate race with socioeconomic status or SES, and by 
that I mean income, buying power, marriage rates, credit 
scores, and so forth. Once adjusted for differences in SES, 
race-based gaps found in these studies either entirely or 
substantially disappear, which raises serious questions 
regarding a race-based explanation.
    While individual appraiser bias certainly exists, the PAVE 
report admits that the exact number of instances of valuation 
bias is difficult to assess. We have undertaken a study with 
over 240,000 loans for which we knew the race of the borrower. 
Our statistical analysis found that racial bias by appraisers 
on refinance loans is uncommon and not systemic. These results 
in our methodology have been confirmed by other academic 
research. All of this work was ignored by PAVE. Further, 
research by Fannie Mae, which directly contradicted Freddie 
Mac's preliminary findings, was so selectively cited at this 
point, that it was lost. It is questionable how PAVE could 
arrive at this conclusion when its own report admits a lack of 
data.
    Furthermore, this lack of data is the fault of the 
government. Two years ago, we outlined a statistical approach 
using existing data that would have allowed FHFA, Fannie Mae, 
and Freddie Mac to identify bad actors using existing data. 
This offer was ignored. Now, 2 years later, we are debating a 
task force report and a draft bill based on cherry-picked data, 
discredited research, and flawed conclusions, suggesting a lack 
of interest in getting to the truth and an alternative motive 
to provide an excuse for centralizing appraisal valuation 
standards and appraiser criteria in the Federal Government.
    Instead of this bill, agencies should get to work using 
existing data. These data should be anonymized and made 
available to independent researchers to verify, as a bipartisan 
group of Senators agreed at last week's Senate Banking 
Committee hearing. This would allow bad actors, whether 
racially-biased or incompetent, to be removed immediately from 
the profession, as they should be. Additionally, since PAVE has 
misdiagnosed the problem, its proposed agency actions will not 
address racial and ethnic differences in homeownership rates, 
financial returns of owning a home, or median wealth. Instead, 
it will likely make these differences worse or divert attention 
from finding effective solutions.
    Rather than discredited claims of systemic appraiser bias, 
homeowners and communities of color are being hurt by the 
combination of low SES, which certainly reflects a legacy of 
past racism and lingering racial bias, which leaves Blacks at a 
large income and wealth disadvantage relative to most Whites, 
and foreclosure-prone Federal lending practices.
    Research finds that Black and Hispanic homeowners 
experience lower returns than White homeowners, which it 
attributes almost entirely to the higher prevalence of 
distressed home sales, and not appraiser bias. The study finds 
that the disparity in distressed home sales explains about 40 
percent of the Black-White gap in housing wealth at retirement. 
It also notes that, importantly, absent financial distress, 
houses owned by minorities do not appreciate at slower rates 
than houses owned by non-minorities, which, again, directly 
contracts the PAVE report.
    Foreclosure-prone affordable housing policies have been 
targeted at low-income and minority borrowers. These policies 
subsidize debt by providing excessive leverage and lower rates. 
Coupled with a supply shortage, the increased demand from 
additional leverage has fueled unforgiving boom-bust home price 
cycles. During the financial crisis, these policies contributed 
to over 10 million foreclosures, which were proportionally 
higher in low-income and minority neighborhoods. 
Notwithstanding massive subsidies and lending, Federal housing 
policies have not built generational wealth.
    A Federal takeover of the appraisal industry could have 
serious consequences similar to prior housing task forces, such 
as the 1967 Presidential Task Force on Housing and Urban 
Development, which ended up destroying many American cities, 
especially Black neighborhoods, or the 1995 National 
Homeownership Strategy, which ended in millions of 
foreclosures. Mis-valuing millions of properties could have 
similar consequences, with minorities once again being the 
victims.
    Thank you.
    [The prepared statement of Mr. Peter can be found on page 
97 of the appendix.]
    Chairwoman Waters. Thank you very much. I now recognize 
myself for 5 minutes for questions.
    Mr. Bunton, in your invitation to testify, the committee 
asked that you provide in your written testimony the racial, 
ethnic, and gender diversity of all Appraisal Foundation staff, 
boards, and members. Some stakeholders and industry 
professionals have identified the Foundation's minimal 
appraisal standards and qualifications as contributing to 
barriers to entry for the appraisal industry, especially for 
lower-income individuals, people of color, and women, so it 
matters who is thinking about writing and setting those 
standards. Others argues that those standards have a role to 
play in the lack of diversity in an industry that is about 98-
percent White, and nearly 70-percent male.
    I would like to know more about the current composition of 
the Foundation's board. What is the current racial, ethnic, and 
gender makeup of each board, including the Foundation's 
qualifications board and standards board and the board of 
trustees?
    Mr. Bunton. Thank you very much, Madam Chairwoman. I will 
start off with the Foundation staff. Fifty percent of the 
Foundation's staff are people of color. I hired every one of 
them. The Appraiser Qualifications Board is composed of nine 
people. The last four people who were appointed over the last 2 
years included an African American, a Native American, and also 
a Hispanic woman, and 3 of the 4 appointees were women. So, of 
the nine right now, three are women and two are minority. The 
Appraisal Standards Board has seven members, three women and 
four men, and there is one woman who identifies as a Native 
American. The board of trustees has 21 people. I am going to 
kind of guess here, I would say, I think it is 9 percent 
minority and about 38 to 40 percent women.
    Chairwoman Waters. In what year did each of the three 
boards welcome the first board members of color? Has that been 
recently?
    Mr. Bunton. The Appraiser Qualifications Board was 
appointed in 1989, and had a person of color on it at that 
time. He was the assessor for the City of Atlanta.
    Chairwoman Waters. Okay. You have three boards?
    Mr. Bunton. That is correct. There has not been a person of 
color on the Appraisal Standards Board. We have had a person of 
color on the board of trustees for close to 20 years.
    Chairwoman Waters. On the board of trustees, is there an 
African American?
    Mr. Bunton. Yes.
    Chairwoman Waters. And the other two boards that you 
mentioned, each of them have one African American?
    Mr. Bunton. The Qualifications Board has one African 
American, and one Hispanic, Native American. The Standards 
Board does not have an African American, and has one woman who 
identifies as Native American.
    Chairwoman Waters. Thank you very much. Yes or no, do you 
believe the lack of diversity at your organization and on its 
boards has contributed to some of the bias and discrimination 
that has been well-documented here today?
    Mr. Bunton. No. In fact, in the last 2 years, since 
February of 2020, we have been actively working on a number of 
diversity, equity, and inclusion efforts. We hired an outside 
consultant to make sure that we go out to get people on the 
boards that you were just referencing. We gave this consultant 
the entire portfolio, our application, how we solicit 
applications, the questions we ask, how we rank candidates. 
That person came back with suggestions and we have implemented 
them starting this year as far as improving the diversity of 
our boards.
    Chairwoman Waters. Title XI of the Financial Institutions 
Reform, Recovery, and Enforcement Act envisions the 
relationship between the Appraisal Subcommittee and The 
Appraisal Foundation to be that of grantor and grantee. 
Presumably, this relationship would provide a check and balance 
on the Foundation by the Federal Government for the 
implementation of congressionally-required minimum appraisal 
standards and qualifications. So, while the subcommittee has 
made $2 million in grant funds available to the Foundation over 
the last 2 years to support Title XI related activities, The 
Appraisal Foundation did not accept these funds for Fiscal Year 
2021. Whether intended or not, the Foundation is able to 
effectively sidestep the Federal oversight by rejecting the 
Federal funds.
    In the past, Mr. Bunton, the Appraisal Subcommittee has 
objected to burdensome education requirements that perpetuate 
barriers to entry for the profession, and Federal regulators 
recently sent a joint letter to the Foundation regarding Fair 
Housing concerns with the Appraisal Standards Board's ethics, 
rules, and Advisory Opinion 16. When the Federal Government 
objects to your industry standards and qualifications in this 
way, do you have an obligation to fully address these 
obligations? Yes or no?
    Mr. Bunton. Yes, and we have a separate meeting with those 
agency representatives.
    Chairwoman Waters. Do you believe Federal oversight is 
needed in the establishment of minimum uniform standards and 
qualification criteria? Yes or no?
    Mr. Bunton. Yes.
    Chairwoman Waters. Do you believe your standard should be 
subject to the Administrative Procedure Act, to ensure that the 
public has an opportunity to comment and that your organization 
appropriately considered these views, yes or no?
    Mr. Bunton. Yes.
    Chairwoman Waters. Thank you very much. I yield back.
    Mr. Hill, you are now recognized for 5 minutes.
    Mr. Hill. Thank you, Madam Chairwoman. And as you know, our 
distinguished ranking member, Mr. McHenry, was not able to be 
with us this morning. I ask unanimous consent to insert his 
opening statement in the record.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Hill. Thank you, Madam Chairwoman.
    Mr. Bishop, of course the housing market has been booming. 
House prices are double-digit. There is a real shortage of 
housing out there. Prices have gone up, but we drove interest 
rates to zero. So, it has been a booming time for people trying 
to do mortgage finance over the past 2 years particularly, and 
I understand there is a shortage in the workforce of 
appraisers. Is that true?
    Mr. Bishop. Yes, sir.
    Mr. Hill. And is it worse in rural areas?
    Mr. Bishop. That is what I understand.
    Mr. Hill. The PAVE recommendations for the Administration 
talk extensively about a, ``well-trained, accessible, and 
diverse appraiser workforce.'' Is that a goal you share?
    Mr. Bishop. Yes, sir.
    Mr. Hill. What actions are you taking to work with our 
private appraisers around the nation to encourage and help 
advance training for people of color to operate and serve as 
leaders in the industry at the grassroots level?
    Mr. Bishop. That is a great question. There are several 
things that we have undertaken. The first is the Appraisal 
Diversity Initiative (ADI). It is a collaborative effort 
between Fannie Mae, Freddie Mac, the National Urban League, and 
the Appraisal Institute, and it is backed by Chase Bank, which 
made a $3 million commitment to help this endeavor. What ADI 
has accomplished so far is through a bunch of seminar-type 
events, they have identified minorities and people of color who 
want to enter the appraisal profession, and about 150 of those 
individuals have been selected and have entered the program.
    Mr. Hill. That is good. How many licensed appraisers are 
out there in the U.S. right now, more or less?
    Mr. Bishop. Roughly 75,000.
    Mr. Hill. Okay. So, that is a small step in the right 
direction. I know my colleague, Alma Adams from North Carolina, 
will probably talk to you at length about our initiatives with 
our Historically Black Colleges and Universities (HBCUs), which 
are great places to recruit. Do you have people actively 
recruiting on those campuses?
    Mr. Bishop. Yes, sir. One of the endeavors of the Appraisal 
Institute is the University Relations Committee, and we are 
just kicking off a pilot program now to get into the 
universities. Our members are there already, and this is an 
endeavor to organize it and make it more efficient, and our 
targets are HBCUs, community colleges, and universities across 
the United States.
    Mr. Hill. Thank you, Mr. Bishop.
    Mr. Peter, back in 2010, I referenced in my comments about 
my experience in the 2008 crisis for appraisal mania, and 
certainly, I witnessed it when I was at the Treasury Department 
from the results of the late 1980s, particularly in the savings 
and loan industry. In 2010, Democrats enacted the Dodd-Frank 
Act as a part of that was financial system overhauls. The 
Democrats in charge at that time made it illegal to violate 
appraisal independence. Is that right?
    Mr. Peter. I believe so.
    Mr. Hill. How is the process harmed when you have 
valuations that are not independent or fairly conducted?
    Mr. Peter. I think the process can be seriously harmed from 
a politicization of the appraisal process. For one, if that 
were to happen, the government could potentially over-valuate 
or mis-valuate properties on a massive scale. This would 
exacerbate home price boom-and-bust cycles, and it would expose 
the most borrowers with the least financial wherewithal to 
potential swings which led--
    Mr. Hill. Yes, thank you. I think we witnessed that several 
times in recent years in our economy, most recently in the 2008 
crisis. Are there any data out there on the effectiveness of 
those prohibitions? In other words, is there any data to 
support the integrity of an independent appraisal process?
    Mr. Peter. I am not sure. I would have to get back to you 
on that, sir.
    Mr. Hill. How about data on the effectiveness of the anti-
discrimination prohibitions in the Equal Credit Opportunity Act 
(ECOA) or in Title VIII?
    Mr. Peter. We, at the American Enterprise Institute, at the 
Housing Center, have undertaken a study of 240 refinance loans.
    Mr. Hill. How many?
    Mr. Peter. Of 240,000 loans, and what we found when we 
looked at them was that there was no systemic appraisal bias. 
As a whole, we looked at the industry, and we found no systemic 
bias.
    Mr. Hill. Okay. On average, how many reported violations 
are there each year of ECOA or Title VIII, do you think?
    Mr. Peter. The last numbers that I have seen from 
[inaudible] that they were in the low double digits.
    Mr. Hill. Okay. Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you.
    The gentleman from New York, Mr. Meeks, who is also the 
Chair of the House Committee on Foreign Affairs, is now 
recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman. And I thank the 
witnesses for their testimony.
    Let me follow up with Mr. Bishop on some of the questioning 
that the chairwoman was asking back and forth with Mr. Bunton, 
when she discussed with Mr. Bunton about the board. My concern 
also on top of that, Mr. Bishop, is that I could not agree more 
with the chairwoman that diversity and inclusion is extremely 
important in this industry. And when I looked at the Bureau of 
Labor Statistics report, it shows that of the approximately 
80,000 appraisers in this country,--these are the individuals 
who are actually out there appraising--97.7 percent of them 
identify as White. So, it seems that there is a complete lack 
of diversity, which I believe also can feed into systemic 
issues of Black homeowners receiving lower property appraisals 
than White homeowners.
    Can you speak to, what are the barriers? Are there 
barriers? Why would it be so lopsided? Are there barriers to 
individuals getting in to be appraisers?
    Mr. Bishop. Yes, sir. It is difficult to get into the 
appraisal business, particularly the residential side of the 
business. Most appraisal companies are small, and 
independently-owned, with one or two appraisers in the company, 
and the common theme is, they do not have time to take somebody 
and train them. They cannot afford to pay them while they are 
doing it, and it takes away from their time to produce their 
own appraisal, so it costs them money. That is the common 
theme, which suggests that the current supervisor-trainee model 
is not adequate for allowing entrants into the market, 
particularly in the smaller residential-type appraisal 
businesses. That is where the PAREA--Practical Applications for 
Real Estate Appraisal--is an alternative to earning appraisal 
experience by working for someone like me, who would take you 
and mentor you through a 6-month or 1-year process to learn the 
basics of appraising a residential house, and then you could 
get licensed.
    The PAREA Program will actually involve taking these 
individuals and training them, and they will be matched up with 
someone like me, an experienced appraiser. We envision it as a 
series of case studies where they start off with a basic 
appraisal, and each one gets a little bit more, not nuanced or 
complicated, but it takes them through what a residential 
appraiser would experience, working with me as their mentor, so 
that on the outcome, they would then be qualified as a licensed 
appraiser to go start doing appraisals.
    Mr. Meeks. Mr. Bishop, I want to follow up with you 
because, to me, any time you have an industry like that, and it 
seems to be a block, it always comes to the point where there 
are excuses. I am not saying that you are giving one today, you 
are telling it as it is, but others give excuses which block 
people from getting in, and we have to open that up. And I 
think that is an area Congress can work on also, so that we can 
eliminate these barriers that continually exist. And I would 
like to follow up with you, but I am limited on time.
    Mr. Bishop. Yes, I would be glad to follow up in writing on 
any questions you have.
    Mr. Meeks. Yes, please.
    Mr. Bishop. Or just call me and I can talk to you.
