Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California

Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California
Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California

Tuesday, August 3, 2021

Home Appraisal Bias Event - Consumer Finance Protection Bureau - Meeting - Real Estate Appraisal - by Mary Cummins

home appraisal bias event, consumer finance protection bureau, hud, mary cummins, fha, real estate appraisal, discrimination
home appraisal bias event, consumer finance protection bureau, hud, mary cummins, fha, real estate appraisal, discrimination

Today August 3, 2021 I just heard about this meeting. As a certified licensed real estate appraiser on the Federal approved real estate appraiser list I was not notified about the meeting which is why I didn't see it live. Stakeholders should be notified of these meetings. They should also have a real estate appraiser on the panel for many reasons. The people on the panel were missing key information and insight about the main issues. 

My notes are within the meeting agenda outline. I haven't watched the second half yet but I will. The second half has to do with civil rights issues. I've already seen part of that presentation from one speaker. Below is a link to the two hour video. My personal comments are in ( ). 

https://www.consumerfinance.gov/about-us/events/archive-past-events/virtual-home-appraisal-bias-event/

"We held a virtual event on Tuesday, June 15th, 2021 at 1:00 p.m. EDT for virtual discussions on home appraisal bias. Acting Director Dave Uejio hosted discussions with civil rights organizations, housing policy experts, and other federal agencies to explore how racial bias in housing appraisals and automated valuation models may occur."

01:00 PM – 01:06 PM Welcome, Federal Agency Panel and Acting Director Introductions Alicia Criado Hampshire, Public Engagement

01:07 PM – 01:10 PM Opening Remarks Acting Director Dave Uejio

Dave Uejio: The Appraisal Institute said it's a growing problem in the industry. San Francisco couple who got rid of black photos, items in their home received $500K higher appraisal. (That case had to do with other issues which were not discrimination, see here https://mary--cummins.blogspot.com/2021/02/alleged-discrimination-home-appraisal.html) Extreme example but underscores example of home appraisal bias. 

Appraisals are imprecise. A low appraisal makes comparable homes value lower. (Wrong. Low sales prices would do that, not appraisals). Biden said he'll take action. I am focusing on long standing inequities. (He read his entire report) We will have experts and federal agency partners and discussions with consumer rights leaders and consumer advocates. 

01:11 PM – 01:12 PM Research Presenter Introductions Alicia Criado Hampshire, Public Engagement

Introduces Michael Neal and Jim Park. 

01:13 PM – 01:23 PM Presentation on the Urban Institute’s research on Automated Valuation Models (AVMs) Michael Neal, Senior Research Associate, Housing Finance Policy Center, Urban Institute

Michael Neal: AVMs (Automated Valuation Methods). They disproportionately affect black neighborhoods. AVM as a substitution for and compliment to in person appraisals. Appraisers contributed to the 2008 real estate bust and great recession (FALSE. That was lenders giving loans to people regardless of their ability to pay them back) Appraisers have a role in perpetuating racial inequities and a role in perpetuating the pandemic. (Even the pandemic now? WTH?!) We can eliminate, reduce racial disparity by using AVMs. We looked at three ways to determine inaccuracy in avms. AVMs are far off the real value of homes (How do they know what is the "real value?"). We compared inaccuracy of black to white areas in three cities, Atlanta, Memphis and Washington DC.

White and black areas both look the same with avms in terms of inaccuracy. The magnitude of inaccuracy is greater in white areas than black (Magnitude is error rate x value). We compared to underlying home value. The percent magnitude of inaccuracy is greater in black vs white areas. (It's not color but home value ranges. As Zillow representative responded in another meeting there is more inaccuracy on the tail end of the value ranges i.e. very low. Lower priced homes are also in poorer condition. They're generally older. There is less data in poor areas so not as accurate). We try to explain via regression analysis via four factors, property differences, neighborhood conditions, turnover rate and majority of black vs white. More turnover increases avm accuracy. (More turnovers, more data, makes sense!) The percent majority race of the neighborhood is statistically significant (because POC tend to own lower priced homes). AVMs shouldn't be aware of race but they are. (No. It's because POC tend to own lower priced homes. More error in lower priced homes due to condition, lack of data. Zillow stated this and I agree). 

Ways to invest in black communities. Black banks and improve home condition. Need more data to determine condition better. A too low estimate can threaten home purchase. Contact me. (His read his report)

01:24 PM – 01:34 PM Overview of ASC’s role in appraisals and D&I efforts Jim Park, Executive Director, Appraisal Subcommittee, Federal Financial Institutions Examinations Council

Jim Park OSC: Bias is an important issue. Appraisal regulatory system. Three main components, states, federal and private sectors. Federal carries out licensing, discipline. Appraisal Foundation has two boards, ASB, AQB. They set USPAP and minimum requirements to be an appraiser. ASC is Federal government. Maintain national registry of appraisers and AMCs. 

ASC member agencies. Slides.




Diversity equity inclusion. I am concerned with  reports of alleged racial bias in appraisals and lack of diversity in the profession. Recent allegation of racial bias and lack of diversity. We must regain public trust. ASC has initiatives to review bias, review of USPAP and credentialing of appraisers. We will be hosting roundtables on bias. Appraisers and Assessors are 96% white, 70% men. I find it deeply disturbing (Jim Park is a white male, see pic above). 

Lack of new appraisers. In the past 10-12 years 20-25% decline in national registry. Aging population, declining numbers, and few new entrants while demand increases. One reason is supervisor trainee model which is the only way to become appraiser, by the apprenticeship model. Generally this is only family members. (My article about the problem with the program with solutions) This contributed to lack of diversity. We're working on an alternative but nothing yet. We are doing research to figure this out and find solutions. HR 2553 would establish inter agency task force to analysis federal underwriting standards and guidance to increase diversity in appraisers. Need study our entire industry. (He read his report).

01:35 PM – 02:05 PM Federal Agency Panel Discussion, acting director. 

Todd Harper. NCUA,  National Credit Union Administration. Appraisal bias is important to explore. Must close the wealth gap (for POC). Purchasing home is one of three major ways (other two are starting a business and retirement savings accounts). Dodd Frank Act 2010 reforms. I've been reading news accounts of bias. Existing statutes, the FHA need to address the problem. We need to enforce. Quality control standards for AVMs were supposed to have been made. Formulas can be garbage in, garbage out. Need good quality data going in to get good quality results. (AVMs use like kind appraisal method used for centuries all over the world choosing most similar sold homes for comparison. It's the main asset valuation method similar to Kelly Blue Book car value system. This is what appraisers use.)

