Black Knight’s new offering examines appraisal comps for bias

As federal regulators are ramping up their efforts to eliminate racial bias in the home valuation process, Black Knight introduced a tool that examines the appraiser’s work for possible discrepancies.

Black Knight is introducing CA Risk Profiler Plus just a month after the White House’s Property Appraisal and Valuation Equity task force released its plan to fix discrepancies. Previous reports from Fannie Mae, Freddie Mac and the Federal Housing Finance Agency identified biases against protected classes in the home purchase and/or refinance process.

“U.S. policymakers are actively working to address valuation bias and its impact on America’s racial wealth gap,” Mike Sklarz, executive vice president, managing director, Black Knight Collateral Analytics, said in a press release. “PAVE’s action plan clearly signals that industry stakeholders can expect greater process scrutiny and regulatory action in the near future.”

Appraisers are required to supply what they determine to be comparable market prices of properties to support their estimate of what the subject home is worth. However, borrowers have alleged the choice of comps in certain areas has been discriminatory because it changed based on the race of the person or people at home at the time of valuation.

Black Knight uses an automated system to analyze the comps on a valuation against multiple listing services and property data, a company spokesperson said. CA Risk Profiler Plus examines neighborhood demographics to see if those comps were chosen based on what it determines to be objective information and not by some other criteria, and alerts customers when an appraisal may contain potential bias.

The end user controls its individual tolerances and risk rules, though Black Knight has a base set that it recommends to clients for use, the spokesperson said.

Collateral Analytics is an automated valuation model provider Black Knight purchased in March 2020. The new offering is an optional add-on to CA Risk Profiler, which determines the overall valuation risk of an appraisal or hybrid valuation based on factors like the degree of similarity between the subject property and the comps, the amount of variance between the appraised value and what an AVM determines, and the compliance with Uniform Appraisal Dataset standards.

While CA Risk Profiler Plus is available via Black Knight Exchange, which is integrated with its Empower loan origination system, it also can be used by any lender, servicer, AMC, etc., via an interactive web interface, batch delivery and API connections.

The use case is not limited to originations. CA Risk Profiler Plus can be run on any valuation, including desktops and broker price opinions, within basically any sector of the industry, for any relevant purpose, the Black Knight spokesperson said.