As part of its ongoing effort to scan appraisal reports for “prohibited or subjective language,” Fannie Mae issued a recent progress report on a process to rid appraisal reports and valuation decisions of any wording that could be contributing to appraisal bias.
In February, Fannie Mae issued a Selling Guide update describing unacceptable appraising practices and prohibited language. It states that prohibited language includes the “development of a valuation conclusion based… on the sex, race, color, religion, disability, national origin, familial status, or including a reference to any protected class ….” while subjective language refers to the “use of unsupported assumptions, interjections of personal opinion, or perceptions.”
The intended goal of the policy is to help lenders and appraisers stay safe as it concerns their obligation to comply with fair lending laws and with the Uniform Standards of Professional Appraisal Practice (USPAP), according to the update.
Since it began scanning appraisal reports in 2021, Fannie Mae received a limited set of terms explicitly called out in the Selling Guide and sent letters to more than 1,500 appraisers, alerting them of violations in 2021. About 79% of the appraisers who received a letter in 2021 had no new findings in 2022. In 2023, the fraction with no new findings increased to 93%. Similarly, 91% of appraisers who received a letter in 2022 had no new findings in 2023.
The overall occurrence rate for these violations has gone down, Fannie Mae reported. In 2021, the occurrence rate stood at 0.15%, and by 2023 it had declined to 0.03%, according to Fannie Mae data.
“These statistics highlight the remarkable progress appraisers have made in becoming more objective in their thinking and writing, and in eliminating consideration of protected class,” Fannie Mae stated in the update.
“[T]he feedback received [from these letters] has been mostly positive,” Fannie Mae said. “We congratulate appraisers for adopting new ways of thinking and writing to eliminate unsupported assumptions and consideration of protected class, and we look forward to even more progress in the future.”
