FHA rolls out new valuation guidelines for reverse and term mortgages to fight discrimination
The Federal Housing Administration (FHA) on Wednesday announced new guidelines for FHA mortgage valuations, targeting both term and reverse mortgage programs and designed to limit instances of racial bias in valuing homes looking FHA mortgage financing. This is according to the publication of the Mortgage Lender‘s Letter (ML) 2021-27 released on Wednesday.
“The ML strengthens the commitment of the Department of Housing and Urban Development (HUD) and the FHA to preventing racial bias in the valuation of single-family properties by clarifying the requirements for compliance with the requirements of the Fair Housing Act, which concern the process of appraising properties that will serve as collateral for FHA-assured financing, âthe FHA said in an announcement from the new ML.
The new guidelines are designed to clarify the expectations that the FHA maintains for appraisers and mortgagees, stressing that they “must comply with all applicable anti-discrimination laws, including the Fair Housing Act with regard to relates to the FHA Single Family Title II front and rear evaluations. mortgage programs.
A priority for the Biden administration
The release of the new ML follows ideas and themes expressed by President Joe Biden in June when he followed in the footsteps of his predecessors in declaring the month as “National Homeownership Month.”
“Today, for people across the United States, the desire to own a home is on fire more than ever,” the president said in his June proclamation. âYet the harsh reality is that, for too many people, the dream of owning a home is getting harder and harder to achieve and sustain. This is especially true in the wake of the economic devastation inflicted by the COVID-19 pandemic. “
This is also true for people of color, who continue to face housing discrimination that can affect their ability to get a mortgage, get a home assessed, or live in neighborhoods of their choice, have declared the president.
On the same day the President issued this proclamation, the President announced the creation of an interagency initiative to address inequalities in housing valuations, called the Interagency Real Estate Valuation and Valuation Working Group ( PAVE).
“[PAVE] seeks to harmonize federal agencies to eliminate discrimination and bring about systemic change in the process of appraising and buying a home, âthe new ML read. âAs part of an effort to combat discrimination in the assessment process, this [ML] clarifies existing FHA requirements for appraisers and mortgagees regarding compliance with fair housing laws related to the appraisal of properties that will serve as collateral for FHA insured mortgages.
Unlike other updates to the Single Family Housing 4000.1 manual explicitly linked to the HECM program, which will be implemented sometime in 2022 after a recently extended review process, the guidelines in this ML take effect immediately for FHA insured term and reverse mortgages. programs, explains the ML. However, the updates will be codified in the manual in a future update.
Expected areas of compliance
In its efforts to strengthen the housing market and support the economy while protecting consumers, these new guidelines from the FHA and HUD are designed to reflect the actions of the housing arm of the federal government to comply with Presidential Executive Order 13985. Biden published on the day of his inauguration.
“Federal fair housing requirements stem from the 1968 passage of the Fair Housing Act and subsequent amendments, in addition to other civil rights laws,” the ML read. “As stated in Executive Decree 13985, ‘[a]The promotion of fairness, civil rights, racial justice and equal opportunity is the responsibility of our entire government. ‘ Promoting economic opportunity and equitable housing is central to the role of HUD and FHA.
In its efforts to advance equity for people who have been “historically underserved, marginalized and affected by poverty and persistent inequality,” HUD expects all parties engaged in mortgage insurance programs of the FHA “remove all considerations of race, color, national origin, religion, gender, family status or disability from the assessment process,” the ML read.
“[This includes] considerations of race or national origin of the owner, neighbors of the owner and the racial makeup of neighborhoods where comparable properties are identified, âsays the guide. It lists the relevant provisions of applicable law that must be observed, including Title VIII of the Civil Rights Act 1968, as enacted by President Lyndon B. Johnson; the Fair Credit Reporting Act; and the Equal Credit Opportunity Act.
The ML contains three specific changes to the current policy to reflect the priorities outlined. The section on âPost-Approval Reviewer Requirementsâ has been reworded to focus on compliance with all applicable federal, state and local anti-discrimination laws, including the Fair Housing Act.
The section âQuality of the appraisalâ has been amended to highlight the obligation of the mortgagee to âensure that the appraisal complies with all applicable laws, including the Fair Housing Act and all others. federal, state and local anti-discrimination laws, âthe ML read. .
Finally, the âGeneral Evaluator Requirementsâ section has been restructured into a new set of subsections, clarifying the guidelines with respect to the FHA guidelines for the conduct of reviewers and clarifying the specific guidelines for non-reviewer conduct. -discrimination.
“Stakeholders should review and familiarize themselves with the changes described in this ML to ensure that they comply with the Fair Housing Act and other anti-discrimination laws,” the ML announcement said. . âPolicy updates noted in today’s ML will be incorporated into a future version of Handbook 4000.1. “
Read ML 2021-27 on HUD.