    Mr. Meeks. Very good. Let me jump to Ms. Rice, because I 
have another question that, truth of the matter is, I do not 
know which is best. Ms. Rice, unconscious bias is pervasive 
throughout so many different aspects of the mortgage and 
lending process, and I do not know which one is best. One is 
prescriptive and the other one is more algorithm-driven. Which 
is best, because I can see abuses in both? What would you say 
is the best way to utilize it?
    Ms. Rice. Congressman Meeks, thank you for the question. I 
worked on a case a number of years ago in which a judge opined 
that appraising was an art and not a science, and the art is 
where we bring in a lot of discretion, subjectivity. And I 
think what we are trying to do is move the field away from 
being more discretionary and having a lot of subjectivity in 
the process to one that is more scientific, more uniform, and 
more standardized. The algorithmic-based systems can be 
problematic because they are using data that has bias embedded 
and baked into the data.
    Mr. Meeks. Thank you.
    Ms. Rice. So, both need help.
    Chairwoman Waters. Thank you, Mr. Meeks.
    The gentlewoman from Missouri, Mrs. Wagner, is now 
recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman.
    Mr. Peter, the PAVE Task Force acknowledged in its own 
report that, ``Much of the gap in rates of homeownership can be 
traced to socioeconomic factors that differ on average between 
Black and White homeowners.'' The task force went on to 
recommend 21 actions. Did any of those relate to the above 
statement?
    Mr. Peter. No, they did not.
    Mrs. Wagner. What would be the result of taking these 
actions if they result in improper evaluation of homes?
    Mr. Peter. Thank you for the question. The consequences 
could be really catastrophic, particularly for minorities and 
people living in rural areas. There, you do not have as many 
home sales, so if you mis-valuate properties in this area, you 
could easily exaggerate home price boom-and-bust cycles, which 
would expose those to a larger default.
    Mrs. Wagner. And whom do you think would be most affected 
by the taking of these actions and the improper valuation of 
homes?
    Mr. Peter. It would be mostly lower-income people, and 
there is a history of this every time the Federal Government 
has gotten involved in the housing market. They tried to fix 
big problems, like in 1967 when they tried to eliminate all 
substandard housing. It has crashed and burned, and it has 
ruined neighborhoods, particularly for minorities in lower-
income neighborhoods. Likewise, in 1995, there wasthe National 
Homeownership Strategy, where the goal was to raise the 
national homeownership rate up past levels that we have ever 
seen before. And, of course, it created a massive home price 
boom that later came crashing down and ended up in millions, 
tens of millions of foreclosures, and it ended up wrecking the 
economy. And, again, the people hurt the most were lower-income 
minorities.
    Mrs. Wagner. Mr. Peter, have past Presidential task forces 
or strategies on housing topics--and you just outlined a few 
examples here--created meaningful changes or results? And, 
probably more importantly, what should be our takeaway from the 
previous times that the Federal Government has substantially 
increased its role in the housing market?
    Mr. Peter. I think we really need to be careful with 
Federal takeovers of the appraisal industry, and as I already 
mentioned, in the past, these actions have crashed and burned. 
And again, if you were to repeat something like this, the 
danger of doing it wrong could far outweigh the benefits of 
doing it right. And furthermore, I think the Federal Government 
has not proven its case. All of the claims in the PAVE report 
are unsubstantiated, and instead, we should be focusing on 
improving the socioeconomic status of lower-income minority 
Americans so we can actually address the root causes and not 
the symptoms here.
    Mrs. Wagner. The root causes, absolutely. Mr. Peter, if the 
recommendations of the PAVE Task Force went into effect, could 
you detail what some of the results might be for potential home 
buyers in rural America?
    Mr. Peter. As I stated before, I think it would potentially 
mis-value homes in rural areas, and the consequences could be 
dire, but then also, the PAVE report talks about releasing data 
publicly. And, of course, the data would be restricted, the 
data that can be released to the public would be heavily 
restricted, at which point it would actually be useless to use 
for independent researchers such as myself to verify what the 
government has done. But the PAVE Task Force is recommending, 
and then the government would be having all the data 
internally, but after the PAVE Task Force's recommendations and 
what they have come up with, I am very skeptical that the 
government is going to come up with the proper analysis. And, 
hence, I think we need to be very careful about the PAVE Task 
Force recommendations.
    Mrs. Wagner. I thank you very much for your very frank and 
honest input. I, too, am skeptical of most of these Federal 
agency task forces and recommendations going forward. I thank 
you for your testimony.
    I thank all of our witnesses, and I yield back the 
remainder of my time.
    Chairwoman Waters. Thank you very much. The gentleman from 
Georgia, Mr. Scott, who is also the Chair of the House 
Agriculture Committee, is now recognized for 5 minutes.
    Mr. Scott. Thank you, Madam Chairwoman. Ms. Rice, I want 
you to help shine a light on just who has generational wealth 
in America today, and also the many ways in which this kind of 
accumulated wealth can impact the social mobility of the 
average American family. So, to start with, who would you say 
holds the majority of American wealth today?
    Ms. Rice. Congressman Scott, thank you for the question. We 
know that we have grave racial wealth disparities in the United 
States. When it comes to households with children, families 
with children, Black households have $0.01 of wealth for every 
$1 of wealth held by White households, and Latino households 
have $0.08 for every $1 of wealth held by White households.
    Mr. Scott. That is very remarkable. Now, tell me some of 
the common ways that middle-class people inherit wealth?
    Ms. Rice. Many families inherit wealth because they get it 
from their parents, and that wealth is passed down, and for the 
typical family, most wealth is held in home equity. So, 
homeownership really is the path to wealth-building and has 
been the path to wealth-building for the typical American 
family for hundreds of years.
    Mr. Scott. I am glad you mentioned real estate as one of 
the assets that families pass down to their children and 
grandchildren. But also in your testimony, you also say, ``Home 
value in the United States is the cornerstone of generational 
wealth.'' And you further stated that historical appraisal 
practices have created some of the worst inequities and 
inequalities among Black and Hispanic families. So, Ms. Rice, 
can you explain to us how lower appraisals limit the amount of 
equity that a homeowner can earn from their home if they were 
to sell or refinance?
    Ms. Rice. Certainly. Thank you for the question. When a 
home is undervalued, what that means is that as the borrower is 
paying down their mortgage debt, they are not seeing an 
appreciation in the equity that they are able to amass in the 
home. And the lower the equity in your home, that means that 
you are not going to be able to transfer as much wealth to your 
children when you make your transition.
    Mr. Scott. What do you believe is the root cause of this 
under-evaluation, and how can we here in Congress work together 
towards a more equitable valuation of homes?
    Ms. Rice. There are many root causes, and this is an issue 
I have been working on for almost 40 years. One of the root 
causes is a lack of diversity in the appraisal field, a lack of 
familiarity with appraisers who are appraising properties in 
underserved communities of color. We also have a long, long 
history of race-conscious policies in the appraisal sector, and 
that data has flooded our marketplace, if you will. And a lot 
of the technologies that we use in the appraisal field are 
built on data that is embedded with this biased information, 
and that also yields disparate outcomes.
    Mr. Scott. Mr. Kelker, Ms. Rice mentioned technology. Do 
you believe that technology, such as online appraisals, is the 
answer to ending discrimination in the appraisal industry?
    Mr. Kelker. I don't believe that is the sole answer to 
ending discrimination. However, the addition of technology-
based solutions help a third party, whether it is an AMC or a 
lender, to evaluate the quality of the appraisal data that they 
are receiving from the field. So, it helps--
    Mr. Scott. Thank you.
    Mr. Kelker. Okay.
    Mr. Scott. My time has expired. Thank you, sir.
    Mr. Kelker. Certainly.
    Chairwoman Waters. Thank you very much. The gentleman from 
Texas, Mr. Sessions, is now recognized for 5 minutes.
    Mr. Sessions. Madam Chairwoman, thank you very much.
    Mr. Bunton, you have sat through this entire hearing, been 
here, heard the testimony of the president of The Appraisal 
Foundation. You have listened to Ms. Rice and others today talk 
about the numbers of people, supposedly the data that is 
flawed, the data that might be biased, the lack of minority 
participation. I heard you enumerate the people who work within 
your industry that are on your boards, the people who would 
represent you and The Appraisal Foundation. The chairwoman 
spoke of this in her few minutes. She was highlighting the 
issues, and discrimination, and bias that became very apparent 
today in the hearing.
    Would you tell me what you think you heard that was 
discrimination and bias? Is your takeaway as the president that 
you would walk out of here and say to your organization, I 
heard in this hearing this discrimination and bias and what you 
might want to do about it, because I have heard numbers that 
suggest minority participation back home in States, in 
localities, do not necessarily represent the numbers that we 
want. But what did you hear?
    Mr. Bunton. I think there is a problem, the press reports. 
There are three things I would talk about as far as bias and 
discrimination. One, identify the problem. Right now, there is 
no aggregation of data, how many complaints are actually out 
there at the State level, Civil Rights Commission, or with HUD, 
so that is one.
    Mr. Sessions. Was there testimony given today related to 
that, because we heard that the numbers don't exist there.
    Mr. Bunton. Correct. That is what I am saying. We need to 
find that out. We need to get our arms around the size of the 
problem. If we don't know where we are today, how will we 
measure success 12 months from now? There are a lot of 
anecdotal, a lot of press reports, very concerning press 
reports, but I have not seen any specific data that tells me 
the depth and breadth of the problem.
    Mr. Sessions. Do you think this hearing today developed 
that issue? Are you going to walk out and say, well, this 
hearing produced results that I need to go back, or are you 
going to have to go back and define these yourself as opposed 
to this hearing producing them?
    Mr. Bunton. I think it is important to focus on the issue. 
It is an important issue, from our perspective, the area of 
awareness, education, making sure appraisers are aware of 
unconscious bias. But also one other thing, sir, and that is 
enforcement. The Federal entity, the Appraisal Subcommittee, 
when it goes out and does compliance reviews to the various 
States, it does not check for consistent compliance of our 
standards. So we write the standards, but if we are not 
checking on the enforcement of it, we are going to have a 
problem.
    Mr. Sessions. What are they there to do if they are not 
there to check on the--
    Mr. Bunton. They check administrative matters, like when 
the case was filed, how long did it take to adjudicate it, and 
things like that. But they do not seem--
    Mr. Sessions. They sure seem to be biased in that process.
    Mr. Bunton. It is a little surprising that doesn't occur.
    Mr. Sessions. It does or does not occur?
    Mr. Bunton. It does not occur.
    Mr. Sessions. It does not occur. So, perhaps part of what 
we need to do is to ask the questions of those people who do 
these audits, and you are suggesting you have not seen that 
bias that is there.
    Mr. Bunton. That is correct.
    Mr. Sessions. I want to be very sympathetic to any person 
who would choose to enter the marketplace in any area that 
would be important for them based upon their qualifications and 
desires. And I want to be very much supportive of not just Mr. 
Meeks' comments, but also the chairwoman. I am simply saying I 
did not hear these in the testimony that was given today. So, 
it would be my one question for you to go back and to really 
listen to what Ms. Rice said about things that are embedded in 
databases.
    I saw from her testimony what may have been old data. There 
was no date that appeared. For us here today, perhaps if this 
were 1983, I thought those terms that were embedded in, what 
she brought forth were out of the norm also, so I want to agree 
with her. But I would like to have you go back and take a look 
at the databases that you look at across the country and see 
what your current snapshot is, because I want to be very 
sympathetic to the ideas that this bias or discrimination 
exists. And I want to thank the chairwoman in this endeavor, 
and I think that we need to look deeper for those viewpoints. 
And I thank the chairwoman for bringing this together today.
    Chairwoman Waters. You are welcome. The gentleman from 
Texas, Mr. Green, who is also the Chair of our Subcommittee on 
Oversight and Investigations, is now recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. I, too, greatly 
appreciate this hearing today, and I have had some experience 
with these circumstances. I have talked to REALTORS and persons 
who claim that their properties have been undervalued. This 
starts with the person who appraises the property. Sometimes, 
the attitudes are not such that you feel comfortable with the 
person you are working with, but let us get beyond that and you 
get your appraisal. At some point, you decide that this is not 
an appropriate appraisal. It is too low. You have to now go to 
your bank, you have to now try to get the person who made the 
actual appraisal to reconsider, and that attitude that you 
experienced at the genesis of the process becomes even more 
prevalent as you challenge the appraisal.
    Discrimination is illogical. It makes no sense for people 
to do it, but it happens. And it seems to me that there should 
be some process by which persons who receive an undervalued 
appraisal can appeal to someone other than the bank and the 
person who initiated the original appraisal. So let me ask you 
Ms. Rice, your thoughts on some sort of process that gives us 
at least some third party to appeal to.
    Ms. Rice. Thank you so much, Congressman Green, for the 
question, and I did want to correct something for the record. 
The anecdotes and the research in my testimony is all recent. 
It is not dated information. It is all very recent, within the 
past couple of years. So your question about the 
reconsideration process is very important, because oftentimes, 
when consumers experience undervaluation, the first thing that 
they have to do is go back to the lender and ask the lender to 
order a second appraisal or have the appraiser reevaluate it. 
And so, the call is made by the lender. It is not made 
necessarily by the appraiser or made by the consumer. If the 
lender will not grant the request for reconsideration, then the 
initial appraisal, which may undervalue the property, will 
stand.
    So we agree with you absolutely, Congressman Green, that 
there has to be a reform of that process. And what we are 
suggesting is that consumers be considered, that the law be 
changed so that consumers are considered as the intended user 
for the appraiser. After all, it is the consumer who pays for 
the appraisal, so the consumer should have the right to request 
a reconsideration and have that request granted.
    Mr. Green. Ms. Rice, perhaps the industry itself could do 
more to monitor these things. For example, if you had some sort 
of third party involved, some entity that is not vested in this 
process, you can track the number of persons who are giving us 
appraisals that are undervalued. You can then have that 
information compiled such that the things that have been talked 
about earlier that we don't have, we could have that 
information. Are your thoughts in the reclamation process 
having the third party or some entity to perform this function 
of re-evaluation?
    Ms. Rice. One of the things that we do agree on is that the 
Appraisal Committee should be elevated to a Federal agency, and 
it could be that third-party agency that you are talking about, 
Congressman Green, that has expanded and increased authority to 
provide oversight. One of the things I do want to point out is 
that there has been a lot of talk about the over-appraisal of 
values in the lead-up to the foreclosure crisis. But I want to 
point out that most of those abuses, the lion's share of them 
happened in the subprime sector, which was not regulated. So, 
we do need appropriate regulation over the valuation of 
properties.
    Mr. Green. Thank you, and I will just close with this: 
Unfortunately, many people will never experience what it is 
like to be alone with a person of a different hue, who has an 
attitude, and you are trying your best to appeal to the person, 
but this person, for whatever reasons, chooses to treat you 
with disrespect. That happens in this process.
    Thank you, and I yield back.
    Chairwoman Waters. Thank you very much, Mr. Green.
    The gentleman from Florida, Mr. Posey, is now recognized 
for 5 minutes.
    Mr. Posey. Thank you, Chairwoman Waters. Mr. Peter, are 
there any peer-reviewed studies or meta analyses of multiple 
studies that establish a strong case for the existence of 
racial bias in real estate appraisals?
    Mr. Peter. No, sir, I am not aware of any. In fact, I am 
only aware of studies that disprove it.
    Mr. Posey. The purpose of a real estate appraisal is to 
provide an estimate of market value on a property that is 
prospectively going to be sold or bought. What does your 
research suggest about the accuracy and overall error rates 
associated with single appraisals that is a reliable metric of 
market value, and what should be done to improve the overall 
accuracy of appraisal methods?
    Mr. Peter. Thank you, sir. That is a great question. And 
what our research has shown is that under-appraisals, as they 
come in, actually provide a great value to borrowers. So if the 
appraisal comes in far below the negotiated sale price, it 
provides a consumer benefit, because the borrower now has the 
opportunity to go back and renegotiate the sale price. It gives 
him power to go back to the seller.
