AEI's Critique of Freddie Mac’s Research Note on “Racial and Ethnic Valuation Gaps in Home Purchase Appraisals"

[CGinMN]

"which they didn't make any attempt to do"​

I'ma ask for a citation for that one. I mean, other than the allegations being made in this other study.

Other than the allegations in the other study... DW stated in another thread* that the suggestion to adjust for income was made by several entities, which to me implies they didn't do it. Their study makes no reference to income factors or socioeconomic status as one of the possible causes of the gap. Instead, it states they focus on the appraisal-related issues to understand the gap:

We conduct exploratory research to begin to understand what causes the observed gaps for minority versus White tracts. We focus our research on the fact that appraisers primarily determine the appraisal value of a property by comparing the historical sale prices of comps. By leveraging our in-house appraiser and appraisal expertise and through discussions with researchers who are experts on this topic, we identified several candidate factors and explored them in isolation, including comp distance, comp reconciliation, comp variance, and purchaser overpayment.

So instead of making sure the presence of an "appraisal gap" is accurately measured and quantified, they jump to looking for causes, which to me seems premature. Then instead of focusing on the borrower and lending side of the equation, they focus on the appraisal side of the equation.

And for sure, Freddie employs enough quants to have the capacity to do these sorts of analyses.

Agree, this seems simple. That's why this is disheartening.

My guess is that Freddie's disclosures don't include everything they've found so far. They're probably still holding some inconclusive and incomplete analyses.

Or even a completed analysis that does not fit this narrative. Like you said, Freddie isn't an appraisal entity. They have their own *** to cover. I don't blame them for doing so, but that doesn't mean we should accept their narrative whole hog. Sames goes for AEI, who have been critical of FHA loans and have their own political axe to grind.

And like I said before, where did this study get their data? Are we even sure they're using Freddie's datasets?

AEI is having a housing conference and they'll be discussing this topic on Thursday.

*Citation: https://appraisersforum.com/forums/threads/AMC-workflow.230320/page-5#post-3084807

 

[George Hatch]

I'ma wait and see how this shakes out before I buy into any conclusions. My default is that even a little ethical misconduct is intolerable and there will always be room for improvement so that's where I'm starting from. If the problem is relatively limited then the fix will be similarly limited. If more widespread then the fix that goes with that will also have to be extensive.

IMO

 

[CGinMN]

I feel the same. And by no means am I concluding that racial bias isn't an issue in the industry. But other than some anecdotal incidents, I still haven't seen anything convincing. That said, when all the various players in this game come to the plate, I'ma reserve the right to call balls and strikes, ask questions, and level criticisms. Brookings, AEI, GSEs, TAF, AI, PAVE and whoever else - they all have agendas. In the end, I might find Freddie's analysis and conclusions end up being closest to the truth.

 

[George Hatch]

To the question of what data they did have access to, there's this note at the bottom of pg 2. I read this to mean they didn't see the actual appraisal reports. Which that's not really a problem, per se; it just indicates to the limitations of their analysis.

 

[CGinMN]

Given their considerable database, the GSEs will be in the best position to study this.As to where AEI's data comes from, I emailed the authors and will post if I hear anything.

 

[CGinMN]

Footnote 26 mentions a joint project between AEI and FHFA so I'm guessing they have been given access to some datasets in order to study appraisal-related issues.

 

[CGinMN]

 

[Mike Kennedy]

"What causes the appraisal gap?"

The actions of other buyers and sellers IN a specific neighborhood/market taken on OTHER competitive closed sales - REGARDLESS of who the sellers / buyers/ lenders (if there is one) are.

Ethical Appraisers see Green.

 

[George Hatch]

View attachment 56784

A bit of a puzzler, but okay. More studies using more data from more sources should be considered a good thing, right?

 

[djd09]

where is DW? i'm sure he can clear this all up