Indiana Bill Aims to End Discrimination in Home Appraisals, Loans

An Indiana House Democrat has drafted a bill to end discrimination in residential mortgages and appraisals.

House Bill 1326 through Rep. Cherrish Pryor, D-Indianapolisprohibits discrimination in appraisals and loans based on race, color, religion, sex, disability, marital status, national origin, or residents of the neighborhood in which the property is located.

According to the wording of the bill, this would include the use of the aforementioned characteristics as the basis for establishing the terms of a residential real estate transaction, making an excessively low appraisal on the property which is the subject of a mortgage loan and refusing a qualified appraisal, creditworthy applicant for a mortgage loan.

Indianapolis:The black owner had a white friend for the third review. The value of his house has doubled.

The proposed bill has been referred to the House Committee on Financial Institutions and Insurance, where it seems unlikely to be heard before Tuesday’s deadline to pass the bills out of committee.

Pryor said she proposed the bill because she wanted people to have a fair assessment of their property, regardless of their race or the community they live in. An IndyStar report in May detailed a fair housing lawsuit in which the valuation of a black Indianapolis woman’s home skyrocketed after she removed all signs of her racial and cultural identity from the home and the white husband of a friend replaces her during the visit of the evaluator.

Home ownership, Pryor said, can lift families out of poverty if they can pass the property on to future generations or draw equity from the home to pay school fees, make home repairs or generate income. richness.

“African Americans, their net worth is just awfully lower than their white counterparts – a big part of that is home ownership,” she said. “The issue of discrimination against people guarantees, and really enshrines, that this wealth gap will remain in place, so we need to address the practices that create this wealth gap.”

State Representative Cherrish Pryor arrives for the first day of the legislative session Tuesday, Jan. 4, 2022, at the Indiana Statehouse in Indianapolis.

Fighting Systemic Racism

Pryor said she was motivated to write the legislation and introduce the bill after hearing the stories of Carlette Duffy, the Indianapolis woman came forward in May 2021 alleging racial discrimination in home appraisals she requested, and another individual who expressed concern about receiving a low appraisal while trying to sell a condo.

Pryor did not identify this person, adding that she does not know the outcome of this situation. Former National Bank Settlement Agreement a redlining complaint alleging discrimination against Indianapolis’ black borrowers also influenced his decision.

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“People say we pull ourselves by the boots, but when you give people boots without soles, when you give people boots without straps, it’s quite difficult to get out of poverty,” he said. she adds. noted.

Duffy’s story captured national interest after she and the Fair Housing Center of central Indiana filed complaints against mortgage lenders and home appraisers whom she accused of undervaluing her home in the historic Flanner House Homes neighborhood near downtown.

Landlord Carlette Duffy is pictured at the Fair Housing Center in central Indiana on Thursday, May 6, 2021.

Duffy said she received two low ratings before having a white friend replace her on a third rating. She also deleted family photos, books and home decor that revealed or hinted at her race. The value of her home, she says, more than doubled between the second and third appraisals.

Amy Nelson, executive director of the Fair Housing Center of Central Indiana, said the US Department of Housing and Urban Development is still investigating the complaints. Others have come forward in light of Duffy’s allegations, she said, but they haven’t whitewashed their homes like Duffy did, she added.

On January 19, the National Fair Housing Alliance released a 84-page report funded by the federal government that the alliance and its partners produced on behalf of the Evaluation Sub-Committee of the Federal Financial Institutions Examination Council. The committee is an independent federal body that provides oversight of the real estate appraisal industry.

In the report, the alliance also recommends governance of the appraisal industry and addressing gaps in fair housing and training requirements.

This too documents systemic racism in the nation’s housing and financial markets, noting that racial discrimination in home appraisals continues to affect Black and Latino homeowners nationwide.

“(The) New Deal’s Federal Home Owners Loan Corporation developed one of the most damaging policy decisions in the housing and financial services markets by creating a system that included race as a fundamental factor in determining attractiveness and value. neighborhoods,” the report said. .