Lender owns the appraisal though consumer pays for it. Consumer needs new appraisal to go to a different lender. Consumer should own so can shop appraisal and loan with another lender. (He read his report. Appraisals can currently be transferred from one lender to another with an appraisal transfer letter that references Home Valuation Code of Conduct (HVCC), Appraiser Independence Requirements (AIR) and FHA Guidelines  regarding appraiser independence (ML 09‐28) . Ask for the letter.) 

Michael Hsu, Office of the Comptroller of the Currency (OCC). We must remove structural obstacles. Need access to affordable housing. Lower appraisal value suppresses property tax and money to education. (Lower sales prices do that, not appraisals). It can negatively affect wealth for minorities. Homes in black neighborhoods are worth 1/2 homes in white neighborhoods (FALSE! He cited statistically flawed Andre Perry report. Even Perry said 23% even though it's zero). $156B loss in value nation wide per Brookings Institute (FALSE! Andre Perry's report is statistically flawed and therefore meaningless. He is not the institute but one person who wrote a paper that was not peer reviewed. There was no legitimate research involved but cherry picked numbers from flawed comparisons of two small very different groups chosen by one person. He did not compare similar homes in similar areas.)

We must hold banks accountable but need collective effort. I applaud civil rights leaders for holding us accountable. There is 11 trillion in mortgage loans in the US. 

McCargo, HUD Director for Marsha Fudge. On behalf of Fudge and HUD, thanks. Growing number of reports of bias in the media. Reports of discrimination have increased 10x since 2019. This includes lenders, lending requirements and the lack of diversity of appraisers. Over 85% are white, less than 2% black. Joe Biden told Fudge to lead the task force to address inequities for POC. It will include federal regulators and agencies. Will assess extent, causes, effect and recommend actions. We will engage stakeholders who have information (but not real estate appraisers or people in the actual industry for some reason). June is homeownership month. 

McCargo: News stories. There's a new one a week. There's a wealth and homeownership gap. 

Todd: This isn't a new issue. People fleeing Poconos from NY paid more than what homes were worth. The credit union must meet needs of all even poorer people. Need to help POC access and build wealth to overcome racism over time. We need to diversify appraisers and regulate AVMs. 

ASC: Black homeowners thinking they must "de black" their home is heartbreaking. The idea the tactics work is frustrating. (They don't work. See articles on three main incidents of alleged racism in real estate appraisals which showed the original appraisal values were correct. Two of them didn't "de black" the home. Article 1. Article 2. Article 3. ) The heart of appraisal is objectivity and independence. The (color of the) owner has nothing to do with opinion of value. People must report any perceived discrimination by appraisers to state departments. If they are discriminating, they are violating USPAP and should be disciplined. 

Todd: ASC hotline? 

ASC: Hotline refers users to proper department. 

Hsu: Not a new problem just more awareness from media articles. This puts an urgency on the issue. It's great all agencies are working together on this. 

Dave Uejio: Difficult for consumers to discern discrimination. (Consumers think any appraisal which is lower than what they personally want is "discrimination.") What is contributing to this problem is impacting valuation in communities. 

McCargo: Real estate is local. We should focus on state and local levels. How diverse can we get the industry. 

Jim ASC: Fed and states set requirements. States can exceed federal levels. Need more diversity on state appraisal boards. Needs more minorities. Only Alabama requires it. Appraisals result in a one point value. Not how the market works. (Yes, it is. A buyer only pays one price for a property. That is "market value." Our appraisal actually includes a range of values if someone on the panel had ever seen one) Market reflects a range. (As a whole but not for the specific property which will be secured by a loan backed by the federal government and resold as an investment). Maybe appraisers should do that. It might help lending process. (Lenders would refuse as the loans could not be guaranteed or resold as investments). We should provide more data such as GSEs (Government Sponsored Enterprise  is a quasi-governmental entity established to enhance the flow of credit to specific sectors of the American economy. Created by acts of Congress, these agencies–although they are privately-held–provide public financial services. Fannie Mae, Freddie Mac). If more data made available to appraisers, consumers, might work as check and balance. Make it more difficult to allow intentional and unintentional bias to creep in. (Might be invasion of privacy to share what someone's home appraisal especially if it includes the appraisal which shows interior photos. Public records do show new loans.).

Dave Uejio: What do you think the bureau should be doing about this? 

McCargo: Awareness has gone a long way. Increase in complaints last couple of years (caused by the rising market and not necessarily discrimination). People are learning what it is. Better data collection to better inform. GSEs have lots of data. Need to make it more visible. 

(? speaker): AVMs are playing a huge role today. GSEs use them for appraisal waivers. Not a panacea but based on historic data and unresolved issues. We should promote research on AVMs  to determine risk, error. (There are risk and error scores posted with values, value ranges with most AVMs. Some like CoreLogic won't post an AVM if they feel risk, error too high due to lack of data). Need certification for AVMs. Maybe make publicly available the algorithm so all can use. (Any appraiser can tell you the algorithm. It's not a secret. See below*)

Mike Todd: Need to work on AVMs and consumer education. Federal appraisal law and oversight of private lending. Look at some states' laws on bias to get the best ideas for federal standards and regulations. Federal transaction levels are $400,000. In 1989 it was $10,000. Higher threshold doesn't protect people who buy cheaper homes as well.

Hsu: Office of the Currency. Stories are anecdotal but need research to back it up. (YES! The media stories are not only anecdotal but the three main ones are FALSE. The government should do independent research on alleged bias. Mike Neal already did and he said there's no difference in appraising based on AVM values between white and black neighborhoods. Andre Perry's report is based on the same AVM values). 

I'll post notes from the civil rights discussion later.

*The appraisal value algorithm. Appraisers use matched pairs analysis to value homes. We compare the subject property to the most similar recently sold nearby homes with the same amenities which sold on the open market in armslength transactions. We give more weight to the more similar home sales. We don't use averages, means or median prices. While we include properties which are listed and not sold we don't give them as much weight. We actually do give a value range via the comps we use. We are generally limited by the unadjusted highest most recent similar sold price. We must use sold comparables that bracket the most important features which are size, bed/bath count. 

The appraiser searches properties which are +/- 15% difference in gross living area within a half a mile radius which sold on the open market within the last three months. We go wider if there aren't enough comparables. We need at least three sold comps, one pending and one listed. We then choose the most similar recent comparables to the subject.

