Why mortgage lenders are ignoring Trump's rollback on home appraisals

The Star

15 hours ago

The U.S. flag flutters on a building as people make their way through the streets of Manhattan during a work day in New York, U.S., January 23, 2025. REUTERS/Fabrizio Bensch/File Photo
NEW YORK: At one midsized US mortgage lender, almost a quarter of customers who dispute property appraisals find that the value of their home had been miscalculated.
It's an industry-wide issue that has historically penalised minority groups, and now President Donald Trump has offered lenders the chance to ignore his predecessor's attempts to make it easier for homeowners to question the valuations assigned by property appraisers.
Trump has scrapped some of the guidelines, part of his team's vow to stamp out what it sees as initiatives that support diversity, equity and inclusion (DEI).
Many financial professionals agree that home appraisals can be unreliable, and that Black homeowners and other minorities are often put at a significant disadvantage.
This can be especially damaging given that home ownership is the top wealth-creation tool in the United States, and an appraisal is a key determinant of how much, if anything, someone can borrow.
With their decision to end some of the requirements related to home valuations, however, Trump and his cabinet members may have little impact on lenders' practices.
That's because there's fresh evidence that the changes the Biden administration put in place are supported by the industry.
Some of the country's biggest lenders, including JPMorgan Chase & Co, Bank of America Corp and US Bancorp, said they would make no policy changes as a result of the rollback.
New American Funding, which also isn't planning to change its approach, was the only financial institution of more than 10 contacted by Bloomberg to disclose information about disputed home valuations.
The Tustin, California-based mortgage lender, which provided roughly US$14bil of mortgage loans last year, said an average 2.5% of its customers request new valuations each month.
Of those contested, roughly 22% are found to need an adjustment. New American didn't share a breakdown of borrowers' requests by race.
'The changes have made it much easier for the borrower,' said Michelle Rogers, New American's chief valuation officer. 'It's more transparent and the borrower knows they can initiate it.'
The appraisal directives were put in place following a deep dive by the Biden administration into prejudices in the business.
One of Trump's housing regulators, Housing and Urban Development (HUD) Secretary Scott Turner, said rolling them back was part of an attempt by the president to put an end to the 'obsession' with DEI.
The administration also has vowed to make deep cuts to the federal apparatus that enforced fair housing and fair lending laws, from slashing Consumer Financial Protection Bureau staff to gutting the Justice Department's Civil Rights division.
A HUD official who spoke on background said the department's recent reforms simply reverted its stance to the way things were before Biden-era regulators imposed their standards.
Lenders aren't being barred from letting borrowers dispute their appraisals, said the official, who declined to be identified. The White House hasn't responded to a request for comment. — Bloomberg