The HOLC rating system, the report says, included color-coded maps that rated and ranked the attractiveness of neighborhoods and perpetuated unfounded assumptions between race and risk in national financial and real estate markets.

Meanwhile, researchers at Freddie Mac, a government-sponsored company agency that provides money for the US housing market, has analyzed millions of reviews to determine if racial disparities exist. The researchers found that rating gaps were more likely to be found in majority black and Latino census tracts than in white census tracts.

One reason is the sales comparison approach that appraisers primarily use for valuing single family residential homes. The report notes that the approach – one of several used to determine home valuation – relies on comparable sales, contract sales and listings of properties that are most comparable to the property in question.

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Although racially neutral on its face, the approach opens the door to implicit or explicit discrimination, given historical evaluation practices and the broad discretion that evaluators were expected to determine every aspect of the evaluation, including including selecting comparable homes for analysis.

“The historical undervaluation of communities of color along with the broad discretion leave room for evaluators to perpetuate bias on a passive or active basis,” the report said. “That is, appraisers may passively or unintentionally perpetuate a bias by continuing to use undervalued comparable sales in neighborhoods of color.”

State Rep. Cherrish Pryor, D-Indianapolis, speaks during a vote of Indiana House Representatives on redistricting maps Thursday, Sept. 23, 2021, at the Indiana Statehouse in Indianapolis.

Other provisions of the bill

In addition to prohibiting discrimination, Pryor’s bill requires the Real Estate Appraiser Licensing and Certification Board to submit recommendations for rules that would require at least an hour of training on cultural competency and implicit biases like initial certification condition.

In a press release on Thursday, Pryor said his bill aligns with the NFHA’s policy roadmap to address bias in the evaluation process.

The proposed bill establishes the Fair Housing Practices Fund, a prize pool that would provide compensation to those deemed wronged by discriminatory home lending and appraisal practices.

The fund, administered by the Indiana Housing and Community Development Authority, would also help with residential real estate down payments and closing costs and grants for community education and outreach efforts.

State appropriations, fines resulting from a final settlement or judgment, donations and grants, and civil penalties levied for violations of the bill’s provisions prohibiting loans and discriminatory appraisals would fund the fund. .

The deadline is approaching for the bill to be heard

The clock on whether Pryor’s bill will be heard before the Indiana House’s Tuesday deadline for the bills to pass the committee.

Rep. Martin Carbaugh, R-Fort Wayne, chairs the House Committee on Financial Institutions and Insurance. He could not be reached for comment on Monday. The committee will meet at 8.30am on Tuesday, but it will only hear two bills, one on charities paying bail for indigent offenders and the other on government contracts.

Indiana Center’s Fair Housing Center supports the bill. Pryor said she relied on information from the center to draft some of the bill’s provisions.

Nelson of the Fair Housing Center said Indiana needs to take more aggressive action to address its housing crisis. This includes the presence of prejudice and discrimination in real estate transactions.

Indiana:What to do if you suspect discrimination in your home valuation

“Our work has also raised awareness that evaluative discrimination happens in our community, and we need to do more to stop it from happening,” she said. “This legislation would provide some baseline requirements to address housing discrimination. Indiana is not alone in introducing legislation.”

Executive Director Amy Nelson in her office at the Fair Housing Center of Central Indiana on Thursday, June 8, 2017.

Meanwhile, the Indiana Bankers Association, in a statement, applauded Pryor’s efforts to address discrimination in mortgages and appraisals, but the organization opposes moving the bill forward.

He sees Pryor’s bill as a duplication of federal law and has expressed concern that it would create a new type of civil liability for banks.

“The discriminatory lending practices that this legislation seeks to prevent are already addressed (much of it using exactly the same legislative language), by existing federal laws and regulations that all banks must comply with or face regulatory and civil liability. important,” the association said in an emailed statement.

Contact IndyStar reporter Alexandria Burris at [email protected] or call 317-617-2690. Follow her on Twitter: @allyburris.

James C. Tibbs