Next we adjust for differences between the subject and the comparables. If one has three beds and another has two, we figure out the value of the third bedroom via regression analysis. We basically search sold homes which are similar in every way except the bed count. The difference in the three bed verses two bed home sales should be the value of the extra bedroom. 

After we make the adjustments for all differences we have a range of adjusted and unadjusted values for all the comparables. The home sales that are the most similar carry the most weight. If we were appraising average newer tract homes which are identical there should be very little variation in values. Appraisers are extremely happy when we don't have to make any or at least not many adjustments. This generally only happens to me with newer average sized identical condos. 

That's the home value formula the AVMs use though it's not in the form of a mathematical equation. I've written real estate value math equations for my HP12C. Maybe I'll write a simple one and post it here. I've mainly written appreciation, leveraged value, return on value...equations. 

#homeappraisalbiasevent #consumerfinanceprotectionbureau #realestateappraisal #discrimination #marycummins #cfpb #daveuejio #aliciacriado #michaelneal #jimpark #toddharper #alannamccargo #michaelhsu #asc #asb #aqb #uspap #avm #losangeles #california #realestateappraiser #hud #fha #officeofthecurrency #nationalcreditunionadministration #ncua

Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the California Department of Fish and Game and the USDA. Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.


Google+ Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary Cummins-Cobb, Mary, Cummins, Cobb, wildlife, wild, animal, rescue, wildlife rehabilitation, wildlife rehabilitator, fish, game, los angeles, california, united states, squirrel, raccoon, fox, skunk, opossum, coyote, bobcat, manual, instructor, speaker, humane, nuisance, control, pest, trap, exclude, deter, green, non-profit, nonprofit, non, profit, ill, injured, orphaned, exhibit, exhibitor, usda, united states department of agriculture, hsus, humane society, peta, ndart, humane academy, humane officer, animal legal defense fund, animal cruelty, investigation, peace officer, animal, cruelty, abuse, neglect #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit

Sunday, August 1, 2021

Who oversees, regulates Real Estate Appraisers in the US? The Federal and State governments. by Mary Cummins

real estate appraiser, regulation, firrea, mary cummins, los angeles, california, real estate appraisal, hud, fha, appraisal foundation
real estate appraiser, regulation, firrea, mary cummins, los angeles, california, real estate appraisal, hud, fha, appraisal foundation

Some people seem to be under the misconception that real estate appraisers govern themselves via the Appraisal Institute. The Appraisal Institute is a private organizations for a few real estate appraisers. It's very expensive so there aren't that many members compared to total number of appraisers in the US. (There are 78,000 real estate appraisers with licenses as of 2018 in the US. Allegedly AI has 25,000 members in the world. They include retired and life time members. Because it's expensive to join I find it hard to believe they have 25,000 members). It has nothing to do with the government, licenses or regulations though they do sometimes publicly comment on issues which affect appraisers. 

Real estate appraisers are regulated by the federal and state governments. In 1989 the FIRREA Act (aka Savings & Loan bailout) established the Appraisal Foundation and the  Appraisal Subcommittee (ASC). The Appraisal Foundation is authorized by Congress as the source of appraisal standards and appraiser qualifications. The Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council monitors and reviews the work of The Foundation. The Committee also maintains oversight authority over the states to ensure the minimum qualifying criteria to license and certify real estate appraisers are implemented and that appraisers are held to a professional set of ethical standards.  

The  Foundation’s Appraiser Qualifications Board (AQB) sets the minimum Real Property Appraiser Qualification Criteria and the Appraisal Standards Board (ASB) develops the generally accepted standards of practice for the appraisal profession which is the Uniform Standards of Professional Appraisal Practice. These are reviewed every two years. Everyone can comment while they're being updated.

Each US state or territory has a real estate appraiser regulatory agency that is responsible for licensing and certifying real estate appraisers and supervising their appraisal-related activities, as required by Federal law. Here is a list of all the state regulatory agencies for real estate appraisers

Here in California we didn't need a license until 1994 after FIRREA passed. Real estate appraisers had nothing to do with the Savings & Loan crisis but as usual they were falsely blamed and later more heavily regulated. I fully support all real estate appraisers being licensed. It should have happened when they licensed real estate agents. I was both a real estate agent/broker and appraiser at the same time. I was first licensed as a real estate appraiser in 1994. I was licensed as a real estate agent in 1983 and broker in 1986. 

After the great recession the Dodd Frank Act was passed in 2010 which added even more regulations for banks, lenders and real estate appraisers. Again, real estate appraisers were blamed for the crisis. Real estate appraisers only report value based on past sales. We don't drive sales or affect the market. The problem was lenders giving loans to people regardless of their ability to pay them back. When the bubble burst many people who couldn't make their payments lost their homes. 

The Dodd Frank Act set up a system of Appraisal Management Companies (AMCs). Instead of having the lender hire and assign an appraiser the lender now hires the AMC who hires the appraisers. The AMC is the new middleman. The purpose was so the lender wouldn't be able to pressure the appraiser to hit an appraisal price. 

The concept of AMCs did not work. The appraiser still must contact the owner, borrower to inspect the property. The owner, borrower sometimes says "Here are some comparable sales from the lender and my real estate agent. I need a value over $500,000." Not only that but after the appraisal is submitted to the AMC who gives it to the lender the owner, borrower, lender, AMC can request a reconsideration of value, an appraisal appeal. They can request that certain other comparable sales and factors be considered. The lender can also make requests in underwriting. 

The real estate appraiser does not have to make the requested changes unless they are legitimate. Obviously if you refuse legitimate changes you won't be hired again. The owner, borrower, lender can also order another appraisal. There are some agents, lenders who refuse to use certain appraisers because they didn't hit their price points in the past. The only thing AMCs did add is an extra middleman fee paid by the owner, borrower. If you are paying $650 for an appraisal, $300 goes to the AMC and $350 goes to the appraiser. If you want a review, it can cost even more. 

If you have a problem with an appraisal, request a reconsideration of value. Here's an article I wrote about how to do that. You can also call the appraiser. If you leave a ranting voicemail, they probably won't return your call. Their client is the AMC. The appraiser doesn't have to speak to you after the appraisal is completed. We only have to speak to the owner in order to inspect the home. 