    And oftentimes, what the research found--Fannie Mae found 
that the larger the difference is between the actual negotiated 
sale price and the undervaluation, the larger degree of 
revaluation and the greater the consumer benefit. And also, the 
research shows that there is not much drop-off, meaning not 
many loans that come in under-appraised end up dropping off the 
market. So, they are just getting renegotiated and still get 
done.
    Mr. Posey. Very good. Now, who gets harmed when an 
appraisal comes in for more than the actual value that it 
should be?
    Mr. Peter. Could you repeat that?
    Mr. Posey. Who is harmed when--
    Mr. Peter. Oh, who is harmed?
    Mr. Posey. --when an appraisal comes in.
    Mr. Peter. Yes. If an appraisal comes in low in a purchase 
transaction, it ultimately benefits the buyer, but the seller, 
of course, has to renegotiate, and they are losing some money 
on the sale price. But you cannot have it both ways. If under-
appraisals are the issue, then you are providing a benefit to 
the consumer and the seller is losing somebody. You cannot have 
it both ways.
    Mr. Posey. Yes. I would think that to insist that appraisal 
just meets the criteria that somebody wants can do more harm to 
that person than good. Do you agree with that assessment?
    Mr. Peter. Yes, absolutely. And on refinance appraisals, 
oftentimes it is the approach comes in, what do you need, and 
that oftentimes allows borrowers to borrow more than they can 
actually afford. And what we have seen is kind of the studies 
out there from Kermani and Wang from UC Berkeley which show 
that actually, if you wouldn't have all of these foreclosures 
in these neighborhoods, the home price appreciation in White 
and majority-minority neighborhoods would actually be similar, 
but it is the foreclosures that bring down the return for these 
minority borrowers. So that is, I think, what we need to 
address. Next to socioeconomic status, I think we need to 
really address the lending practices that exist in some of 
these minority neighborhoods.
    Mr. Posey. Very good. I appreciate it, and I yield back, 
Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from Missouri, 
Mr. Cleaver, who is also the Chair of our Subcommittee on 
Housing, Community Development, and Insurance, is now 
recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. Ms. Rice, are you 
familiar with the term, ``rubophobia?''
    Ms. Rice. No, sir, I am not.
    Mr. Cleaver. Maybe I made it up. But the point is, there 
are those of us who have apprehension about some of this new 
technology like artificial intelligence (AI). And so, we are 
becoming well-known across the country as either [inaudible] or 
we are suffering from, ``rubophobia.'' The issue is, human 
beings tend to trust AI as much as they trust other human 
beings. So, when we talk about bias, do you believe that bias 
can be programmed into AI?
    Ms. Rice. Congressman Cleaver, thank you for the question. 
Yes, absolutely. AI systems, algorithmic systems are just a 
reflection of human performances. AI reflects what happens in 
the marketplace, so if there is discrimination in the 
marketplace, then the AI system or the algorithm doesn't have 
to be an artificially intelligent system; it could be a linear 
regression system. It will pick up and reflect the bias that is 
embedded into the data. So, if you have communities of color 
where there are sort of systemic undervaluations of prices, any 
algorithmic model that is going to value a property is going to 
repeat the undervaluation. And, in fact, algorithmic systems 
could actually amplify bias and undervaluation.
    Now, I heard my colleague here, Mr. Peter, say that he 
thinks that undervaluation of a property is a good thing for 
consumers. I don't want my property undervalued, because it is 
a not a good thing for consumers in the long run. Accurate 
appraisals are what we want. That is the goal, not undervalued 
or overvalued appraisals. Neither are good.
    Mr. Cleaver. You can also practice some psychiatry. Thank 
you. It is helping treat me. Mr. Peter, do you believe that 
there are dangers in AI, in particular as we as we think about 
the issue of appraisals?
    Mr. Peter. Yes, I think there are some concerns that are 
out there, and I am not an expert on this. But I would like to 
add at the same point, that you have these models that could 
also be tweaked, even without AI, especially when you have 
competition between Fannie and Freddie. If they were to be put 
in charge of these AVMs, they could compete with each other and 
it could lead really to a race to the bottom. It happened 
during the 2000s with automated underwriting systems, where 
they progressively competed against each other. Each one 
thought they were smarter than the other, but because they were 
the market, it led to detriments to consumers.
    Mr. Cleaver. Thank you. Actually, I don't have enough time 
for everybody to deal with this, but LBJ pushed through the 
Fair Housing Act of 1968. Is there an immediate need to upgrade 
the Fair Housing Act of 1968?
    Mr. Bishop. I am not familiar enough with the Fair Housing 
Act of 1968, but there is a Fair Housing Act out there right 
now that appraisers should get educated on. If they haven't, 
then we are in support of the PAVE Action Plan recommendation 
to educate appraisers. Nothing could help an appraiser more 
than to learn about the history of the housing markets, and 
redlining, and things along that line that were completely 
inappropriate up to this point in time. They also need to learn 
about their unconscious bias, how to recognize it, and then how 
to interrupt it so that it doesn't appear in their reports. 
Fair Housing is part of that education along with everything 
else and we support that.
    Mr. Cleaver. Thank you. I yield back my time.
    Chairwoman Waters. Thank you. The gentleman from Missouri, 
Mr. Luetkemeyer, is now recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. Mr. Bishop, 
you are the sole appraiser on this panel, if I am not mistaken. 
That is your business that you run. Is that correct?
    Mr. Bishop. Yes, sir.
    Mr. Luetkemeyer. I was a bank examiner for a couple of 
years, and I was in the banking business for 30 years as well 
as the insurance business. I have looked at, if not hundreds, 
thousands of appraisals through my time, and I have gone 
through lots and lots of situations where people come in and 
they want you to over-appraise or under-appraise, based on 
whatever they are trying to accomplish with the mortgage they 
are trying to get or the insurance they are trying to get.
    It is interesting to watch a different dynamic of how this 
all goes on. But I also have a really, really good friend, one 
of my closest friends, who is an appraiser, and he constantly 
talks to me about the problems in the field itself today and 
the industry with people not wanting to come in because of the 
restrictive nature of the regulations that came out a few years 
ago with regards to having to have a college education. You 
have to have 2 years of apprenticeship. I am not sure if those 
are still the samec, because when I, myself, and Mr. Cleaver 
over here were chairman and ranking member of the Housing and 
Insurance Subcommittee a few years ago, we worked on this issue 
a little bit.
    Can you tell me the problems that we have right now with 
the appraisal process, of getting educated to become an 
appraiser, that we need to maybe take a look at? I think my 
friend, Mr. Sessions, here had a great discussion with Mr. 
Bunton a minute ago with regards to enforcement. And I think 
those two go together from the standpoint that we need to get 
the right people in there who had the right education, rank 
balance of this, and then be able to enforce the folks who are 
bad actors in there to clean it up and maybe do a better job so 
we don't have this perceived problem we are talking about this 
morning.
    Mr. Bishop. Yes, sir. That is a great question. As I 
alluded to or answered earlier, the Appraisal Diversity 
Initiative (ADI) is one step. The University Relations 
Committee Program that the Appraisal Institute has is another 
step to get the profession exposed to young folks at college 
level in HBCUs, community colleges, and universities. That is 
underway right now as well. The present Institute has had the 
education and relief foundation available for scholarships for 
women and minorities for a number of years to help them pay the 
cost of the initial education that licensing requires, that is 
what ADI does. ADI is simply a scholarship program. There are 
150 folks who have entered at age 18, and have graduated and 
been placed in positions to do appraisals as trainees, and 
another 100 or so in a program right now.
    Mr. Luetkemeyer. Okay. Let me stop right there. I think 
there are a couple of problems here. One is education, the 
amount of education that you have to have to be able to qualify 
to get your appraisers license, the amount of time it takes to 
become an appraiser, the apprentice process, because they just 
said a while ago that the appraisers don't want to have a 
trainee there because it takes away from their time, and costs 
them money. And a person going through the apprentice process 
really can't afford to have 4 years of education, not being 
able to get really much of an income for 2 years as they go 
through the apprentice process as well. I think those are 
problems with all of that, and it deters people from getting 
in. And I can tell you, I have 13 counties in my district, and 
I am going to bet that, safely, 7 to 8 of them are probably 
going to have a single appraiser in the county, or none, zero. 
There is a huge problem with people beginning in the profession 
being able to actually do the work.
    And so, I think we need to work with both the Foundation 
and the Institute to try and find a way to make itz, not 
necessarily easier, but to streamline the process here so that 
people can become appraisers and fill a need here or fill a 
gap, because I can tell you the time it takes to get one if you 
do a closing alone, it might take another 30 days to 6 weeks to 
get an appraisal because of the lack of people in a profession. 
That is a big problem when you are trying to finance a new home 
or buy a new home and get it appraised and get it financed.
    Mr. Bishop. Yes, I have experienced that for about 30 
years, trying to hire appraisers and get them through the 
initial training process. It is 3 education programs that costs 
you about $2,500. You can do it over about 3 or 4 weeks if you 
really press hard. Most people take a little bit longer--
    Mr. Luetkemeyer. Are you guys looking at a new way to 
streamline this, put some processes in place, new education 
requirements?
    Mr. Bishop. Right. We are the appraisers. So if we don't 
set the policy for education, the Foundation does.
    Mr. Luetkemeyer. Mr. Bunton?
    Mr. Bunton. Yes, the hearing you referenced a few years 
ago, since that time, we have reduced the amount of experience 
required for the licensure level from 2,000 hours over 12 
months, to 1,000 hours over 6 months. There is no more college 
required for the license level. For certified residential, we 
reduced the experience to 1,500 hours, and we eliminated the 4-
year degree, and now it is an associate's degree or equivalent 
with 10 classes. And as I mentioned earlier, with the simulated 
training, you don't need to supervise appraisers anymore--
    Mr. Luetkemeyer. Sir, have you seen an improvement in the 
numbers as a result of that?
    Mr. Bunton. Yes.
    Mr. Luetkemeyer. Okay. Thank you very much. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Colorado, 
Mr. Perlmutter, who is also the Chair of our Subcommittee on 
Consumer Protection and Financial Institutions, is now 
recognized for 5 minutes.
    Mr. Perlmutter. Thanks, Madam Chairwoman. And I guess where 
I am coming from is I would like more education and less 
discrimination. That is what I would like to see so that we 
have a system that really works for everybody, that there isn't 
bias against a person, there is no bias to go high on the loan, 
or high on the mortgage, or low on the mortgage. I represented 
a lot of appraisers as part of my law practice over the years, 
both commercial and residential. So appraisers are really 
important to the whole process, and we have to make sure it is 
as transparent and honest and without bias as possible. And I 
think everybody who is testifying today would agree with that.
    I will start with you, Ms. Rice. You have given some 
anecdotes and some other pieces of data within your testimony, 
including the one you kind of mentioned earlier in your 
testimony about a couple where there was a $145,000 increase in 
the home's appraisal when it was a White woman who greeted the 
appraiser versus the Black man. And for anybody who sees that 
kind of differential, it has to be infuriating. In your 
presentation, you have a recommendation for congressional 
action, your testimony describing how Congress should encourage 
the Foundation to limit discretion and provide more consistency 
in the appraisal process. Can you amplify that, elaborate on 
that for me, please?
    Ms. Rice. Certainly. There is not one panacea. There are a 
number of things that need to be addressed. For example, the 
common way that appraisers are required to conduct what is 
called a sales comparison, use the sales comparison approach to 
appraise a property, now that standard is set by the 
Government-Sponsored Enterprises (GSEs), not necessarily by The 
Appraisal Foundation. But that sales comparison approach yields 
more discretion and subjectivity into the process because the 
appraisers can select which comparables they are using, and 
then the appraiser also has to use their expertise in order to 
make adjustments to get the comparable to match the subject 
property.
    That whole process is highly subjective. So, we are 
advocating sort of using more standardized procedures and 
policies to select comparables and to determine adjustments, 
but also there can be other approaches that could be adopted. 
We don't have to use the sales comparison approach, and this is 
something that we did in the insurance industry. We helped move 
the insurance industry from being more artistic in the 
valuation of property to a more scientific approach that didn't 
involve the greater utilization of technologies to make sure 
that you are getting the measurements accurate, that you are 
getting the number of rooms accurate, that you are getting the 
type of materials accurate, and things of that nature. But it 
moved to a much more scientific and more accurate approach.
    Mr. Perlmutter. Okay. And I guess back when I was 
representing appraisers, and this is more on the commercial 
side, you had sales, you had income, and you had cost. You 
looked at all three, and at this point, you have to really 
trust the appraiser to take those three things into 
consideration to come up with an appropriate appraisal. I guess 
I would like to talk to you, Mr. Bishop, and to you, Mr. 
Bunton. Have either of you, in an effort to get rid of a 
potential bias in the system, been working with the Urban 
League, Fannie Mae, or Freddie Mac, to attract a more diverse 
workforce so that we know that appraisers across the country 
look like the country?
    Mr. Bishop. Right. Absolutely, the appraisers should mirror 
the communities, the faces of the communities they work in, and 
that is the diversity effort. And the endeavors that I 
mentioned, another problem or another potential roadblock is 
when an appraiser is a trainee, the client won't allow a 
trainee to go look at a property, a bank, so I will have to go 
look at it with them. They can't go on their own. Even though I 
determine, as their mentor, that they are completely capable of 
inspecting a property on their own, it is the client's 
regulation, the lender's regulation that a trainee cannot be 
the sole person to do the property inspection. So, there is 
somewhat of a barrier right there just from the client.
    Mr. Perlmutter. Yes. My time has expired, so thank you. 
And, Mr. Bunton, I will get back to you. Thank you. I yield 
back.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Williams, is now recognized for 5 minutes.
    Mr. Williams of Texas. Thank you, Madam Chairwoman. And I 
want to commend you, Mr. Peter, for your testimony and body of 
work demonstrating that a few bad actors should not be used to 
label the entire appraisal industry as racist. But before we 
get into more questions, poking holes into this narrative being 
driven by the Democrats, I wanted to take a second to talk 
about the President's budget request that was released 
yesterday.
    In this proposal, President Biden wants to implement a tax 
on unrealized gains that he estimates will generate over $360 
billion in tax revenue. He wants the IRS to act as an 
appraiser. Now, imagine that. Imagine the IRS acting as an 
appraiser and assigning a taxable value on a variety of 
illiquid assets. I am very concerned that this unconstitutional 
tax is being considered because it says the President is 
inserting a third party, which is the IRS, which hasn't had 
quite that good of a record in the past on these issues, so to 
estimate a tax value on asset instead of the free market.
    An appraisal value of something is irrelevant if there are 
no buyers willing to pay for it. I know about that because I am 
in the car business. And we are talking about appraisals in the 
housing markets, so there must be a lender willing to give the 
prospective borrower the land or the loan based on the 
appraised value of a home. Now, this two-party agreement 
doesn't exist in the President's proposal to generate tax 
revenue based on unrealized gains and this market is completely 
removed from the equation. So while we are told this will only 
affect the ultra-wealthy, we all know that this is not true. If 
this proves to generate increased tax revenues, the thresholds 
will be lowered to affect many more people in the future, 
mainly all people.
    So, Mr. Bunton, can you discuss the negative consequences 
of taxing unrealized capital gains?
    Mr. Bunton. I think that is a little bit out of my league, 
so I am not really competent, to be candid with you.
    Mr. Williams of Texas. Would you like to answer that, Mr. 
Peter?
    Mr. Peter. I kind of have the same answer, but if I may, 
sir, I would like to make a point about Congressman Green's 
earlier point about finding a third party to perform evaluation 
of appraisers. Two years ago, we developed a statistical 
approach at the AEI Housing Center that would tell you within a 
day's work if appraiser A is perhaps biased, if appraiser B is 
not, if appraiser C is just incompetent. So, I would like to 
volunteer the AEI Housing Center for such an approach if FHA, 
Fannie Mae or Freddie Mac were to make the data available to us 
on an anonymized basis.
