Beyond appraisals, America’s biggest bank is promising to ease obstacles that make it harder for Black and Latinx households to buy homes, build wealth and access affordable housing.
“There are systematic barriers in housing — and we have a role to play in addressing them,” Heather Higginbottom, president of the JPMorgan Chase Policy Center and co-head of global philanthropy, told Asia Despatch Business.
A $156 billion problem
That gap existed even after the researchers controlled for differences in schools, crime and other neighborhood characteristics. This problem has amounted to $156 billion in cumulative losses, Brookings found.
“Discrimination and bias in appraisals contribute to inequity in housing values and adversely affect a critical source of wealth accumulation for minority families,” Michael Hsu, acting Comptroller of the Currency, said Tuesday at a virtual event on home appraisal bias. “The impact is large and cannot be ignored.”
Worse than before redlining was banned
The appraisal gap is just one part of the overarching inequality that exists in housing.
In a new policy paper, JPMorgan warned that “worsening housing market conditions,” including a shortage of affordable homes, rising prices and barriers to down payments, “have put sustainable homeownership further out of reach for many Americans,” especially Black and Latinx people and low-income families.
“The hill is very steep,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition, a group that promotes fairness in banking and housing. “I don’t think we’ve even begun to put a dent in that program.”
Appraisal industry ‘needs to be revamped’
JPMorgan said other potential reforms to the appraisal industry include establishing new “anti-bias training requirements” for appraisers, allowing equal access to valuation data and techniques and creating new national standards for valuation methods.
“It’s an industry that really needs to be revamped, utilizing less judgment and more data,” Mark O’Donovan, CEO of Chase Home Lending, told Asia Despatch Business.
To promote that revamping, JPMorgan said it made a $1 million philanthropic investment in Ashoka and Brookings to launch a challenge that will study innovations to help narrow the appraisal gap.
The experience of Carlette Duffy put an exclamation point on these appraisal problems.
“The fact that I had to remove myself from my home in order for my home to have value — that’s the part that really hurts,” Duffy told Asia Despatch’s New Day last month. “It felt dehumanizing, it felt demoralizing.”
Less than 2% of appraisers are Black
JPMorgan and other big banks have been criticized for relying on discriminatory appraisals.
Diversity is clearly lacking in the appraisal industry.
“There is a lot of subjective judgment that goes into making an appraisal. That means there is a lot of room for bias,” said Van Tol. “Banks should be thinking about who they do business with. Are they inadvertently supporting low valuations in minority communities?”
In an effort to promote more diversity, JPMorgan said it will provide mentors for trainees in an industry diversity pipeline program that aims to attract new people to the field and overcome barriers to entry.
The bank also said it has hired more than 100 people to a new role, known as the Chase community home lending adviser, that aims to help people become homeowners. JPMorgan said these are not commission-based positions.
O’Donovan, Chase Home Lending CEO, said the bank is trying to hire more people who “look like the communities we are investing in.”