If you have a problem with an appraiser that is beyond a reconsideration of value, you can file a complaint with the state where they are licensed. You can also file a complaint with the federal government depending upon the nature of the complaint. HUD handles discrimination complaints. Below describes the process for HUD housing discrimination complaints. 

https://www.hud.gov/program_offices/fair_housing_equal_opp/complaint-process

Below is a chart showing the outcome of HUD discrimination complaints for 2019. Most complaints are for disability discrimination and not skin color or race. Only 2% of the HUD housing discrimination complaints had cause. This is for 2019. 37% had no reasonable cause, 7% withdrawn, 36% conciliated, 14% administrative closure, 4% DOJ referral. This sounds about right. I've seen a few friends claim discrimination about a transaction. I ask them what happened. So far almost all of the time it wasn't discrimination that caused the issue. Now when it comes to every day events I see discrimination all the time especially as it relates to skin color, gender, race. 


Right now August 2021 some buyers, borrowers feel they are being low-balled because some homes are under contract for more than they are appraised. Appraisals are coming in under purchase price. The problem is the skyrocketing market and limited supply which is causing people to bid over list price and over market value. Appraisers used sold comparables to support the value. That means we're 1-3 months behind the market at times. If there isn't a recent sale of a similar home we have to use older comps. We also can't appraise over the highest unadjusted sold comparable home even though we can time adjust. This is not our fault as we are following the law and regulations. It's happening to everyone regardless of color. Just because your appraisal came in low does not mean the appraiser was racist and discriminated against you. Appraising is a math formula based on home location, size, condition, amenities. Racism and discrimination exist. That doesn't mean every appraisal that is lower than what someone would like is the result of racism. The most common cause of loan denial is actually the creditworthiness of the borrower. 

More information below about real estate appraisal regulation. 

https://www.appraisalfoundation.org/imis/TAF/About_Us/Appraiser_Regulatory_System/TAF/Regulatory_Structure.aspx

#realpropertyappraisers #realestateappraisers #realestateappraisal #hud #fha #marycummins #losangeles #california #firrea #doddfrankact #greatrecession #savingsandloanbailout #uniformstandardsofprofessionalappraisalpractice #uspap #appraisalfoundation #appraisalsubcommittee #asc #appraisersquallificationboard #aqb #complaint #realestate #appraisal 

Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the California Department of Fish and Game and the USDA. Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.


Google+ Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary Cummins-Cobb, Mary, Cummins, Cobb, wildlife, wild, animal, rescue, wildlife rehabilitation, wildlife rehabilitator, fish, game, los angeles, california, united states, squirrel, raccoon, fox, skunk, opossum, coyote, bobcat, manual, instructor, speaker, humane, nuisance, control, pest, trap, exclude, deter, green, non-profit, nonprofit, non, profit, ill, injured, orphaned, exhibit, exhibitor, usda, united states department of agriculture, hsus, humane society, peta, ndart, humane academy, humane officer, animal legal defense fund, animal cruelty, investigation, peace officer, animal, cruelty, abuse, neglect #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit

Thursday, July 29, 2021

HUD Webinar - Advancing Equity in the Home Valuation Process - by Mary Cummins

advancing equity in the home valuation process, hud, mary cummins, real estate, appraiser, real estate appraiser, los angeles, california, fha
advancing equity in the home valuation process, hud, mary cummins, real estate, appraiser, real estate appraiser, los angeles, california, fha

Earlier today I attended the Zoom seminar on "Advancing Equity in the Home Valuation Process" by HUD. Speakers were Secretary of HUD Marcia Fudge, Melody Taylor, HUD Lisa Rice, Alanna McCargo, Zillow Dr. Svenja Gudell, Noerena Limon, Michael Neal and Andre Perry

Based on what I heard today none of these people understand appraisals or the appraisal process. At the end of the meeting they actually said "we need a regulatory federal government agency to oversee real estate appraisers." The federal government has overseen real estate appraisers since 1989 per the FIRREA Act over 30 years! Guess who is one of the departments that oversees appraisers? HUD! HUD also handles complaints against appraisers. Shocking these people don't know this basic fact. FDIC, FHFA, FRB, OCC, NCUA, CFPB are other federal government agencies that oversee appraisers. 

After the speakers spent the meeting stating over and over that all real estate appraisers are biased and have robbed POC of $150 billion (citing flawed and meaningless data by Andre Perry) the speakers said something pretty disturbing. They said "the problem is old white men" meaning old white male appraisers. They stated this opinion without any evidence whatsoever. That is the actual definition of bias. It's also racist besides hypocritical. 

Below are my notes from the meeting. Below that is the information from the meeting and link. I'll post the Zoom video when it's ready. I came in when Lisa Rice started at 11:20 a.m. PST. My comments are in ( )s. 

Lisa Rice LR: Appraisal bias has been around for decades. It's robbing $150 billion in equity from black people and POC. That's why we started the task force. (LR is quoting Andre Perry's misleading paper. No money was stolen from POC by real estate appraisers or anyone.) We want to close the racial home  ownership gap. The gap is now larger than before the FHA passed. Part of the reason is credit. Blacks have 13% of the wealth of whites. Latinos have 19%. Blacks earn less than whites. Blacks don't have as much home equity. (Obviously if you earn less money, you have less money to buy and own a home) White schools get more money. (Schools get most of their funding from property taxes which is based on home values in their county. White people generally make more money so they buy more expensive homes and pay more property tax which goes to schools). 

Latino and Black borrowers pay more in credit fees than whites. (Poor people of all colors pay more in fees). There is now climate injustice and de-greening for POC. It's 5-20 degrees hotter in the same city for POC than white. (This is caused by lack of trees, open space, gardens which is caused by higher housing density. I live in such an area and it's all Latinos. New York luxury high rise condos have the same problem.) People think something must be wrong with black people to suffer these things. The cause is an unfair system. 

We (Americans) took (stole) land from the Indians and gave it to certain (white) people only. The distribution was not fair to black people. It's not fair because of the laws and policies which shaped our system. (It was even more unfair to the Indians who had their land stolen)

(LR cited Andre Perry's false and misleading $156B of equity stolen from black people.) The task force is the right path to equitable outcomes in appraisal context for POC.

Moderator Alanna McCargo AM: (McCargo is an advisor to HUD Secretary Fudge). How we will attack appraiser bias issue and remove it. Appraiser bias is multi-pronged and systemic. Biden said "we will use federal levers to root out discrimination in appraisals and the home buying process." Appraisals represent value, pricing, equity, affordability. Welcome, panel.

Noerena Limon NL: I work for public policy for the National Association of Hispanic Real Estate Professionals. 