    Mr. Williams of Texas. Okay. I will just say some of the 
negative consequences of taking unrealized capital gains, that 
is dangerous because they have no cost and they just guess, and 
the consumer or the borrower is the one who pays the price.
    Competition is a form of government protection or consumer 
protection, and if you have an appraiser who understands true 
market value of a house, the owner can request a second 
opinion. Now, this process takes more time and more money, 
something that lenders want to avoid as much as possible. The 
accuracy is extremely important for the lenders, which are the 
ones that hire the appraisers in order to underwrite a loan for 
the correct amount. So, rather than looking to centralize this 
process and create more avenues for lawyers to get involved, we 
should be looking at ways to get more appraisers into the 
market. We talked about that today.
    The bottom line is, you create more competition, which 
basically can drive prices down. And if you have more 
competition, lenders will have more options to choose from if 
the appraisers there use consistently undervalued homes. 
Lenders will choose to do business with the businesses based on 
their performance and accuracy, so the best appraisers will 
rise to the top while the others will lose their market share. 
So, a competitive marketplace will drive out bad actors as it 
does in everything, and not another layer of government 
bureaucracy.
    Mr. Peter, my last question is, what are some of the ways 
we can increase the number of appraisers in the market so we 
can ensure that this is as competitive an industry as possible?
    Mr. Peter. This seems probably a question more 
appropriately directed at my colleagues here. But what we have 
outlined in our previous work is that the appraisal industry 
should actively recruit with minority Black colleges to 
diversify the industry. But at the same time, scapegoating the 
whole industry certainly is not going to be good for finding 
new recruits to the industry.
    Mr. Williams of Texas. What I will say is that competition 
is key in anything. We have competition among the private 
sector. The consumers decide what the prices are, which drives 
prices down and takes services up, and that is what we need to 
be doing. The IRS can never touch that. They don't understand 
competition and they don't understand services.
    With that, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from Ohio, 
Mrs. Beatty, who is also the Chair of our Subcommittee on 
Diversity and Inclusion, is now recognized for 5 minutes.
    Mrs. Beatty. Madam Chairwoman, thank you, and I would also 
like to thank the witnesses for being here today. Madam 
Chairwoman, a special thank you to you for being a consistent 
champion of housing and funding. I was pleased also to see the 
President has requested an $11 billion increase to HUD's budget 
for the 2023 Fiscal Year to address the housing challenges in 
the nation. And we certainly do have challenges that we have 
yet to overcome, many of which we have discussed or heard from 
our witnesses today.
    And that leads me to my first question, which is for you, 
Ms. Rice. But before the question to you, let me just say thank 
you as a point of personal privilege in knowing you, and 
knowing that the Congressional Black Caucus Foundation during 
our ALC gave you a housing award for all of your work.
    You shared in your testimony anecdotal information about 
Black homeowners facing appraisal biases. We frequently know 
and have heard of the stories of Black families having to, 
``Whitewash,'' their homes, which means removing all traces of 
their rich culture and heritage, resulting in the home 
receiving a higher valuation price than its original appraisal 
by 40 percent or more. I have experienced this firsthand as a 
child, with my father. I believe it is not possible for the 
Uniform Standards of Professional Appraisal Practice to say 
that biases in appraisals are prohibited when individuals are 
forced to remove traces of their race or ethnicity in order to 
receive a fair valuation of their home.
    Do you think the basis of the valuation process should be 
reevaluated to identify opportunities for potential appraisal 
bias?
    Ms. Rice. Congresswoman Beatty, thank you so much for the 
question. Yes, I do.
    Mrs. Beatty. Okay. Let me go to my next question, and I may 
have time to come back with a follow-up, Ms. Rice.
    This question is for Mr. Kelker. One of the things most 
glaring from the PAVE report and all of the witnesses' 
testimony today is the lack of consistent data collection on 
appraisals and property valuation over time. As Chair of the 
Subcommittee on Diversity and Inclusion, we previously issued 
requests for data from banks, from asset management firms, and 
from insurance companies. And we did this in an effort to 
promote diversity as well as to promote transparency and to 
establish a baseline measure for future success in D&I 
practices, but also for changing cultures and creating equity.
    Can you explain how the impact of data collection of 
residential property appraisals can promote equity in home 
valuation? If we have enough time, what would be the primary 
area of focus when collecting specific types of data for the 
appraisal industry?
    Mr. Kelker. The data that would be collected would be the 
physical characteristics as well as the market data that is 
contained in appraisals. But with respect to any individual 
AMC, I don't think anyone has enough concentration of data to 
actually be very useful. That data ultimately ends up at places 
like Fannie and Freddie, but through FHA, where I believe it 
can be accumulated and analyzed and in many ways become useful 
to the marketplace and for regulatory purposes.
    Mrs. Beatty. Thank you. Ms. Rice, let me circle back and 
ask you, how can the appraisal industry mitigate implicit and 
unconscious bias in the valuation of residential property?
    Ms. Rice. Training on fair housing issues is critically 
important and updating the current training that appraisers 
have to receive, we think is necessary. We think that there are 
gaps in the current training program, but we also have to 
change the system, because it is in part the system that is 
driving some of the disparities that we are seeing. So, we have 
to change the system so that we are increasing standardization 
for more uniform outcomes and more accurate appraisals.
    Mrs. Beatty. Okay. I yield back. My time is up.
    Chairwoman Waters. Thank you. The gentleman from Tennessee, 
Mr. Kustoff, is now recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman, and thank you to 
the witnesses for appearing today.
    Mr. Bishop, we talked about the PAVE report that was 
released last week. I think we all know that the regulatory 
structure for real estate appraisal is outdated. We have talked 
about that. It has been untouched since 1989. I have a bill, 
H.R. 5756, the Portal for Appraisal Licensing (PAL) Act, which 
I introduced with Congressman Perlmutter. It is bipartisan 
legislation that would establish a nationwide cloud-based 
licensing system for real estate appraiser certification and 
licensing. It would also direct the Appraisal Subcommittee to 
work with State appraisal regulatory agencies to establish 
consistent license application and renewal procedures for 
appraisers.
    Could you talk about how this legislation, if it were 
enacted, could increase coordination across State lines, and 
whether it would help the profession?
    Mr. Bishop. Thank you, and that is a great question. 
Absolutely, it would help. I am licensed in three States. I 
have a primary State right now. In the last 5 years, I have 
been fingerprinted twice for two different States. I have 3 
application renewals, one in January, one in April, and one in 
June. One is very easy and accommodating. It is almost a 
formality. For the others, I have to recreate basically what I 
am recreating from my primary State to give that State, which 
is duplication, and it takes time to do that. There are a lot 
of appraisers that are in multiple States, as many as 30 and 
40. The PAL Act, which we support and really wish that it could 
get passed, would simply be a data warehousing, a place for all 
of the appraiser data. My fingerprints should be in one place 
that any State could see. My education will be in one place 
that any State could see. It wouldn't change the State 
registration process for the individual States. I would still 
have to apply, still pay their fees, but all of the 
certification and identification criteria would be warehoused 
in one spot.
    And the most important thing about the PAL Act is, if I 
were to get in trouble in my primary State and leave or be 
forced or asked to leave, right now, I could go to another 
State and possibly set up, and they wouldn't know it because 
there is no collaboration between them. If the PAL Act were in 
place, that would go on my record in my primary State, and any 
other State could see it.
    Mr. Kustoff. I hate to argue against myself, but thinking 
about the other side, can you think of any reason or any 
arguments not to enact the PAL Act?
    Mr. Bishop. None.
    Mr. Kustoff. That is a great answer. Thank you very much. 
Mr. Peter, in November of last year, November of 2021, The New 
York Times published a column about Orange Mound, which is a 
community in Memphis, just outside my district. It has 
struggled, but it is a very proud community. From 2009 to 2019, 
property values in Orange Mound decreased around 30 percent. 
Can you discuss, if you would, the impact that the Great 
Recession had on low-income and minority communities, and why 
communities like Orange Mound have had a difficult time 
recovering since then?
    Mr. Peter. Yes, absolutely. I am not familiar with your 
particular community, but I can speak more broadly about lower-
income minority communities in general. And what happened was 
during the run-up in the housing boom, during the 2000s, these 
communities took on a lot of leverage and a lot of it was 
government-sponsored or government-driven. And because of this 
over-leverage, which drove up prices higher and higher, the 
ensuing collapse in home prices was much more severe in these 
neighborhoods. And these borrowers also had less financial 
resiliency to withstand the leverage that was provided to them 
because oftentimes, they had employment issues, or they had 
marital issues. Once you increase prices in these neighborhoods 
by the motion that we did, and oftentimes these borrowers got 
in late into the housing boom.
    They got in, in 2005, 2006, 2007, so they really didn't 
have much time to build up equity. They were predominantly hurt 
and really quickly hurt once the market turned and house prices 
started collapsing, so they were the last ones in, and they 
were the first ones out. And because of the devastation wrought 
by the financial crisis, you also had a lot of foreclosures. 
You had a lot of homes that fell in disrepair. And these 
communities just had a really hard time catching up and 
repairing some of the damage done, that came about from 
problematic lending standards, which was driven by the 
government.
    Mr. Kustoff. Thank you, Mr. Peter. I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Massachusetts, Ms. Pressley, who is also the Vice Chair of our 
Subcommittee on Consumer Protection and Financial Institutions, 
is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman. When we say, 
``Black Lives Matter,'' that must also mean that Black 
communities matter, Black businesses, Black homes, and Black 
wealth matters. And yet, the systemic evaluation of Black 
communities and homes adds up to around $156 billion in lost 
equity, equity that could have been invested in education, in 
starting small businesses, or as a buffer during the financial 
hardship. Ninety-seven percent of appraisers are White and 
almost 70 percent are men. And while lack of diversity in the 
field and individual biases undoubtedly contribute to the 
discrimination Black people face, the widespread undervaluation 
of Black-owned homes points to a more systemic issue concerning 
how we appraise homes, and the industry writ large.
    Ms. Rice, homes in Black neighborhoods are valued 23 
percent less, on average, than those in comparable White 
neighborhoods, despite similar characteristics and amenities. 
The average homeowner in a Black neighborhood loses $48,000 per 
home due to appraisal bias. Don't you agree that this indicates 
a wider issue of systemic racism in the appraisal industry?
    Ms. Rice. Yes, I do. There is definitely a systemic 
problem.
    Ms. Pressley. Thank you. We cannot separate the rampant 
appraisal bias against Black homeowners from our nation's 
history of segregation and redlining. When establishing a 
property's value, appraisers use comparable sales of similar 
properties in that neighborhood. However, they often select 
lower-value comparable sales in Black and minority 
neighborhoods, leading to undervalued appraisals.
    Ms. Rice, even if appraisers use appropriate comparable 
sales, can you tell us how historical discriminatory practices, 
such as redlining, are baked into current property values 
perpetuating the impact of past discrimination today?
    Ms. Rice. Thank you, first of all, Congresswoman Pressley, 
for the question. What redlining does, both lending redlining 
and insurance redlining, is it causes a restriction of 
competition in the market, so you have a decreased number of 
transactions. You have a decreased number of players in those 
communities, and some of those communities don't have access to 
lending or insurance products at all. When you rob a community 
of competition, you are automatically deflating valuations in 
those communities, because you are not supporting the demand 
that otherwise could be there.
    Ms. Pressley. And building upon that, Ms. Rice, how do 
these compounding effects of low appraisals in a community 
dampen home values in that neighborhood, reducing the realized 
wealth of all of the homeowners who live there?
    Ms. Rice. Right. Because of the way that appraisals are 
done in the residential space, the sales comparison approach, 
in order to assess the property value for your subject 
property, you have to rely on values of adjacent properties in 
that community where the subject property is located. So, if 
all of the values, or if even some of the values of those 
properties upon which you are relying for your comparables are 
deflated or artificially deflated, that is going to result in a 
deflation of the value for your subject property.
    Ms. Pressley. Thank you. I yield back.
    Ms. Rice. Is it okay if I mention one thing, because I am 
very familiar with the Orange Mound community in Tennessee?
    Chairwoman Waters. Yes, please go ahead.
    Ms. Rice. First of all, the Orange Mound community has 
suffered from decades and decades and decades of redlining 
practices and discrimination. There has always been a 
hyperconcentration of subprime mortgage lenders operating in 
that community. Orange Mound wasn't subjected to subprime 
lenders in 2004, 2005, or 2006. Just as most communities of 
color throughout the United States, it has always been 
subjected to a hyperconcentration of subprime lenders in those 
communities that utilize abusive lending products which drive 
consumers into foreclosure. So. it has nothing to do with 
government policies, or Federal policies, or anything like 
that. It was all market-based and it was all private sector, 
market-based abusive practices that caused hyper foreclosures 
in the Orange Mound neighborhood, and, ultimately, distressed 
property sales in that community.
    Chairwoman Waters. Thank you. The gentlelady yields back.
    The gentleman from Tennessee, Mr. Rose, is now recognized 
for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters, and thank you to 
our witnesses for taking time from your schedules to join us 
today. I will dive right into my questioning.
    Under the agency actions to advance valuation equity, the 
PAVE report describes steps that should be taken for building a 
well-trained, accessible, and diverse appraiser workforce. It 
states that agencies should update appraiser qualification 
criteria related to the appraiser education experience and 
examination requirements to lower barriers to entry in the 
appraiser profession, while at the same time increasing 
requirements for anti-bias, fair housing, and fair lending 
training for appraisers. Mr. Peter, does increasing training 
requirements lower barriers to entry and make the industry more 
attractive to prospective appraisers?
    Mr. Peter. First of all, to back up, I think the government 
has not made the case that there is widespread and systemic 
bias going on, and I think the evidence in the PAVE report is 
more than flawed. For example, the FHFA blog post that is 
mentioned, while there is no excuse for the incendiary language 
used, it cites 16 examples out of millions of appraisals that 
use such language, but the total instances where these were 
occurring was not provided. So, this really suggests to me that 
the total number couldn't have been very large.
    Similarly, the Freddie Mac report that the PAVE report 
relied on was entirely contradicted by a study by Fannie Mae 
and also by a study that we have done in-house. And then, the 
Brookings Institution report that was referred to earlier, 
which claimed that the 23-percent undervaluation in certain 
neighborhoods, which a large minority presents, the study said 
that by just using 23 control variables, we control for all the 
differences in home care group characteristics and neighborhood 
amenities. That is just a preposterous statement to make.
    And with our research that we have done, we show that by 
just adding one additional variable, so going from 23 to 24 
variables, by adding the credit score of all of the borrowers 
in the neighborhood, which is a very powerful indicator for 
socioeconomic status, we can explain away the entire difference 
that the Brookings study attributed to raising the 
socioeconomic status. So, I think we should address 
socioeconomic status first before we address anything else.
    Mr. Rose. Thank you. And, Mr. Bishop, I would also be 
interested in hearing your thoughts on this question.
    Mr. Bishop. Right. Obviously, if you increase requirements, 
then it makes it a longer process, and a more expensive 
process. And anybody looking at it to get in is going to see 
increasing as a negative. I don't know why, how they would see 
that as a positive, other than if they were of the mindset that 
with education, more is better. But, yes, increasing 
requirements would be a negative.
    Mr. Rose. Thank you. One of the action items of the PAVE 
report is that HUD will require FHA lenders to track usage and 
outcomes of reconsiderations of value and to report this data 
to the FHA so that HUD can evaluate the impact that 
reconsiderations of value might have on possible 
discrimination. Mr. Peter, would the cost of increased 
reporting requirements like this impact the cost of buying a 
new home?
    Mr. Peter. Ultimately, yes, but I think it is not needed. 
