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18 | M R EP O RT FEATURE Finance Agency (FHFA), examin- ing more than 47 million apprais- als conducted between 2013 and June 30, 2022, provided some vital insights into potential appraisal bias concerns. In addition to the FHFA's findings, the Brookings Institute showed a correlation between lower valuations and Black neigh- borhoods in their November 2021 report, "Biased Appraisals and the Devaluation of Housing in Black Neighborhoods." Brookings reporters Jonathan Rothwell, Nonresident Senior Fellow, Brookings Metro, and Andre M. Perry, Senior Fellow for Brookings Metro, in their analysis found that Black neighborhoods were associated with much lower property values overall, and only some of this was explained by physical characteristics and neigh- borhood amenities. Median home values in major- ity Black census tracts were 55% lower than median home values in non-Latino or Hispanic white census tracts, according to the Brookings Institute findings. Part of this difference was attributed to quality differences between the housing stock. The authors con- cluded that lower wealth in Black communities meant that homes in majority Black neighborhoods tended to be older, smaller, and more likely to be attached than homes in neighborhoods with few or no Black people. Lower wealth and lower home values further hinder the ability of Black homeowners to pay for structural improvements to their homes and access mortgage refinancing to pay for renovations. Further lending credence to the appraisal bias argument, Chandra Broadnax, Senior Examination Specialist from the FHFA's Office of Fair Lending Oversight, Division of Housing Mission and Goals, highlighted examples of overt references to race in appraisals and the importance of appraisals in the discussion of wealth inequality in a blog titled "Reducing Valuation Bias by Addressing Appraiser and Property Valuation Commentary," originally published on FHFA.gov. Additional appraisal bias concerns were addressed by the government-sponsored enter- prises (GSEs), as Freddie Mac's research showed that properties in minority tracts are more likely than properties in white tracts to receive an appraisal lower than the contract price in the GSEs' September 2021 report titled, "Racial and Ethnic Valuation Gaps in Home Purchase Appraisals." In the report "Appraising the Appraisal," by Jake Williamson, SVP, Single-Family Collateral Risk Management, Fannie Mae, and Mark Palim, VP and Deputy Chief Economist, Fannie Mae, four major findings came to light: » Black borrowers refinancing their homes on average re ceived a slightly lower appraisal value relative to automated val uation models. According to an analysis of 1.8 million apprais- als conducted as part of refi applications in 2019 and 2020, white borrowers refinancing their homes on average received a slightly higher appraisal value relative to the models. This was true for homes in both ma- jority-white and majority-Black neighborhoods. » Homes owned by white borrowers were more frequent ly overvalued than homes owned by Black borrowers. Overvaluations of white-owned homes were present at a higher rate in all neighborhoods but were more likely to occur among homes owned by white borrowers in majority-Black neighborhoods. Overvalued equated to an appraised value nearly 10% higher than the automated valuation models. » The frequency of "undervalu ation" did not have a notable racial pattern. Undervaluation of Black-owned homes occurred at the same rate as white- owned homes in neighbor- hoods comprised of predomi- nantly white households. » In majority-Black neighborhoods, the frequency of undervaluation for Black and white homeowners was within a percentage point of each other. "Undervalued" equated to an appraised value at least 10% lower than the automated valuation models. » Six states accounted for nearly 50% of the overvalued homes of white owners in majority-Black neighborhoods. These states were found to be Georgia, Louisiana, South Carolina, North Carolina, Mississippi, and Alabama. Observers feel that increasing diversity in the appraisal profession may help alleviate appraisal bias. The Urban Institute found that three in four employees in real estate are white, compared with 63% in the private sector. But according to Urban Institute calculations of 2019 American Community Survey data, this gap is even more pronounced for appraisers, as 89% of all property appraisers and assessors at the time of the report were white, while only 2% were Black and 5% Hispanic—estimates consistent with industry and occupation reports by the Bureau of Labor Statistics (BLS). Making strides in diversifying the appraisal space is the Appraiser Diversity Initiative, a program spearheaded by the Appraisal Institute, Fannie Mae, Freddie Mac, and the National Urban League, established to attract new entrants to the real estate appraisal field while promoting diversity in the appraisal profession. Working through the National Urban League's regional Entrepreneurship Centers, the Initiative is designed to reach diverse, talented candidates and educate them about the appraisal profession; provide resources for interested candidates to help them get on a path to success; and offer guidance from appraisers employed by the government- sponsored enterprises.