Svenja Gudel SG: I work for Zillow. We are involved in data driven insights and trends. 

Michael Neal MN: AVMs Automated Valuation Methods discriminate against black people. 

Andre Perry AP: I hear appraisers say "there's no discrimination or racism in appraising. We passed laws." All value is a social construct. "Affordable" is one of their code words. We must correct the markets. Appraisers under priced black owned homes by 23% or $48K per home in lost equity. (False. His paper has major statistical errors and is meaningless). That money could have been used by homeowners to buy a home in a better neighborhood (He actually said that! So black people don't want to own a home in their own neighborhood? They want to go to a "better" neighborhood? Yet he says their neighborhood is as good as a similar white neighborhood).

SG: I agree with AP (She said this repeatedly). At Zillow we want to empower consumers to find a new home. It's important to provide more data. We use AVMs to level the playing fields and address racism. Our policy can work with industry to address issues. 

MN: Home ownership. We must help blacks get a home and benefit from equity. Undervaluation. If an appraisal is low a home sale can fall through. The homeowner has lower equity. Home owners use equity to invest in themselves, home improvements. We're in a recession. POC are more vulnerable in economic downturns. 

NL: Home ownership is the number one way to build wealth. It's a way to pass on wealth to their family, improve their health, business. The wealth of homeowners is 80x that of black renters. Latino homeowners have 40x wealth of Latino renters. Urban growth will come from non white communities. Discrimination and bias have no room in the housing market.

AM: It's a complex situation with lot of stakeholders. 

AP: Appraisers feel attacked. They are not the only actor in variance of price. There are agents, lenders though appraisers are included in that. Appraisers say "we've done nothing wrong. I'm not breaking the law." That doesn't mean there shouldn't be standards so you don't lower values. Real estate appraisals used to keep blacks out of certain communities (Wrong. Real estate agents, lenders kept blacks and others out of certain communities. You wouldn't get an appraisal if you didn't already own a home or were allowed to apply for a loan in that area). Appraisers are self regulating which isn't right. (Wrong. The federal government oversees appraisers. People can complain to HUD and others.) Appraisers have the freedom to discriminate. In the price comparison approach they compare homes in area to another in the same area. If you only compare homes in a discriminated area to the same area, discrimination continues. There are multiple ways to arrive at value. We look across metropolitan areas instead of just the same neighborhood to get our values (for his paper which is a huge statistical error making his results misleading). 

Real estate appraisers are the gate keepers. Only a few people make the determination. They are 85% white, 75% male (Wrong. Those numbers came from a poll in the Appraisal Institute which doesn't represent appraisers as a whole). They have too much opportunity to express bias which permeates the practice. Only a few actors determine value.

SG: I agree with AP. Former redlined areas show lower home values today than non redlined areas (which doesn't have to do with race but property age, type, median income of owners/tenants...). It stays with us. Human bias is real. (But Zillow uses AVMs which don't use humans so explain that). 

More data is better but it must be clean and correct data. Models are only as good as data you feed them (Garbage in, garbage out). All of the major AVMs don't use demographic (racial) data and shouldn't. They should only look at the home, amenities. We use a broad base of comps from similar neighborhoods (No. They use comps from the same immediate neighborhood). 

MN: We looked at AVMs. We didn't find evidence of bias with AVMs. We didn't see AVMs undervalue in black neighborhoods. (Tell that to Andre Perry who stated the opposite). Appraisal waivers encourage AVMs. If it's humans introducing bias into the appraisal why not remove humans from the process. There is more AVM error in black neighborhoods. Overvaluing is also problem besides over correcting to the low side. If you over value, you set up an additional layer of instability for more vulnerable. We need to boost the underlying value of the community. 

AM: What about the great recession. 

NL: The recession wiped out wealth for Latinos. POC more likely to have FHA loan, lower down payment. They are losing bidding war to bigger down payment buyers. Appraisals take too long and charge rush fees.  

AP: Over valuing is rooted in exploitation. People wanted to make money (making loans to anyone.). Black and brown bore the brunt of failure. Dodd Frank Act to correct that. In the white community they agree on a price point with the appraiser. In black community, no. (That's false. We don't agree on a price point ahead of time. It's illegal.) The deals fall through more in black areas. Blacks are burdened by regulations. They (the federal government) should focus on helping only black, brown and not the aggregate. If you can correct for black, brown, you can correct for entire country. If you over correct, you cause more damage.

SG: The current frenzy. It's hard for anyone to value a home today. The "value" is whatever anyone is willing to pay for it. Human or AVM appraisal. It's hard to evaluate homes now. Incredibly difficult. 

NL: This is a supply, demand issue. We need more homes. 

MN: Blacks need more equity. How they lend that money is important for impact. Black banks. We need to make sure when the increase is home value doesn't come with gentrification (Gentrification is just the revitalization of an area). Property tax assessments. Blacks pay higher property taxes than whites. (Property tax based on county and state laws where the person lives, when they bought it, how much they paid and how much it's reassessed. These things affect everyone not just black people).

AP: What recourse does a homeowner have from a bad appraiser? We need to make data transparent for all.  GSEs have lots of data to develop AVMs. (online avms). It's holding black people back. White and brown who own homes in black areas. The value effect of blackness. It spreads across different races. (Exactly. That's because it doesn't have anything to do with color but income, assets, savings, credit, home sales. AP also talks about finding a way to give the $48,000 in "stolen equity" to each black person. What about the others also suffering from the "value of blackness?")

SG: We care about data. Zillow was the first to make the data available and transparent. In 2002 you had to go to a real estate agent to find homes to buy. Consumers had no power. We give data for buyers and sellers. We give data to level the playing field. Data is powerful to shine a light on issues and provide better outcomes."

MN: We looked at AVMs. The magnitude of error is larger in black areas. The algorithm clearly "knows" the race of neighborhood. (Just because prices are lower doesn't mean it's a black neighborhood. Prices are low where I live and it's 90% Latino). Human appraisers can see the color of the people but not the computer model yet it did. (This proves it's not about color but income, assets, home values) 

SG: With data comes responsibility. The confidence range around the point estimate. It's harder to be more specific on tail ends (of the curve). We need to know if they've  been renovated... (She's referring to more error in certain areas with lower priced homes responding to MN).

AM: Maybe we should use the market value range concept for appraisers with a margin of error instead of point in time. We need to know the consequences of setting the value differently, how it would work for lenders. (They would say no. A USPAP compliant appraisal is needed for government to guarantee a loan. It's also needed so lenders can sell the loan and investors can buy, trade them.)