The data already exists. Fannie Mae and Freddie Mac already 
have the data. Two years ago, we developed a statistical 
approach to test every single appraiser in this country for 
racial bias--2 years ago. This has not been done. We went to 
Fannie Mae and Freddie Mac. We suggested it, do this or give us 
the anonymized data and we will do it for you. Two days later, 
we could give you the answer if appraiser A is biased, 
appraiser C is maybe incompetent, and then, you do some more 
investigation of these cases, but that has not been done. So, 
this really suggests to me that there is an ulterior motive 
which really sets up the stage for Federal Government to take 
over the appraisal process.
    Mr. Rose. Sure. And appraisals are typically done under 
tight timelines, as we know, that buyers and sellers have 
agreed upon in most cases. Mr. Peter, and Mr. Bishop, in the 
little time we have left, would any of the task force's 
recommendations slow down the appraisal process and risk sales 
falling through? Mr. Bishop, I will let you go first.
    Mr. Bishop. Well, yes, it is timeline-centric, and 
appraisers turn it in on a deadline, and it is nearly the day 
before. So, yes, increasing that could prolong the closings, 
ultimately.
    Mr. Rose. Mr. Peter?
    Mr. Peter. Yes, I would concur with that.
    Mr. Rose. Okay. Thank you both. And, Chairwoman Waters, I 
yield back.
    Chairwoman Waters. Thank you. The gentleman from Illinois, 
Mr. Foster, who is also the Chair of our Task Force on 
Artificial Intelligence, is now recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman. Some of the worst 
damage that was done in the bursting of the housing bubble 10 
years ago happened to minority communities where people 
invested into houses at the peak of the bubble value. And I 
just want to follow up on Representative Hill's comments about 
the damage that can be done by overvaluing appraisals and 
encouraging people to make decisions which, in retrospect, 
wreck their lives, that we made some progress in Dodd-Frank 
with the ability-to-pay requirements that at least guaranteed 
that if you kept your job, you could maintain the mortgage 
payments. It did not protect you, however, from ending up 
underwater if you invested into a bubbly market.
    And about 10 years ago, I gave a series of presentations at 
the American Enterprise Institute on a concept that for 
essentially countercyclical loan-to-value limits, instead of 
just using the appraised value, which was meant to be a 
snapshot of what the market value was today, you would give 
also look at the probability that this was a bubbly market. The 
simplest way to do this is if the local housing index had 
appreciated by 20 percent or 40 percent in the last few years, 
you would actually only allow the loan to be made against, not 
the current market value, the appraised value of the house, but 
what the appraisal would have been 5 years ago was corrected by 
the housing index. And at the time, the American Enterprise 
Institute, and I think others, had some enthusiasm for 
following up on mechanisms for making that happen. Is there 
anyone who is familiar with the state-of-the-art? Yes, please?
    Mr. Peter. Yes, very recently, we suggested exactly this 
countercyclical approach to FHFA in its request for input on 
its capital rule. So, we have taken this concept and proposed 
it to the regulator. Of coursec, it was unfortunately ignored, 
but in terms of better mortgage products that build equity much 
faster. And we have a proposal out there that would work by 
shortening amortization schedules, so going with a 20- or 15-
year mortgage but providing assistance to lower-income, first-
generation homebuyers so that they could have set the 
difference in payment between a 30-year and a 20-year mortgage. 
This would allow them to build equity much faster. It could 
provide basically a vaccine to the entire neighborhood. If 
prices would decline, it gives people more staying power. And 
it is not just one person, but if you provide it to multiple 
people in this area, they could all benefit from each other 
and--
    Mr. Foster. Sure. That was a huge chain reaction in 
neighborhoods where people would end up underwater, lose their 
jobs, and the house would get dumped onto the market in 
foreclosure, and then everyone in the neighborhood would be 
further underwater and just fend for itself. But the tough part 
about that is that part of the solution is to say, when a 
bubble is happening, you have to say, no, this is a bad thing 
for you to invest in. You have to buy a smaller house or 
perhaps no house at all with the amount of equity you have. And 
this is a very tough conversation. And I think that is one of 
the reasons why there was some industry opposition at the time, 
but that is a thread that is continuing.
    So, I would like to encourage you to keep thinking about 
that and look at specific ways to implement that because that 
was sort of the missing piece in a lot of this discussion.
    Mr. Peter. Congressman, we are going to follow up with you 
on this proposal.
    Mr. Foster. Okay. Any other--yes?
    Ms. Rice. Thank you so much for your question, Congressman 
Foster. And one thing that I would like to remind everyone is 
that in the lead-up to the foreclosure crisis, most of the 
abuses that we saw, the hyper-valuation of properties occurred 
in the subprime space, which was highly unregulated. But also, 
most of the loans that were generated in the subprime space 
were refinances, not home purchases. So, we also have to be 
careful as we look at the appraising of assets, of properties, 
when homes are being refinanced as well. That can also lead to 
grave problems and disparities. And many of the cases that are 
now sort of winding their way through HUD, or DOJ, or through 
the courts, or that are at private fair housing organizations 
involve refinance situations. The Austin family, for example, 
were refinancing their home, and that was the situation.
    Mr. Foster. No, I agree. Some of the most tragic 
conversations I had were with families who lost homes they have 
been in for 40 years.
    Ms. Rice. Exactly.
    Mr. Foster. Anyway, my time is up. I yield back.
    Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez, 
is now recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Chairwoman Waters, and 
thank you to our witnesses for being here today and for your 
testimonies. Let me start by saying something I think is pretty 
obvious, which is that it is important that we identify ways to 
reduce wealth disparities, and that promoting homeownership and 
building equity is an incredibly important piece of the 
equation, especially for young families. It is my hope that we 
can work in a bipartisan way in this committee and throughout 
others to incentivize building and help create new pathways to 
homeownerships for all Americans. One of my favorite sayings 
that I have always tried to live by is, ``In God we trust. All 
others bring data.'' I don't know exactly who said it, but I 
think it is pretty valuable.
    And, Mr. Peter, I want to start with you because you talk a 
lot about the data that was used in the PAVE study. And I would 
like for you to comment specifically on the quality of the data 
that was used, what was rejected. And maybe just from your 
standpoint, if data is ultimately going to help us solve this 
problem, and I think it is, start with a good set of clean 
data, let us see what it tells us, and then let us make the 
necessary adjustments. Walk me through your sort of analysis, 
if you will, at a high level of the quality of the data and the 
analysis used.
    Mr. Peter. Initially, we were equally shocked by these 
reports in the newspapers about appraisal discrimination, but 
then we thought, well, we could use the data that already 
exists and that we have within the Housing Center to really get 
to the bottom of this. And we ran a statistical approach where 
we could test the entire housing market, and we found that 
systemic bias was not widespread. That is what we found for the 
entirety of the market.
    Mr. Gonzalez of Ohio. So, was the data that PAVE relied on 
faulty, or was it lacking context?
    Mr. Peter. Some of the data that PAVE used, which was the 
study by Freddie Mac, was never released to the public. Once we 
read the report, we went to Freddie and said, hey, could you 
release the data so we could replicate what you have done, and 
also we have some ideas that we think would be important to 
test namely what is the impact of socioeconomic status on these 
differences that you are finding, and Freddie Mac said, no, we 
can't do this. But then, we went to--
    Mr. Gonzalez of Ohio. Why? It seems like we would want that 
data public. I would love to see it.
    Mr. Peter. I would like to see it, too.
    Mr. Gonzalez of Ohio. I would like to have the academic 
community really analyze this, and speed it up, and let us see 
what is there.
    Mr. Peter. We then went to a third-party provider who had 
similar access to similar data, and the data will still be 
under the pay wall, but we fed them the code that they should 
be running. And they ran the code for us, and then we 
discovered the differences that Freddie Mac found and 
attributed to race-based were not race-based. They were 
actually due to socioeconomic status.
    Mr. Gonzalez of Ohio. Okay. So from your analysis, the 
conclusion is that there are other factors that are--
    Mr. Peter. There are very much other factors, and we have 
not really explored them.
    Mr. Gonzalez of Ohio. I want to go back to something that I 
think is sort of the crux of the whole thing, which is we want 
to close the racial wealth gap. I think that is a noble goal 
that we all share, and it has been persistent and it has been 
stubborn, and we haven't been able to sort of crack it. Housing 
is a component of that obviously. From a housing solution 
standpoint, what policies would you advocate for that could 
help us close the racial wealth gap?
    Mr. Peter. Number one, we need more supply.
    Mr. Gonzalez of Ohio. Supply of houses.
    Mr. Peter. Supply of houses. The lack of a supply of houses 
is what is driving up home prices, and it is pricing out lower-
income minorities from the market. That has been going on for 
the last couple of years, and it is a real tragedy. So, that is 
number one. We need more supply, but at the same time, this is 
not a Federal Government issue. This is a local and State 
issue, and it needs to be handled at those levels, and there is 
already movement in that direction by certain States, 
California, for example. If California can pass this, anyone 
else should be able to pass this.
    Mr. Gonzalez of Ohio. Yes.
    Mr. Peter. At the same time, for foreclosure of loan 
lending practices, the practices where you give borrowers more 
and more debt that they cannot sustain, that is really 
dangerous. And especially borrowers who get in late in the boom 
cycle, they are the first ones to get foreclosed on, so we need 
to break this cycle. And there is academic research which 
conclusively shows that neighborhoods in minority and White 
neighborhoods would have the same home price appreciation, so 
you would be building the same amount of equity, but at the 
same rate of equity. The difference is that minorities tend to 
default more, and that wipes them out completely, so we need to 
break that cycle, and we need better loan products. We have the 
Wealth-Building Home Loan out there. We have the LIFT home 
program out there that we have proposed.
    Mr. Gonzalez of Ohio. I have 30 seconds. Better mortgage 
products, I agree completely. Go as deep as you can on that in 
30 seconds. What do we need?
    Mr. Peter. We need to subsidize wealth-building and not 
debt. Down payment assistance, for example, would just get fed 
through and drive up home prices higher. So if two people want 
to buy the same home and you give everyone $20,000 more, that 
would get capitalized in higher home prices. What we are 
proposing is, buy down the interest rate. By buying down the 
interest rate, you are building up more equity each month, so 
you are building up this cushion that protects it from 
foreclosures. That would be one big step that we should 
undertake, and if there is Federal Government money to be spent 
for it, a limited amount, that would be fine.
    Mr. Gonzalez of Ohio. Thank you, and I yield back.
    Mr. Perlmutter. [presiding]. The gentleman's time has 
expired.
    The gentleman from Florida, Mr. Lawson, is now recognized 
for 5 minutes.
    Mr. Lawson. Thank you, Mr. Chairman, and I welcome all of 
the witnesses to the committee today. And I probably want Mr. 
Bishop and Mr. Bunton to comment on this. There had been many 
cases regarding discriminatory appraisers from people of color. 
I remember hearing about a family in Jacksonville, Florida, 
which is in my district, who wanted to refinance their home and 
pay down the mortgage. When the appraiser came back with a 
shockingly low estimate, they decided to get a second appraisal 
with a new appraiser, that made the home appear as if the 
husband was doing the appraisal. He just happened to be married 
to a Black female. And what they did was, they took down all of 
the pictures and everything in the house to make it appear that 
it was only a White person included, and all of a sudden, the 
second appraisal went up 40 percent, which is pretty 
significant to go up 40 percent.
    Mr. Bishop, first, what happens in a situation like this if 
a complaint is filed with the appraisal company for 
discrimination, bias? How is it reported, and how is the issue 
handled?
    Mr. Bishop. Thank you for your question. And it is 
important to understand that any time a property owner feels 
like they have been discriminated against in the appraisal 
process, they should do exactly what those folks did, which is 
just start asking questions why, if they truly feel that way. I 
don't know enough about the situation to be able to render an 
opinion as to why there was a 40-percent higher conclusion on 
the second appraisal. But what I can tell you is that if I were 
to be given the two appraisals, and we could understand the 
scope of work, then we might understand why there was a 
difference in the conclusion. It could have been a mistake. It 
could have been a different set of instructions. But 
absolutely, if the reason was because those homeowners had to 
take the decoration of their home and change it, that is just 
unacceptable.
    Mr. Lawson. Okay. Mr. Bunton?
    Mr. Bunton. I would suggest that they file a complaint with 
the Florida Real Estate Appraiser Board. Our standards clearly 
prohibit bias and discrimination, and that is the yardstick 
that board would use on the actions of those appraisers. And 
they have a wide array of disciplinary actions ranging from a 
warning letter to suspension, revocations, and fines, but that 
is the recourse that a homeowner would have.
    Mr. Lawson. This is a hypothetical question to the panel. I 
know my time is running out. Does the appraiser sometimes form 
a relationship with financial institutions, the banks and so 
forth, and have an expectation from the banks, the financial 
institutions, that the appraiser will come in at a same amount 
when they are dealing with minorities? The lenders--
    Mr. Bunton. Is that to me as well?
    Mr. Lawson. Yes.
    Mr. Bunton. Yes.
    Mr. Lawson. I would like to know, because some institutions 
only want to use the same appraisers.
    Mr. Bunton. Right.
    Mr. Lawson. And so, is it a relationship established that 
in order for you all to do business, you have to come in with 
an appraisal that is the amount that each financial institution 
is looking for?
    Mr. Bunton. The Dodd-Frank Act had a whole section on 
appraiser independence. This used to be a huge problem. ``If 
you don't hit the number, I am not going to use you anymore.'' 
And now, it is much more of an arm's-length transaction. So, if 
that kind of conversation is occurring, then the Federal 
banking agency that is in charge of that bank should be 
notified, because that is against the law.
    Mr. Lawson. Okay. Would anyone else care to comment?
    Mr. Bishop. Yes, I would. The structure setup, the 
regulatory structure setup within most lending institutions now 
doesn't allow me to talk directly to the lender. I talk to an 
intermediary, kind of like an appraisal manager. That is where 
the appraisal management company concept comes in. It puts a 
wall up between the appraiser and the borrower in both 
commercial and residential. So, I wouldn't even be able to talk 
to the lender in such a circumstance. And if that is going on, 
if they are circumventing that, then absolutely, that is 
against the law.
    Mr. Lawson. Okay. I have some other questions I may have to 
submit in writing, but anyway, my time is running out. And with 
that, I yield back.
    Mr. Perlmutter. The gentleman from Florida yields back.
    The gentleman from South Carolina, Mr. Timmons, is now 
recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman. The appraisal 
industry is by its very nature somewhat subjective. The metrics 
we use to measure the value of properties are constantly 
changing, and the true value of properties varies from bar to 
bar, depending on their priorities. I bought a property 11 
years ago, and the value has changed over 10 times because 
people are moving into Greenville, South Carolina. They are 
moving into the upstate from all over the country. We have 
cranes everywhere. It is fantastic. Let's go to a different 
part of South Carolina where people are not moving. The 
population growth, demographics, all of these variables make it 
really hard to have consistency. But I would say that the 
appraisal industry overall is doing a good job, and I hope the 
appraisal we are about to do on the property that I have comes 
back great. Fingers crossed.
    But Mr. Peter, I want to ask, is there an opportunity to 
make use of technologies, such as Automated Valuation Models 
(AVMs) to try and eliminate some of this subjectivity?
    Mr. Peter. Yes, and there is certainly already some of that 
in use. Fannie and Freddie are using now what is called 
appraisal waivers. This started even before the pandemic, but 
because of the pandemic, it really got turbocharged, where 
people basically submit a self-evaluation of the property's 
value. And then, Fannie and Freddie check, does it fall within 
our range, and if it does, then you don't need an appraisal. 
The problem with this is, and we have looked at this in great 
detail, is that so far, we haven't found that it is actually 
having a salutary effect in the market, but we have found 
evidence of gaming.
