Freddie Mac has updated its list of unacceptable appraisal practices to include the following:

• Provide “working class” and “inner city” as additional examples of terminology or veiled language that could indicate underlying bias;
• Identify that inclusion of references, statements or comparisons about crime rates or crime statistics, whether objective or subjective, in the appraisal analysis or report is an unacceptable appraisal practice;
• Acknowledge that the scope of work of some appraisals does not require a personal inspection of the comparable properties;
• Reflect that development of an opinion of value based on factors that local, state or federal law designates as discriminatory is unacceptable.

The update is effective for mortgages with application received dates on or after January 30, 2024, however, sellers are encouraged to implement immediately. Evidence of any unacceptable appraisal practices are considered to be a breach of the seller’s warranty as to the professional quality of the appraisal. The complete Freddie Mac list is outlined below:

Unacceptable Appraisal Practices

1. Consideration of the race, color, religion, sex, sexual orientation, gender identity, age, marital status, disability, familial status, exercise of any federally protected civil right, receipt of income derived from any public assistance program, birthplaces of residents at the property or in the neighborhood, national origin of the prospective owners or occupants of the subject property or of the present owners or occupants of the properties in the vicinity of the subject property.
2. Use of unsupported or subjective terms or statements to assess or rate, such as, but not limited to, “high,” “low,” “good,” “bad,” “fair,” “poor,” “strong,” “weak,” “rapid,” “slow,” “fast” or “average” without providing a foundation for analysis and contextual information.
3. Incorporating terminology or veiled language that could indicate underlying bias, including but not limited to, “pride of ownership,” “crime-ridden area,” “desirable neighborhood or location” or “undesirable neighborhood or location,” “gentrified,” “working class,” “inner city,” “preferred community,” “up and coming,” predominantly Hispanic or Black neighborhood, substantial amount of Black or Hispanic residents at the property, diverse school system, amenities specifically geared to a race, ethnic or religious group or using terms such as Millennials, Generation X or Baby Boomers.
4. Development of an appraisal using inaccurate or incomplete data about the subject property, the neighborhood, the market area or any comparable property used in the appraisal analysis or report.
5. Inclusion of references, statements or comparisons about crime rates or crime statistics, whether objective or subjective, in the appraisal analysis or report.
6. Consideration of the age or location of a dwelling or the age of the neighborhood or census tract where the dwelling is located in a manner that has a discriminatory effect.
7. Basing the development of an opinion of value on factors that local, State or federal law designates as discriminatory.
8. Reliance in the appraisal analysis on comparable properties that were not personally inspected by the appraiser when required by the appraisal’s scope of work. A personal inspection requires at least a visual inspection of the exterior of the comparable property.
9. Reliance in any appraisal analysis on inappropriate comparable properties, or the failure to use comparable properties that are more similar to or nearer to the subject property without adequate explanation.
10. Use of comparable property data provided by any interested party to the transaction without verification by a disinterested party.
11. Use of inordinate adjustments for differences between the subject property and the comparable properties that do not reflect the market’s reaction to such differences, or the failure to make proper adjustments when necessary.
12. Development of an opinion of value and/or marketability conclusions that is not supported by available market data.
13. Breach by the appraiser or supervisory appraiser of a certification or Statement of Assumptions and Limiting Conditions or comparable statements on any Freddie Mac approved appraisal report form or addendum.

Access the bulletin here:

https://guide.freddiemac.com/app/guide/section/5603.4/01-30-2024