AP: I would like to ease the tension of appraisers out there. Data is not taking your job. Appraisers' inability to come up with accurate assessments is more of the problem. I used to have a problem (cabbies discriminated against him because he's black) getting a cab in certain areas in the Bronx. Technology, innovation evolved because of that problem. (You still can't get an Uber in certain areas of the Bronx no matter your color). There have been no research reports but reports anecdotal in nature in media coming out about appraisers discriminating against black people. (So far those specific reports have been proven wrong. ALL people having issues with appraisals in the last year because of the huge run up in sale prices, values. It's an every color issue.). There is a problem. I'm more concerned with low appraisals. If the appraised value comes in below the AVM it should trigger a second appraisal (I'm sure the buyer would love the extra cost. Then they have to deal with another appraiser.).  

SG: AVMs have limitations. Sometimes you need someone to walk through a property so there's no second guessing. 

NL: We need diversity in the appraisal industry to better understand the communities they serve. 

AM: The problem is old white men appraisers. (Everyone else, YES). It's tough to find an apprentice (She meant mentor) to train new appraisers. You need to look like the community you serve. How many real estate appraisers have been convicted of the crime of discrimination? (Discrimination is not a crime as far as I know. If it were, 80% of the nation would be in prison right now).

AP: It's the lender. The lender will say it's the appraisal. There is no accountability. We need clean lines of accountability. HUD is supposed to help detect discrimination. 90% of HUD complaints refused. It's not a criminal activity...yet! There are wild appraisal "errors" that negatively impact some groups more than others. 

MN: The lack of home supply. We should fix vacant homes to make them livable. Nonprofits should build homes. Homeowners of color live in inadequate housing. (Poor people of all colors live in inadequate housing). We need to renovate their homes for them. 

NL: Appraisal waivers are a higher risk event. How do we speed up the process?

SG: New homes are priced at a higher level. It's expensive to build new homes. It's difficult to build affordable housing. We need to fund the gap to repair housing to increase supply by tax credits. (Gov already offers that).

AM: Housing is infrastructure. We need to build it. (Public housing has always been a failure because of gov red tape, administrative costs...). Would a national standard for appraisers work? (We already have national standards!) 

AP: The Appraisal Institute makes standards. Individuals should review their standards and express their voice. (The Appraisal Institute is a private organization and not the government. They don't make any standards. The standards are made by the federal and state governments. In 1989 FIRREA established the Appraisal Foundation and the  Appraisal Subcommittee (ASC). The  Foundation’s Appraiser Qualifications Board (AQB) sets the minimum Real Property Appraiser Qualification Criteria and the Appraisal Standards Board (ASB) develops the generally accepted standards of practice for the appraisal profession (the Uniform Standards of Professional Appraisal Practice). These are reviewed every two years. Everyone can comment! I posted an image of the federal control of appraisers below).

SG: We should be more transparent and have a national database of home sales.

MN: Government should step in to fix the issues. The federal government probably needs to step in and oversee appraisers.  (Everyone replied, "YES, the federal government should oversee appraisers!") (They already do! See above. These people are clearly not experts.)

AM: (12:47 pm)There are 550 people here. 

END

Here is my solution to the financial problem. Help everyone get a good paying job so they can save money to buy or rent a home if they like. Don't go blaming others for a problem that doesn't really exist and is not their fault. Appraising is a math formula whether you're an AVM or a live person. One speaker even said he saw no difference between the live person and the AVM robot. Even Zillow said it's very difficult to appraise in this skyrocketing market. EVERYONE thinks the appraisal came in low if it's lower than the contract. Racism does exist and it harms people and communities. Trying to find racism in a math formula and appraising makes no sense. The government's energy would be better spent fighting major issues of real racism in the every day world. 

https://www.huduser.gov/portal/event/quarterlyupdate-July2021.html

"Homeownership is integral to building household and intergenerational wealth. However, bias in the home valuation process – including human bias, algorithmic bias, and lender redlining – hinders wealth creation and contributes to racial wealth disparities in the United States.

On July 29, 2021, the U.S. Department of Housing and Urban Development (HUD) will host an event to discuss how bias in the home valuation process and the lack of diversity in the appraisal industry overall contributes to racial wealth disparities. HUD’s Office of Policy Development and Research will host this event which will be opened by HUD Secretary Marcia L. Fudge who will discuss President Biden’s recent charge to HUD to lead a new Interagency Task Force on Property Assessment Valuation Equity, or PAVE. An expert panel will reflect on home appraisal bias and the related but distinct systematic devaluation of homes in minority neighborhoods, delving into topics including the potential for automated valuation models to help identify appraisal bias, Fair Housing implications, and the interagency governmental intersections of this issue that PAVE will explore. Please join our diverse group of experts from research, industry, and government for this PD&R Quarterly Update.

Opening Remarks

  • Secretary Marcia L. Fudge, U.S. Department of Housing and Urban Development

PAVE Interagency Task Force Overview

  • Melody Taylor, PAVE Executive Director; Regional Director, HUD’s Office of Fair Housing and Equal Opportunity

Keynote Speaker

  • Lisa Rice, President and CEO, National Fair Housing Alliance

Discussion: How Racial Bias in the Home Valuation Process Contributes to Racial Wealth Disparities in the United States

  • Alanna McCargo, Senior Advisor, Housing Finance, Office of the HUD Secretary – Moderator
  • Svenja Gudell, Chief Economist, Zillow Group
  • Noerena Limón, Senior Vice President, Public Policy and Industry Relations, National Association of Hispanic Real Estate Professionals
  • Michael Neal, Senior Research Associate, Urban Institute
  • Andre M. Perry, Senior Fellow, Brookings Metropolitan Policy Program "



Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the California Department of Fish and Game and the USDA. Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.


Google+ Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary Cummins-Cobb, Mary, Cummins, Cobb, wildlife, wild, animal, rescue, wildlife rehabilitation, wildlife rehabilitator, fish, game, los angeles, california, united states, squirrel, raccoon, fox, skunk, opossum, coyote, bobcat, manual, instructor, speaker, humane, nuisance, control, pest, trap, exclude, deter, green, non-profit, nonprofit, non, profit, ill, injured, orphaned, exhibit, exhibitor, usda, united states department of agriculture, hsus, humane society, peta, ndart, humane academy, humane officer, animal legal defense fund, animal cruelty, investigation, peace officer, animal, cruelty, abuse, neglect #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit

Monday, July 26, 2021

Racial discrimination alleged by Cora Robinson in real estate appraisal 5924 Martin Luther King, Oakland, California - by Mary Cummins

cora robinson, oakland, california, real estate, appraisal, discrimination, 5924 martin luther king, duplex, bias, mary cummins
cora robinson, oakland, california, real estate, appraisal, discrimination, 5924 martin luther king, duplex, bias, mary cummins

Julian Glover just covered another story of alleged racial discrimination in a real estate appraisal in Oakland, California. After he ran his first story I contacted him via email and Twitter. Julian Glover never replied. 