    And once it becomes widespread knowledge in the 
marketplace, which it always does, then you could have problems 
through gaming the system. And especially when Fannie and 
Freddie are competing against each other for market share, it 
could really get problematic because they are trying to move 
out the risk curve a little bit further and further to gain 
business, of course at the expense of the other who does the 
same who responds in kind. And we have seen this during the 
2000s with automated underwriting where this could quickly 
spiral out of control and then you end up with a massive bust.
    Mr. Timmons. The gaming--are they just manipulating factors 
in the appraisal, or how are they gaming the system?
    Mr. Peter. What we have found is there is a certain amount 
of punching at a certain LTV point. For example, at an 80 LTV 
that, you know if you go $1 above 80, you need mortgage 
insurance. So, what we found is that at 80, at an LTV, 
generally a value that is awarded with a waiver is much greater 
than the value awarded by an appraiser. I don't really know how 
exactly this happens, but there is some evidence that at these 
price points, at the same at 80, at 70, at 60, every time where 
the pricing changes, that with a waiver, you get a higher 
valuation. And of course, if someone figured this out at these 
price points, it is easier to see how this could eventually 
become widespread throughout the market, and then you end up 
with waivers awarding higher values across-the-board in human 
appraisals.
    Mr. Timmons. Are there any standards in place, common data 
standards for AVMs?
    Mr. Peter. As far as I am aware, there are not. This is all 
in a black box that Fannie and Freddie have. And we think for 
AVMs to be used, you should have capital to back it up to 
withstand your losses, but Fannie and Freddie are chronically 
undercapitalized. They don't have the capital to back this up. 
So if a private lender is using AVM, you have the capital to 
withstand any severe losses, but with the government doing it, 
there is always the danger that you don't have capital and to 
get gamed and exploited.
    Mr. Timmons. Sure. Thank you. The Consumer Financial 
Protection Bureau (CFPB) has shown interest in publishing a 
rulemaking on AVMs. I tend to favor a light-touch regulatory 
system that is very clear in its rulemaking and consequences. 
The CFPB tends to take the complete opposite tack under this 
Administration. Under Director Chopra, they love to issue 
opaque and burdensome rules so they can regulate industry by 
enforcement. What impact would overreach by the CFPB in this 
space have on the industry, and does the CFPB have a strong 
record of appropriately regulating emerging technology?
    Mr. Peter. The problem with the government taking this 
whole process over is always that it could be politicized 
eventually. And it is easy to see how you could quickly be mis-
valuing properties across the whole country, for political 
purposes of increasing valuation in minority neighborhoods, for 
example. But of course, if you don't use the market-- let the 
market decide what the real value is. You can easily see how 
you could be driving a housing boom, and then eventually, when 
the party is over and the music stops, as it always does, you 
are going to have a massive price correction.
    Mr. Timmons. So, AVMs could be used effectively using 
appropriately-transparent variables and making sure that the 
algorithms are all--there are no politics in it.
    Mr. Peter. If a private lender is doing this, with enough 
capital, how about it? No problems with AVMs. We use AVMs in 
our research all the time.
    Mr. Timmons. Thank you, Mr. Peter. Mr. Chairman, I yield 
back.
    Mr. Perlmutter. The gentleman from South Carolina yields 
back.
    The gentlewoman from North Carolina, Ms. Adams, is now 
recognized for 5 minutes.
    Ms. Adams. Thank you, Mr. Chairman, and I thank Chairwoman 
Waters and Ranking Member McHenry for hosting today's hearing. 
And to our witnesses, thank you for your attendance.
    Mr. Perlmutter. Ms. Adams, there seems to be a problem with 
your microphone. You might see what happened there. Let's stop 
the clock for a second.
    Ms. Adams. Can you hear me now?
    Mr. Perlmutter. Just barely. We heard you loud and clear 
for a second or two, and then it kind of was muted or muffled 
again.
    Ms. Adams. What about now?
    Mr. Perlmutter. Just barely, yes.
    Ms. Adams. Can you hear me now?
    Mr. Perlmutter. It's getting better.
    Ms. Adams. Can you hear me now?
    Mr. Perlmutter. Just barely. I think what we would like to 
do is to move on to Mr. Davidson, and then come back to you, if 
that is okay.
    Ms. Adams. Yes, Mr. Chairman. What about now?
    Mr. Perlmutter. Now, we can hear you.
    Ms. Adams. Great. Thank you so much. I want to thank 
Chairwoman Waters and Ranking Member McHenry for hosting the 
hearing. And to our witnesses, thank you as well.
    For far too many of our neighbors pursuing the American 
Dream, a decent, affordable place is just that: a dream. I am 
proud that this committee is working with the Biden 
Administration on the PAVE Task Force to help turn what is too 
often a dream into reality. Collectively, one common thread I 
have heard today is that we don't want bias. We all want to 
treat people fairly. We all want to make sure that our 
neighbors and friends and families can enjoy the fruits of 
their labor in the comfort of their own fairly-appraised homes. 
And one of the ways we do that is straightforward: We need to 
train, we need to recruit, and we need to retain more diverse 
talent.
    One of my proudest efforts here in the Congress was 
founding the bipartisan HBCU Caucus--that is, for Historically 
Black Colleges and Universities (HBCUs)--which I Chair with 
French Hill of Arkansas, who serves with me here on the 
Financial Services Committee, and he has been a great partner 
as we fight to secure resources. In fact, I attended his HBCU 
summit in Little Rock this past October, and we shined a 
spotlight on the need for companies to strengthen their 
pipelines of diverse talent by working with our HBCUs. That is 
the essence of the HBCU Partnership Challenge. That is what it 
does. We facilitate those connections. And that is why, for my 
Fifth Annual STEAM Days of Action, which is going on right now, 
we are convening members with the HBCU presidents, corporate 
partners, and Members of Congress.
    Mr. Bishop, in your testimony you discussed your Appraisal 
Diversity Initiative, and I am glad to see that you are 
thinking seriously about how to diversify your workforce. So my 
question is, to what extent have you tapped into HBCUs to help 
build a diverse workforce, and how can we help you and your 
colleagues in the industry further your efforts?
    Mr. Bishop. Thank you, Congresswoman Adams. That is an 
awesome question, and the answer is in our University Relations 
Committee. We have reached out to HBCUs, as well as community 
colleges and universities, and we are placing ambassadors in 
each of those educational facilities. And those ambassadors 
will be our members who will introduce the appraisal profession 
to their students, and I would welcome any help. I can put you 
in contact if we can communicate with the member who is the 
Chair of the University Relations Committee, and he is right 
now in the middle of that process of identifying contacts at 
the schools and HBCUs as well. And if we need help there, it 
would be greatly appreciated.
    Ms. Adams. We have the expertise, and we certainly are 
willing to do it. Thank you so much.
    Mr. Kelker, in your testimony you also discussed the need 
to train and retain a diverse future generation of appraisers, 
and I completely agree with that. So to be clear, you have an 
obligation to every American to do so. My question is, have you 
and your colleagues partnered with any HBCUs or other schools 
to begin training that diverse future generation of appraisers 
that you are looking for, and if not, how can we help you do 
so?
    Mr. Kelker. I would say that to date, we have not done a 
partnership with college campuses, largely because our 
qualification requirements are determined by our client base. 
And at this point in time, we are not allowed to use trainees 
or people with less experience yet. So until we can do 
something with some of those requirements, it is difficult to 
work on a pipeline of people that we can use.
    Ms. Adams. Thank you so much. Thank you, Mr. Kelker, and I 
have about a minute left. I yield that remaining time to Ms. 
Rice to respond to the comments that Mr. Peter made about 
existing research in this area.
    Ms. Rice. Thank you so much, Congresswoman. Yes, I take 
exception to the AEI's approach to research in this area 
because what they are doing is essentially applying certain 
socioeconomic factors that are highly correlated to race to try 
to mitigate away or explain away disparities, real disparities 
that exist in the marketplace. For example, Mr. Peter mentioned 
credit scores. And if you just add credit scores into the 
equation, then it explains away the disparities that we are 
seeing in property valuations. But credit scores are highly 
correlated to race and the racial composition of the 
neighborhood, but appraisers don't use credit scores when they 
are assessing the property value.
    Mr. Perlmutter. Thank you, Ms. Rice. I am going to--
    Ms. Rice. It would be totally inappropriate for them to do 
that.
    Mr. Perlmutter. Ms. Rice, Ms. Adams' time has expired.
    Ms. Adams. I am of time. Thank you, Mr. Chairman. I yield 
back.
    Mr. Perlmutter. The gentlelady from North Carolina yields 
back.
    The gentleman from Ohio, Mr. Davidson, is now recognized 
for 5 minutes.
    Mr. Davidson. I thank the chairman. I also thank the 
chairwoman and the ranking member for scheduling another 
hearing on housing, but at least it is a new topic on how we 
appraise the value and to the extent that race is a motivating 
factor in valuations, and evaluations have sort of a trade 
school kind of approach. There is a right answer within a 
range. So, when you look at disparity in valuation, I think it 
is interesting to see some of the research that you have done, 
Mr. Peter, in this space. There are lots of correlations. Ms. 
Rice, you highlighted that. And maybe that is where we can pick 
up.
    Frankly, in your testimony you cite a Brookings study from 
2018 to support your claim that there is an inherent bias 
because somehow there is a disparate impact in valuations. And 
I am just curious, when you look at the granularity of that, 
you picked up on credit scores as a factor, but to what extent 
do you see that? You can continue your thought, Ms. Rice. But 
also in the same neighborhood, same block, do you get a 
different valuation on a comparable property? There are 
certainly some things that we should be alerted to, but could 
you address that?
    Ms. Rice. Certainly, and thank you so much for the 
question. We did in part base our analysis on the Brookings 
Institution study, but we also based it on the analysis done by 
the Federal Housing Finance Agency (FHFA), which found that in 
thousands of appraisals recently conducted, there existed 
inappropriate language and references to race or racial 
composition of a neighborhood or the racial demographics of a 
neighborhood. We also based it on the Fannie Mae study and the 
Freddie Mac study. So, there are multiple studies--
    Mr. Davidson. I appreciate what you cite. And maybe, Mr. 
Peter, I would just give you a chance to respond to that, and I 
appreciate the research that you have gotten. Maybe you could 
clarify what your point is there?
    Mr. Peter. Yes. Thank you. In regards to the FHFA blog 
post, it cited 16 examples, and it said that out of millions of 
appraisals, there were thousands of instances, but it also 
cited that there were a lot of false positives. So the fact 
that it didn't provide the exact number suggests to me that it 
cannot be very large. That is number one.
    The second part about the Brookings study is that credit 
scores were just mentioned, and it was a study done by the 
Federal Reserve Board, so not just a research study, but 
underwritten by all of the Fed Governors, and from 2005, which 
found that credit scores are raised blind. So, that is the 
evidence. That is a fact. And similarly, in the Brookings 
study, they used single mothers with children under 18 as a 
control variable, as an explanatory variable. This, of course, 
is very much correlated with race, too. So if Brookings is 
using it, why can't we be using credit scores?
    And regarding your point about location, location is very 
important. And even if you have the same home, an identical 
home newly built right next to each other, but one has beach 
access, and the other one doesn't have beach access, you could 
easily see how that could really be affecting home valuations. 
And the Brooking study has nothing in there that controls for 
natural amenities, so that is another flaw of this study.
    Mr. Davidson. Yes, location, location, location, is 
certainly a huge factor there. And I think there are some 
things that we could probably disagree on and certainly have 
for a couple of hours now. But I think one of the things we 
can't disagree on is, if there is discrimination, there is 
legal recourse. We have already made it illegal to do this 
activity. So if we identify it, what is the state of lawsuits? 
What kind of lawsuits are being brought for this kind of 
discrimination? We are having a hearing on it. Is it all 
throughout our courts all over the country, Mr. Peter?
    Mr. Peter. I am not very familiar with lawsuits. I don't 
think there are many instances. Based on our data, which 
suggests that discrimination, racial bias by appraisers is not 
widespread and systemic, so I think that is where we should be 
starting.
    Mr. Davidson. I would like to just slightly shift our focus 
to kind of go to, where is the housing market headed? I 
recently saw an interview by Gary Berman from Tricon 
Residential where he discussed the shift in housing demand, 
specifically pertaining to millennials. And Mr. Berman stated 
that on a weekly basis, there are roughly 200 to 300 homes 
available, and that his company gets roughly 10,000 leasing 
inquiries. He attributes much of this demand to millennials who 
desire to move into, ``turnkey dwellings,'' where the burden of 
maintenance is on someone else. I have two questions: first, do 
you agree with this; and second, what are the long-term 
implications for the housing market?
    Mr. Peter. The longstanding problem is that we have been 
not supplying enough housing. And what has been holding back 
the supply is really government regulation, especially in the 
land-use front. So if we were to allow moderately higher 
density in areas around walkable, commercial areas, I think, by 
right, that would make a large impact.
    Mr. Davidson. Yes, thanks for addressing supply. My time 
has expired, and I yield back.
    Mr. Perlmutter. The gentleman's time has expired.
    The gentlewoman from Pennsylvania, Ms. Dean, is now 
recognized for 5 minutes.
    Ms. Dean. Thank you, Mr. Chairman, and thank you to all of 
our witnesses for testifying today about disparities in home 
valuations.
    I want to take a moment to step back and reiterate why we 
are having this hearing. In our country, homeownership is 
literally rooted in the foundation of our country, and it is 
and remains one of the most important tools for families to 
build wealth. It can mean having the means to help pay for your 
kids going to college, or to help you retire with dignity. And 
in fact, for decades, our government policy supported White 
families in becoming homeowners, while excluding families of 
color from the same opportunity. Now, as we look at appraisals 
today, regardless of some of the arguments on the data, it is 
nevertheless clear that families of color are too often not 
getting a fair shake. And I don't understand an argument that, 
oh, a low appraisal might do you some good. That seems really 
insufficient, puzzling, and disappointing to me.
    I represent a district in the suburbs of Philadelphia. 
Multiple studies have found that in Philadelphia, homes in 
Black neighborhoods are devalued by 27 percent compared to 
similar homes in White neighborhoods. Ms. Rice, can you speak 
to the impact of this chronic under-evaluation, particularly 
the compounding effect in terms of wealth-building?
    Ms. Rice. Thank you so much, Congresswoman Dean, for the 
question. Certainly, in individual instances it can be 
devastating, because a person could lose the ability to 
purchase a home, if the property is under-appraised, but in a 
refinance situation, the family could lose the ability to lower 
their monthly debt. They could lose the ability to send their 
children to school or to start a business, and ultimately, the 
lower property valuations translate to tens of thousands of 
dollars per family of lost wealth for that family, lost wealth 
that family could use in order to sustain them through 
financial difficulties and other kinds of issues.
    Ms. Dean. And over time, over decades, in terms of, if you 
wanted to move up to a larger house, if your property value is 
chronically and unfairly held back, it will limit your ability 
and your mobility. Mr. Bishop, how do we ensure that appraisers 
clearly understand their obligations under the Fair Housing Act 
and the Equal Credit Opportunity Act?
    Mr. Bishop. Thank you for your question, Congresswoman 
Dean. The education, education awareness, it is in our canons, 
it is in our ethics, it is in our guidelines. We just amended 
the canons. We amended the guidelines. We have enhanced our 
ethics to address those situations more stringently than we 
had. Basically, it is good for any business or any entity that 
has been around a long time to revisit their bylaws, 
regulations, structures, things like that. And that is what we 
have done, and we are going to continue to do it. We have an 
education that we are developing right now for our members to 
take in those areas that you just addressed in question.
    Ms. Dean. Thank you very much, and if I can, I will try to 
fit in both Mr. Kelker and Mr. Bunton. The demographics of the 
appraisal industry do not reflect our country's diversity, we 
all can see that, and the numbers sadly support that. 
Appraisers are overwhelmingly White male and approaching the 
age of retirement. I say that not as a statement of any insult, 
but just as a statement of fact, and a lack of diversity is 
impacting property values and appraisals. Mr. Kelker, how are 
appraisal management companies engaging in diversity and 
inclusion efforts?
    Mr. Kelker. As a matter of course, we attempt to recruit as 
broadly as we can, specifically in markets where we believe 
that they are underserved or the coverage is thin. But just 
given the numbers that have been discussed during this hearing, 
there are very few candidates who are available. And during the 
last couple of years when the market has been as hot as it has 
been, we have had trouble recruiting anyone, because everyone 
is busy. I think the real solution is to improve the number of 
people coming into the profession so that there is a greater 
pool to recruit from.
    Ms. Dean. You have 2 seconds, Mr. Bunton.
    Mr. Bunton. --for the simulated training that I talked 
about before.
    Ms. Dean. Terrific. Thank you very much. That is what I was 
thinking, back to education, and I yield back. Thank you, Mr. 
Chairman.
    Mr. Perlmutter. The gentlelady's time has expired. We have 
been going for 2 hours and 45 minutes, and I think it is time 
to let the witnesses stretch their legs, so, without objection, 
we will take a 5-minute recess.
    [brief recess]
    Mr. Perlmutter. Take your seats, please. Thank you. Okay. 
We will begin again.
    The gentleman from California, Mr. Sherman, who is also the 
Chair of our Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets, is now recognized for 5 
minutes.
    Mr. Sherman. It seems that we are dealing with two separate 
issues here. One is whether certain neighborhoods are 
underappreciated, and the other is whether individual houses 
are given a low value just because an African-American or 
Hispanic family lives there. Ms. Dean points out to us that 
neighborhoods in Philadelphia that are predominantly populated 
by people of color tend to appraise for 27 percent less. A low 
price might be good for the buyer, but it is bad for the 
seller. It is bad for the refinancer. But a low appraisal 
doesn't do anybody any good. But we should not blame appraisers 
for the racism that has existed and continues to exist in our 
society.
    An appraiser looks at a home and accurately determines that 
it is going to sell for $300,000. They can't give an appraisal 
of $400,000 by saying if it hadn't been for the racism that led 
to the road being here instead of there, if it hadn't been for 
the racism that led to the trash dump being here rather than 
there, then the house would be worth $400,000. The appraisal 
industry has to deal with a society where racist decisions have 
led to certain neighborhoods selling for less than they 
otherwise would. And racism is not just something that existed 
in the past, it exists today, and has an effect on whether 
property sells in one neighborhood for less than it would sell, 
the exact same physical structure, in another neighborhood.
    I want to focus, though, on the issue of undervaluing a 
particular house because it seems that the seller is a family 
of color. We had the widely-publicized example of bringing in 
an appraiser while there are pictures on the walls of an 
African-American family, taking those pictures down, putting a 
different couple sitting there as if they are the owners, 
putting up pictures of a White family and the house appraising 
for more. Mr. Peter, I am sure you are familiar with those 
reports. Do they reflect a tendency of appraisers to undervalue 
a particular house simply because it seems to be inhabited by 
an African-American family?
    Mr. Peter. Thank you, Congressman. I certainly believe that 
there are instances where appraisers are biased. However, our 
research, based on 240,000 loans, which is the only study that 
has actually used big data, shows that this bias is not 
systemic and widespread. And there is also academic research 
that has backed this up as of recently, and Fannie Mae research 
comes to the same conclusion. Soc, I think when we find under-
appraisals in largely minority neighborhoods, that Freddie Mac 
pointed out in its research, once we start controlling for 
socioeconomic status differences--
    Mr. Sherman. In my questioning here, I am not looking at 
full neighborhoods. I am saying the same house in the same 
location gets appraised differently. I will ask Pledger Bishop 
to also respond to this. Is this just one idiosyncratic 
article, or is there more evidence to say that an appraiser 
would appraise the house differently based upon the ethnicity 
of the pictures on the wall?
    Mr. Bishop. Thank you for your question, Congressman 
Sherman. I have heard of those stories and read about those 
stories. And that is about what I know. I know about the 
allegations. And if true, if that is really what happened, and 
if the appraiser did that because they are biased, then that is 
unacceptable. And they should be taken care of.
    Mr. Sherman. That is a problem more likely to affect cities 
other than Los Angeles. So much of Los Angeles is tract homes, 
and for an appraiser to look at the Milan model in a home where 
there are 50 identical homes in the neighborhood and come up 
with a row of appraisal is going to be very different than in 
some of our older cities where the homes are one of a kind.
    Mr. Perlmutter. Mr. Sherman?
    Mr. Sherman. Yes.
    Mr. Perlmutter. Your time has expired, sir.
    Mr. Sherman. Thank you.
    Mr. Perlmutter. The gentleman from California yields back.
    The gentleman from Illinois, Mr. Garcia, is now recognized 
for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Mr. Chairman, and Mr. 
Ranking Member. And I want to thank all of the witnesses for 
joining us today to address the issue of home appraisal bias 
and discrimination. In 2021, the Latino homeownership rate 
remained steady, and Latinos are projected to represent half of 
new homeowners in the next decade. However, discrimination 
against Latinos in the appraisal process poses a serious harm 
to our community and contributes to the widening wealth gap in 
our nation. Communities of color deserve the opportunity to 
purchase or sell a home at a fair price to build wealth. We 
must take action so that Latino and Black communities are not 
shortchanged by a discriminatory system that aims at keeping 
neighborhoods, like the ones I represent, segregated and 
undervalued.
    A question for Ms. Lisa Rice. In your testimony, you 
reference qualitative research that has displayed appraisers as 
active participants of discrimination against communities of 
color. One appraiser assumed neighborhoods were, ``getting 
better,'' and housing values were increasing, ``because all of 
the Mexican people were moving out.'' I represent a district 
with working-class Latino and immigrant families, communities, 
and this community has been hit hard by gentrification and 
displacement and discrimination within the appraisal process. 
Can you speak to the impact of discrimination in the housing 
market and how that has perpetuated gentrification and the 
undervaluation in communities of color?
    Ms. Rice. Thank you, Congressman Garcia, for the question. 
Yes, discrimination has very debilitating impacts, not just for 
the individual consumer involved, because when an individual 
consumer experiences discrimination, they can be denied a 
housing opportunity. And we know that homeownership leads to 
stability and other great benefits for families, particularly 
families with children. So, for example, homeownership for 
families with children leads to higher educational attainment 
for children. There are many, many benefits to homeownership.
    Denying people the opportunity or doing anything that would 
result in denying a person an opportunity for homeownership has 
debilitating impacts for that family, but it also has 
debilitating impacts for a community. And let me say, I don't 
think that most appraisers are discriminatory or out there 
practicing discrimination, but I definitely think that we have 
some systemic issues and we also have some appraisers who are 
engaging in behaviors that they should not be.
    Mr. Garcia of Illinois. Thank you for that. A question for 
Mr. Bishop. The issue of discrimination at every point in the 
housing market, from loan applications to appraisals, is 
exacerbated by the lack of diversity in the housing and 
appraisal field. A recent report found that 85 percent of 
appraisers nationwide were White, and less than 5 percent 
identified as Latino. Can you speak towards the major 
challenges for recruiting diverse appraisers and what more can 
be done to shift these numbers?
    Mr. Bishop. That is an excellent question, Congressman 
Garcia. And as I have said before, we have ADI, we have the 
Appraisal Institute, AIERF, with scholarships. Those are 
scholarships. We have our efforts in the universities to 
promote the profession at that level. And other than that, the 
obstacles to this are simply time required and expense required 
in just obtaining a license, and then post-licensing, getting 
the experience. We have talked about it. PAREA should satisfy 
the experience part. The ADI Initiative, the Appraisal 
Institute Education Relief Fund should provide opportunities in 
the cost arena. So short of that, we have to promote the 
profession as viable for entrance into the profession and 
introduce it, and that is the tricky part. Believe it or not, 
in my experience, in my world, it is second-job, third-job 
opportunity folks who find appraising and want to get in, so 
they are not coming out of the university. So we have to find 
those folks, too, and try to promote the profession in order to 
diversify.
    And this is a top priority for the Appraisal Institute. Our 
strategic planning board adopted a new strategic plan in the 
last quarter and diversity was one of the top initiatives from 
that strategic plan.
    Mr. Perlmutter. The gentleman's time has expired.
    Mr. Garcia of Illinois. Thank you for that. My time has 
expired. Mr. Chairman, I yield back.
    Mr. Perlmutter. The gentleman yields back.
    The gentlewoman from Texas, Ms. Garcia, who is also the 
Vice Chair of our Subcommittee on Diversity and Inclusion, is 
now recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Mr. Chairman, and I want to 
thank the chairwoman for bringing this really important topic 
to our attention and giving us an opportunity to discuss it. 
And I must say, Mr. Chairman, that I feel a little kind of 
almost distraught at some of the comments that I have heard, 
and I apologize that I have been bouncing back and forth 
between here and the Judiciary Committee, so I didn't get to 
hear them all. But it is just perplexing to me why we are where 
we are today on this issue. It doesn't appear to be a new 
issue. And I don't know how long these groups have been working 
on this issue, but it is really disheartening to see that we 
are where we are today. And as has already been said by so many 
others, this is about building generational wealth. It is about 
especially minorities gaining access to a home and then passing 
it on to their children, being able to sell it, being able to 
leverage it.
    And it is unfortunate that the appraisal process has proved 
to be unreliable and consistently holding back minorities who 
seek to close the wealth gap and build financial homeownership. 
We have already heard all the numbers, and I am just going to 
repeat the number of appraisers again: Out of 80,000 
appraisers, 97 percent are White. I don't think I have seen 
that number in any other sector. Why is that? What is it that 
you all have not been doing that you should have been doing 10 
years ago? This is now a very structural issue. Four percent 
Latino, 1 percent Black, and 1 percent Asian, and then the 
breakdown with male and female is 69 to 30. And I heard Mr. 
Kelker say that--I think I heard him say, and I am hopeful I 
didn't hear it right--somebody tells you that you can't go to 
universities to recruit. Is that what you said, sir?
    Mr. Kelker. That is not what I said. What I said was that 
our clients really determine who we can use in terms of 
experience. And someone coming right out of school generally 
does not have enough experience, would be a trainee, or within 
sufficient experience to be approved to do work for pretty much 
any of our clients.
    Ms. Garcia of Texas. But I thought I heard you say that you 
weren't allowed to recruit, when you were responding to the 
question about recruitment in Historically Black Colleges and 
Universities, and, I will add, Hispanic-Serving Institutions. 
Do you actively recruit at these universities to try to get it 
down from the 97.7-percent White?
    Mr. Kelker. We don't recruit at colleges. We recruit 
generally in a marketplace where we are looking for experienced 
appraisers.
    Ms. Garcia of Texas. But the question is why, sir? That is 
the thing that I find so perplexing. If we know we have a 
problem, what is stopping you from recruiting at colleges? I am 
not understanding.
    Mr. Kelker. I think what I am trying to convey is that 
recruiting at colleges, while we could recruit, we could not 
use those individuals until they get licensed and get 
sufficient experience to meet our client's requirements.
    Ms. Garcia of Texas. I see we are not making any movement 
here. So, let me ask the two folks who mentioned scholarships. 
What kind of scholarships are there, how many do you have, and 
are you actively recruiting at HBCUs and at Hispanic-Serving 
Institutions to make sure we do get minority appraisers?
    Mr. Bishop. Yes, we are, and the scholarships are 
plentiful. Initially, they will cover the education.
    Ms. Garcia of Texas. And do you go to the colleges to make 
sure they know that there are scholarships available, and there 
is a career track there for them to seek?
    Mr. Bishop. That is what the ambassadors and the 
appraisal--
    Ms. Garcia of Texas. And how long have you been doing that, 
sir?
    Mr. Bishop. We have been in the universities. This is a 
concerted effort at consolidating and identifying in the 
university so that we can promote that.
    Ms. Garcia of Texas. Sir, the question was how long have 
you been doing this?
    Mr. Bishop. Right. It is 2 years.
    Ms. Garcia of Texas. Because the numbers do not reflect 
that anybody is doing anything.
    Mr. Bishop. We started with the University Relations 2 
years ago.
    Ms. Garcia of Texas. And what about you, sir? You put your 
hand up really quickly, because--
    Mr. Bunton. Yes, we are starting it this year when we 
rolled out this simulated training, so they will have the 
education, simulated training, and even sit for the State exam. 
There is a lot of corporate interest in these scholarships for 
minorities and for--
    Ms. Garcia of Texas. But you are just starting this year. 
What is your goal?
    Mr. Bunton. Right. Our goal?
    Ms. Garcia of Texas. Yes. What is your goal? What is your 
target?
    Mr. Bunton. Our target is, we did a diversity study of the 
profession last year to see if all of those numbers we hear 
from the Bureau of Labor Statistics are the same. Our goal is 
to make appraisal professionals look more like America. So, we 
are going to start with, depending on the corporate support 
that we get, as many people as we can possibly get through the 
system.
    Ms. Garcia of Texas. Mr. Chairman, my time has expired. And 
I did have a question for Ms. Rice, but I will submit it for 
the record. Thank you, and I yield back.
    Mr. Perlmutter. The gentlelady's time has expired, and she 
yields back.
    The gentlewoman from Michigan, Ms. Tlaib, is now recognized 
for 5 minutes.
    Ms. Tlaib. Thank you so much, Mr. Chairman, for taking the 
time and recognizing me. Thank you so much, all of you, for 
really leading this important effort. In Michigan, we know just 
how important homeownership is in empowering communities of 
color to build wealth.
    All 12 of the communities that I represent are in Wayne 
County, Michigan. And we have lost more Black homeownership 
than any other State in the country, in Michigan, but Wayne 
County really was hit the hardest. I was alarmed, but not 
surprised, to read Detroit Future City's report which, Mr. 
Chairman, if I may, I would like to submit for the record, this 
week on homeownership in Detroit, which found that Black 
mortgage applicants were consistently more likely to be denied 
more than White applicants across all income groups.
    In fact, upper-income Black applicants were denied more 
frequently than moderate-income White applicants. The most 
frequent reasons cited for denial were credit history and 
appraisals. We all know this is unacceptable. I know my folks 
are really tired of being studied. They are exhausted by the 
task forces, and the commissions. We already know what the 
issue is. Very little has been done to minimize and monitor the 
appraisers' use of discretion, particularly with regards to 
fair housing. And I think we have seen the harms that approach 
has caused to residents in communities like mine. And again, 
Madam Chairwoman, if I may, I would like to submit for the 
record, Detroit Future City's report.
    Chairwoman Waters. Without objection, it is so ordered. 
Thank you.
    Ms. Tlaib. Mr. Bunton, how can the Uniform Standards of 
Professional Appraisal Practice be improved to limit 
discriminatory appraiser discretion and mitigate fair lending 
risk?
    Mr. Bunton. Our Standards Board is actually viewing the 
ethics rule right now to make sure it is abundantly clear. One 
of the things that we want to make sure is that people 
understand that they file a complaint with their State 
appraiser regulatory agency because most agencies published the 
disciplinary action. And that would be a huge deterrent for 
appraisers when they see their colleagues being disciplined by 
the governing body.
    Ms. Tlaib. So, like telling on, that is good. Ms. Rice, in 
your view, what would be the benefits of minimizing and 
monitoring discretion in the appraisal process?
    Ms. Rice. I apologize. I didn't hear that.
    Ms. Tlaib. Oh, that is okay. I talk really fast. I'm sorry. 
Ms. Rice, so what would be the benefits of minimizing and 
monitoring discretion in the appraisal process?
    Ms. Rice. Minimizing discretion would lead to more 
standardization and uniformity in the process so that we remove 
subjectivity. Discretion and subjectivity have been found in 
thousands of fair housing cases to lead to discriminatory 
outcomes.