The owner of the home is Cora Robinson. The home in question which they specifically mention in their public report is 5924 Martin Luther King, Oakland, California. The address is also public if you search for Cora Robinson's name. The author of the article included this information which is why I'm using it here. First, some facts.

5924 Martin Luther King Jr Way, Oakland, California 94609 is legally a 4 bed, 2 bath, 1.5 story home built 1885, 2,336 sf on 6,000 sf end lot. It's listed as last renovation 1940. I searched building and safety and see no permits for any upgrades or additions. The owners were in default in 2012, 2013. It appears one of them runs a hair salon called Your Locs out of one unit which I don't  believe is allowed per zoning. Please, no one report the business or unpermitted additional bedroom, bathroom. Times are tough enough. 

Zillow lists the home as 5 bed, 3 bath with a current AVM or automatic valuation method Zestimate of $1.2M, range $1M-$1.4M. RedFin estimates $1.1M. Trulia $1.2M. RealtyTrac estimates it as a 4 bed, 2 bath home at $1M. Realtor estimates it at $1.2M. CoreLogic refuses to give an AVM or RealValue because it hasn't sold in a long time and doesn't appear to have recent renovations. Their error variance is too high to give an estimate or even a guesstimate. 

Now for some allegations. July 2020 Cora Robinson said it appraised at $800K which would have been within the range of the AVMs at that time. Cora said Zillow was $1.3M at the time which is false. I'm glad she didn't white wash her home before the last appraisal. All appraisers saw the same exact home in the same condition. Oct 2020 appraisal came in at $825K. February 2021 it appraised at $1.2M. March 2021 she got a new 1st loan at $606K which is about 50% loan to value ratio which is a very low ratio. 

Cora states the property, area is not subject to rent control. Yes, it is. Just because she has a relative currently living there doesn't mean the next owner would be free of rent control. Cora states it's in the higher demand area of Rockridge. It's not. It's three neighborhoods south on the other side of the freeway. Cora states the appraiser made two appraisals. He made only one which he appears to have updated. Cora stated the "bad" appraiser used comps with "nearby homeless encampments, liquor stores, trash on the sidewalk, greater structural neglect and other markers of poverty." If you look at the satellite image of the subject property, that describes the subject's area exactly. There's a liquor store on the corner of Cora's block and a homeless camp one block away! Is this lady for real? She wanted the appraiser to use a $1.6M comp from Rockridge which is a mile north, north of the 24 fwy and a much better more expensive area. Cora said the "good" appraiser used comps "in all directions." We are supposed to use the best comps and not comps in "all directions." Cora thinks the appraiser should have only used higher comps located northwest of her home in the nicer "whiter" area of Rockridge. Cora literally said that the appraiser used comps in areas which have more black people i.e. "has a higher percentage of black residents" which Cora states has a negative effect on value. Who is the racist and biased one here?! Just to be clear Cora is black saying these negative things about black people and how they negatively affect property value. These are direct quotes from her actual written and sworn complaint! 

Cora received the home for free from her mother who received it for free from her grandmother. Cora states she was paying about 7 to 13% interest rate on her mortgage which she got in 2008 at the peak of then prices and interest rates. Everyone knows those loans were predatory. To be paying on that loan all those years is crazy. We're clearly dealing with someone who doesn't understand real estate or finance. She feels she should be paid the difference between that higher rate and her current rate. That is ridiculous. Cora agreed to the terms of the old mortgage. The lender is the one who refused the new loan. The main reason for loan refusal is the credit rating of the borrower. Cora states she is retiring which means refinancing again will be impossible. I believe an appraisal done by any appraiser at the earlier time would have been much lower than the current appraisal. You can't "sue" an appraiser for market value. No money was lost here. The appraiser also only works for the AMC and lender not the owner of the property. 

The home is an end lot on a very, very busy street with what appears to be a Metro train which then turns into a highway, see pic below of the subject property taken from across the Metro. 

cora robinson, oakland, california, real estate, appraisal, discrimination, 5924 martin luther king, duplex, bias, mary cummins
cora robinson, oakland, california, real estate, appraisal, discrimination, 5924 martin luther king, duplex, bias, mary cummins


There are apartment buildings on the street, vacant lot, homeless camp, trash, liquor store. These things reflect negatively on the value. There are more regular lots than end lots which would skew the value higher for all duplexes in the area. I see current comparable sales at $800,000 to $1,500,000 with most $900,000 to $1,100,000. The sales at the lower end were end lots which have not been fully recently renovated. The sales at the higher end are regular lots away from traffic, apartment buildings which have been very recently fully renovated. These comps were given to me by robots. I don't have MLS for this area so I can't actively search it. No one can say I discriminated in my search for comparables as I didn't actively search beyond typing in the address. 

I just used a robot to do a default search for the property which is +/- 20% size within one mile radius. I only changed it to search for the previous 12 months. The comps I found for when it was appraised the first and second time were $755,000 and $850,000 which were right next to the subject, newer, larger and had more bedrooms, baths. The robot refused to search properties in Rockridge which is actually three communities and over a mile away. The more recent comps are $1.1M, $1.1M, $1.0M and $1.3M. I haven't seen the inside of the properties. They could have been and probably are full remodels. I saw some pics of the subject online. It's an old remodel which needs a full remodel. This claim is now officially busted. 