    Ms. Tlaib. I know you heard a little bit about my district, 
but also in my district, the condition of our housing stock 
presents an additional challenge to mortgage lending 
appraisals. Much of our housing stock was built in the early 
and mid-20th Century and is in need of costly repairs. In fact, 
more than half of the homes in my district are valued at less 
than $100,000. Detroit Future City's report found that in some 
Detroit neighborhoods, unoccupied homes need an estimated 
$80,000 to $120,000 just in home repair, while the house itself 
may be offered at $20,000 to $60,000. There are very few home 
improvement loans available to my residents, just like many of 
our folks across the country, and residents are denied at a 
higher rate for home purchases. It is clear that the system 
isn't working for communities like mine.
    And so, Ms. Rice, do you have any recommendations for how 
the appraisal industry should address this gap in home 
valuations created by home repair needs?
    Ms. Rice. It would be extremely difficult for the appraisal 
industry to be able to address those kinds of gaps because they 
are so deep. And they are caused by so many errant factors, and 
so that is one of the reasons. I will just say that we have 
supported things like the Neighborhood Homes Investment Act to 
make up that gap that is needed for those repairs.
    Ms. Tlaib. With that, and this is for anybody on the panel, 
are there ways that we can better integrate home repair needs 
into the appraisal and home mortgage process? This is something 
that continues to come from much of the members of the housing 
justice work group that I created. How do we address that? Any 
other ideas and policy changes?
    Ms. Rice. Yes. There is a mortgage product called an 
Acquisition Rehab Mortgage product. And what happens then is 
the appraiser will assess the value of the home after the 
repair is done. If that after-repair value comes out where it 
needs to be, then the loan can go through. The homeowner can 
purchase the house and rehab it.
    Ms. Tlaib. Thank you so much. It is a very, very important 
hearing. I appreciate it. I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentlewoman from Georgia, 
Ms. Williams, who is also the Vice Chair of our Subcommittee on 
Oversight and Investigations, is now recognized for 5 minutes.
    Ms. Williams of Georgia. Thank you, Madam Chairwoman. 
Unfortunately, the City of Atlanta, in my district, leads the 
nation in the racial wealth gap. Addressing the root causes of 
the racial wealth gap will help us create the promise of the 
American Dream for all, regardless of their race or ZIP Code, 
while adding trillions in output to our economy. One of the 
biggest routes to address is disparities in homeownership, 
which accounts for 27 percent of the Black-White racial wealth 
gap. Unfortunately, bias and discrimination in appraisals have 
systemically lowered home values in neighborhoods that have 
more residents of color, across generations. This has inhibited 
wealth-building for Black and Brown communities.
    Mr. Bishop, how important is it for the appraisal industry 
to be reflective of the neighborhoods they are assessing across 
our country, to help end systemic undervaluation of homes in 
neighborhoods that have more residents of color?
    Mr. Bishop. Thank you for your question. It is very 
important. Diversity is one of our top initiatives in our new 
strategic plan. And I have gone through several initiatives to 
try to promote diversity, including community colleges, HBCUs, 
or University Relations Committee efforts, ADI, and our 
Appraisal Institute Education & Relief Foundation scholarships. 
In addition to that, the PAREA Program is envisioned to open 
the doors for the experience component of licensing to allow 
individuals entering the profession a quicker path to 
licensing.
    Ms. Williams of Georgia. Thank you, Mr. Bishop. I am 
currently working on legislation to help expand the appraisal 
workforce, including adding appraiser trainees to the National 
Registry of Appraisers. By doing this, we can ensure that more 
trainees can gain experience and become licensed. So Mr. 
Bishop, to follow on that, how can an effort like this to 
better integrate the training pipeline help recruit and retain 
more diverse appraisal professionals into the industry?
    Mr. Bishop. I would expect that as more new entrants of 
diverse individuals, people of color, and women and other 
minorities are entering the program or the profession, they 
should be telling their colleagues and your peers about this, 
which should generate more interest in creating more diversity. 
And so, that would be one place where it would start.
    Another place where we might be able to help this is to get 
some of the clients that I worked for to allow trainees to do 
some of the inspections and do the appraisals we heard. Mr. 
Kelker already talked about how their clients won't allow 
trainees to be considered for their business model. We get that 
in my market a lot with the folks in my office, the trainees. 
It takes longer for them to get their experience hours to get 
licensed. So, that would be another area where acceptance of a 
trainee in the appraisal jobs that are out there would help as 
well.
    Ms. Williams of Georgia. Thank you, Mr. Bishop. Ms. Rice, 
what other common-sense steps can be taken to ensure that 
efforts to resolve appraiser shortages also serve to 
significantly increase diversity in the industry?
    Ms. Rice. Thank you so much for the question. There are 
many steps that can be taken, but the one that I will mention 
here is the increased use of technology. Now, it will not be a 
panacea, and we have to make sure that the technology is 
debiased, and there are plenty of mechanisms for doing that. My 
agency, the National Fair Housing Alliance, just released a new 
framework, a state-of-the-art framework for effective 
monitoring of algorithmic systems to make sure that they are 
debiased. But increased use of technology can help us build 
more science into the process, more uniformity into the 
process, and more accuracy into the process.
    Ms. Williams of Georgia. Thank you, Ms. Rice, and thank 
you, Madam Chairwoman, for leading in this work as we continue 
to close the racial wealth gap in this country. I yield back 
the balance of my time.
    Chairwoman Waters. Thank you. Will the gentlelady yield to 
me? Thank you. I would like to ask a question. What are the 
qualifications for being an appraiser? What do you require?
    Mr. Bunton. For the entry level, for the licensed level, it 
is 150 hours of valuation education. That is classroom hours, 
not credit hours. It is 1,000 hours of experience over 6 
months, and then you must sit and pass a State exam.
    Chairwoman Waters. So, you said you reduced the 
requirements from 4 years to 2 years?
    Mr. Bunton. That is for the next category, for certified 
residential.
    Chairwoman Waters. Okay. Thank you.
    Mr. Bunton. For license, there is no college requirement 
whatsoever.
    Chairwoman Waters. So, experience counts a lot?
    Mr. Bunton. It does.
    Chairwoman Waters. And how much experience do you have to 
have if you have very little college?
    Mr. Bunton. You must have 1,000 hours of experience over a 
minimum of 6 months. That makes you minimally qualified.
    Chairwoman Waters. So, over a period of 6 months that you 
have done what?
    Mr. Bunton. You have worked with a supervising appraiser in 
the field to perform assignments, because there is such a 
variety of real estate out there, that you need a certain 
amount of seasoning.
    Chairwoman Waters. So, if you have an experienced 
Realtist--do you know what a Realtist is?
    Mr. Bunton. Yes.
    Chairwoman Waters. Okay. If you have experienced Realtists, 
say they have been in the business for 5, 10 years, how does 
that experience count?
    Mr. Bunton. I don't really know.
    Chairwoman Waters. It doesn't count. We are going to talk 
about it later. Thank you very much.
    The gentleman from Massachusetts, Mr. Auchincloss, who is 
also the Vice Chair of the committee, is now recognized for 5 
minutes.
    Mr. Auchincloss. Madam Chairwoman, I am happy to yield some 
time back to the chairwoman if she wants to continue that line 
of questioning.
    Chairwoman Waters. Thank you very much. I would appreciate 
that, because what I am thinking is that we have a lot of 
experienced Realtists. And it seems as if there are ways in 
which people could basically become an appraiser without having 
formalized education, and I want to know how it all works.
    Mr. Bunton. It is something that our Qualifications Board 
has looked at for a long time. There are many people in the 
real estate industry, so to speak, who have a--
    Chairwoman Waters. How does that experience count?
    Mr. Bunton. It doesn't count right now.
    Chairwoman Waters. So if you are a Realtist, and you have 
been doing this for 15 years, and now you want to become an 
assessor, you have to start from scratch and get some training 
and education?
    Mr. Bunton. Yes.
    Chairwoman Waters. Thank you very much. I yield back. That 
is what we have to deal with.
    Mr. Auchincloss. I appreciate the chairwoman calling 
another edifying hearing on housing issues. And for this and 
any other subject on housing, I feel compelled to start with 
the imperative as we look to lower costs for families in 
America, and as we look to rectify the injustices of redlining 
and other discriminatory measures that we build more housing. 
We need to build more housing in this country. My home State of 
Massachusetts, I regret to say, is one of the laggards here.
    In the last 20 years, in the Greater Boston metropolitan 
area, round numbers, we have created something like 2.5 jobs 
for every one housing unit. And you don't need to be an 
appraiser or a Ph.D. economist in housing issues to understand 
what happens next. Housing prices gallop by double-digit 
inflation, and its lower-income base stayers who are left 
behind are disproportionately, people of color. So, we need to 
build more housing. I am proud to say that the Housing Choice 
Act of Massachusetts is making progress there, but it needs a 
whole-of-government effort, including, in my opinion, tying 
infrastructure funding at the Federal level to liberalization 
of land use regulations at the State and local levels. The 
Federal Government needs to have leverage here.
    Turning now to the issue at hand, Mr. Bunton, for you 
first, please. Following the housing crisis, Fannie Mae 
conducted a study about the accuracy of appraisals during the 
home buying process. And this study found that two appraisers 
can evaluate the same home at the same time of day, but that 
knowledge of the contract price can affect its valuation, that 
there is significant confirmation bias. Now, Fannie Mae and 
Freddie Mac hold the majority of residential mortgages, north 
of 60 percent, and we know that information like that from any 
Federal agency should help guide policy and standards. Based on 
this report, did your organization put in place new standards 
to reduce confirmation bias?
    Mr. Bunton. No.
    Mr. Auchincloss. If you would like to follow up on the 
record with any approaches you might take in the future to 
reduce confirmation bias, I know the committee would appreciate 
that.
    Mr. Bunton. Will do.
    Mr. Auchincloss. For Mr. Kelker, an Appraisal Management 
Company (AMC) is supposed to provide a barrier between the 
lender and the appraiser to decrease improper influence. Do you 
think that this barrier has affected confirmation bias?
    Mr. Kelker. I don't know if it has affected confirmation 
bias. I think when an appraiser has a purchase agreement in 
front of them that has a certain value on it, say it is 
$200,000, that when he or she does an analysis of the property, 
if they come up with $198,000 instead of 200,000, then there is 
back and forth between the AMC and the appraiser, the AMC and 
the lender. So if the contract price is within the range, they 
are generally going to go with the contract price. Value is not 
absolute. It occurs in ranges.
    Mr. Auchincloss. Very well. Ms. Rice, I want to give you 
the floor for this final minute. You had been mentioning in 
your previous answer the importance of technology here, not a 
panacea, as you said, but potentially a source of support. Are 
there any tools currently at appraisers' disposal to detect 
implicit bias in real time before it gets to the lender? Any 
kind of red flag technology?
    Ms. Rice. No. No, there isn't.
    Mr. Auchincloss. Might that technology be important as we 
look to reduce bias in appraisals?
    Ms. Rice. Yes. If it were built correctly, yes, it would.
    Mr. Auchincloss. And are there standards by which that 
technology could be evaluated to ensure that it was built 
correctly, to your knowledge?
    Ms. Rice. Yes.
    Mr. Auchincloss. Where are those standards?
    Ms. Rice. I mentioned that we just released a framework.
    Mr. Auchincloss. Terrific. Thank you, Ms. Rice. And, Madam 
Chairwoman, I yield back, and thank you again for a great 
hearing.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is now recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman, and thank 
you to our witnesses who are here sharing their testimony 
today.
    Today, we are focusing on the discriminatory and racist 
practices in home appraisals in our country. But we also know 
that many Black families and communities are disproportionately 
facing foreclosure now that pandemic foreclosure moratoriums 
have ended and mortgage servicers are beginning to ramp up back 
to full capacity.
    Madam Chairwoman, I ask for unanimous consent to submit for 
the record the City article highlighting New York City's Black 
neighborhoods facing a foreclosure crisis.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Ocasio-Cortez. In New York City, we are starting to see 
that the majority Black ZIP Codes had an average of 8.48 
percent of homeowners who had fallen behind on their payments 
for more than 30 days. That percentage is 4 times that of the 
majority White ZIP Code average, and 1.5 times that of the 
majority Hispanic ZIP Code average from September. Ms. Rice, 
data suggests that New York City's Black neighborhoods, which 
were devastated by the economic shocks and the pandemic as well 
as decades of predatory lending, are most at risk of 
foreclosure. Is this consistent with what you have observed?
    Ms. Rice. Yes.
    Ms. Ocasio-Cortez. We also know that most of the Black 
neighborhoods with high concentrations of struggling homeowners 
are in Southeast Queens and in many parts of the Bronx, areas 
that lenders had previously targeted with subprime loans in the 
run up to the 2008 financial crisis. Ms. Rice, we know that 
none of these financial institutions ever really paid a true 
cost for the financial crisis that they precipitated, 
especially not for the kinds of financial discrimination that 
Black homeowners faced and continue to face. Would you say that 
is a fair assessment?
    Ms. Rice. Yes, it is.
    Ms. Ocasio-Cortez. In your opinion, at the very least, in 
the short term, should loan servicers provide loan 
modifications in order to make residents' monthly payments more 
doable to avoid foreclosure?
    Ms. Rice. Yes.
    Ms. Ocasio-Cortez. What we are seeing here is a history and 
a blatant pattern. We have the pandemic and the way that banks 
had serviced their mortgages and loans during the pandemic. You 
also have that compounding on the injustices and one of the 
greatest wealth transfers out of the Black community in the 
entire United States during the 2008 financial crisis. But what 
we are also seeing is that we know when faced with the 
possibility of foreclosure, residents are more likely to sell 
their homes out of desperation, only to then be faced with 
discrimination in the appraisal value of their home when they 
are trying to get out of it.
    Ms. Rice, the U.S. Bureau of Labor Statistics found that of 
the roughly 80,000 appraisers in the United States, 97.7 
percent identify as White, correct?
    Ms. Rice. That is correct.
    Ms. Ocasio-Cortez. And we also know that across all 
majority Black neighborhoods, owner-occupied homes are 
undervalued by $48,000 per home on average, amounting to $156 
billion in cumulative losses to Black wealth, correct?
    Ms. Rice. That is correct, as per the Brookings 
Institution.
    Ms. Ocasio-Cortez. This is a scandal. This is shocking, and 
it should truly be an affront to every single person in this 
country who believes in any form of financial, social, and 
economic equity. In fact, a study by the Brookings Institution 
found that on average, homes in neighborhoods where the share 
of the population is 50-percent Black are valued at roughly 
half the price as homes in neighborhoods with no Black 
residents. We must do better. And it has just laid bare the 
legacy from redlining to the way that that has transformed 
into, accumulated, and built into the eventual 2008 subprime 
loan crisis because it was Black, and Brown, and low-income 
communities that were especially targeted with subprime loans, 
and then for the pandemic foreclosure rates to be higher.
    Ms. Rice, do you have any advice for us as Members of 
Congress, or even the general American public, in what we 
should be doing in order to right this wrong?
    Ms. Rice. Sure. I see the time is running out, so I will 
just say briefly, adopt the recommendations in the PAVE Action 
Plan, and implement those actions. And we also have a bevy of 
recommendations that we put forth in our analysis and study of 
the appraisal industry that I also would recommend being put in 
place.
    Ms. Ocasio-Cortez. Thank you very much.
    Chairwoman Waters. Thank you very much.
    I now ask unanimous consent to insert statements from James 
Park, executive director of the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council, and from 
Jillian White, Head of Better-Plus at Better.
    Without objection, it is so ordered.
    At this time, I would like to thank our witnesses for their 
testimony today.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    With that, this hearing is adjourned.
    [Whereupon, at 1:29 p.m., the hearing was adjourned.]

                            A P P E N D I X

                             March 29, 2022
                             
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