Below is the map from the search. Maybe this is what Cora means when she stated all the comps were in one direction in the first two appraisals. Most are in one direction even though I pulled a mile radius. Cora's area has commercial, retail, vacant lots, hospital... Maybe there are fewer duplexes in that area. See how far away Rockridge is from the subject, i.e. bottom right of the map. There are cute restaurants, shops, trendy grocery stores, nice parks in Rockridge. In North Oakland there aren't even any fast food chain stores. Fast food chain stores heavily research locations. A location without them has many negative issues. You can get food at the liquor store or the gas station in Cora's neighborhood. Look at the satellite image.

cora robinson, oakland, california, real estate, appraisal, discrimination, 5924 martin luther king, duplex, bias, mary cummins
cora robinson, oakland, california, real estate, appraisal, discrimination, 5924 martin luther king, duplex, bias, mary cummins


Median sales price for a duplex this size in this area went from $900,000 to $1,200,000 within the last 12 months. That's a year from Cora Robinson's first appraisal. The property has gone up in value immensely between the time of the first and last appraisal. As I look at the chart it was about flat July 2020 to January 2021 then it went from $900,000 to $1,200,000. That's a 33% increase in value right there. The appreciation in this area has been skyrocketing because it's such an inexpensive area compared to other local areas. People who are priced out of the more expensive areas of Oakland are going to these less expensive areas. The duplexes selling for more have been recently fully renovated. I bet there are flippers buying run down properties and fixing them up for much higher resale which is driving a lot of the increase in value. The combination of flippers and people being priced out of more expensive areas has driven the explosion in value in this area. 

Based on the information about the subject property and the sold comparables I researched the first and second values could have been correct for that time. Based on the same a higher more recent appraised value would have been within the more recent range of values. It's also possible the more recent appraisal came in a little high per the real bed/bath count, location and condition of the subject. I have a feeling the appraiser will be cleared of wrong doing in this specific case. I did an information act request and will post the results when I receive them. They don't release them until after the investigation is finished. 

Fair Housing Advocates of Northern California released a press release stating they are helping Cora Robinson file a complaint to HUD. The complaint is an online form. She didn't need any help filling it out. It's easier than filling out a loan application. I personally feel this non-profit organization released this news for media attention to get donations. They should have hired a review appraiser to review the appraisals before submitting the complaint. They have most likely destroyed the reputation of the appraiser whose name they plastered all over their national press release, articles and media outreach. 

Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the California Department of Fish and Game and the USDA. Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.


Google+ Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary Cummins-Cobb, Mary, Cummins, Cobb, wildlife, wild, animal, rescue, wildlife rehabilitation, wildlife rehabilitator, fish, game, los angeles, california, united states, squirrel, raccoon, fox, skunk, opossum, coyote, bobcat, manual, instructor, speaker, humane, nuisance, control, pest, trap, exclude, deter, green, non-profit, nonprofit, non, profit, ill, injured, orphaned, exhibit, exhibitor, usda, united states department of agriculture, hsus, humane society, peta, ndart, humane academy, humane officer, animal legal defense fund, animal cruelty, investigation, peace officer, animal, cruelty, abuse, neglect #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit

Thursday, July 15, 2021

Property Valuation, Appraisal Bias, & Black Homeownership - notes by Mary Cummins, real estate appraiser

Mary Cummins, Andre Perry, Pam Perry, Christy Bunce, Jefferson Sherman, Property Valuation, Appraisal Bias, & Black Homeownership, Appraisal Institute, real estate appraiser, appraisal, real estate
Mary Cummins, Andre Perry, Pam Perry, Christy Bunce, Jefferson Sherman, Property Valuation, Appraisal Bias, & Black Homeownership, Appraisal Institute, real estate appraiser, appraisal, real estate


July 15, 2021 11:00 a.m. PST Over 500 people attended. 

Topic: Property Valuation, Appraisal Bias, & Black Homeownership - Zoom meeting.

Description: The New American Dream & Freddie Mac webinar series continues to discuss the challenges to increase Black Homeownership and potential solutions.

What will you get out of this by attending? We will look at appraisals and property valuation and how to overcome potential bias in this arena. We have a powerful group of expert panelists to share insights and their organizations efforts to bridge the gap in Black Homeownership.

Moderator: Christy Bunce, Chief Operating Officer of New American Dream Funding (Bunce)

Panelist: Dr. Andre Perry, Brookings Institution (A Perry)

Panelist: Jefferson Sherman, MAI, AI-GRS Appraisal Institute (Sherman)

Panelist: Pamela Perry, Vice President, Single Family Equitable Housing, Freddie Mac (P Perry)

My comments in ( ). Here is the video. 

-------------------

Zoom meeting notes by Mary Cummins, Los Angeles, California real estate appraiser.

Bunce:  Our company supports lending for minorities and black people.

Sherman: Bias is human. No profession is immune.

A Perry: My research used the Zillow list price of homes and census data. I controlled for crime, education, walkability and there was still a difference in value (between primarily black verses white neighborhoods). The black owned homes were under priced by 23%. This loss of value is not about only appraisers but also lenders and agents. Appraisers have something to do with the loss of 23% (of value of black owned homes). There are biased appraisers media articles show. Structural bias is in the system even though most say there is no racism in appraising. (This article shows that Andre Perry's research is fatally statistically flawed as he committed every grave statistical error.

P Perry: There are 3.4 million black Americans that qualify for a mortgage but have no mortgage. We must eradicate barriers to tens of millions of black people. We have a housing shortage. Black people live on land in areas which will be uninhabitable due to climate change. Fannie Mac recognizes there is an issue based on data from our appraisals. 

Bunce: What research is Freddie Mac doing on valuation? 

P Perry: A lot. There are appraisal gaps. We have a treasure trove of data on appraisal gaps. We did research sales price verses valuation. 2015 to 2020 data showed appraised value lower than contract price for minorities. (2015 to 2020 prices increased. Makes sense past sales would be lower than current contract prices) The appraisers opinion of value more likely to fall below contract price in black and hispanic areas. ("Hispanic" is a racist term. Most prefer Latino including myself) Black and hispanics receive lower values than whites regardless of where home is located. The findings are troubling. The gap is large but we are uncertain of the root cause. The average distance of the comp from the subject is shorter in hispanic, black areas than white areas. (Because less expensive homes are generally in more dense areas. The homes are generally smaller on smaller lots. I see this appraising homes in these areas. I don't have to search as wide to find enough comps)

A Perry: Value verses price. Value is socially constructed, a social construct. Humans determine value. Price is the contract price, what it sold for, a fact.

P Perry: "A few white folk move in (to a black area) and suddenly value spikes." (People are being priced out of more expensive areas and going to less expensive areas which tend to have more people of color. It's the revitalization stage of the real estate cycle which some call "gentrification." It's just affordability economics. This causes prices to increase in less expensive areas.)

Bunce: We as lenders see many appraisals and need to understand this. 

Sherman: Value and price are different. Value is an economic concept, an opinion, subjective, not a science, not a fact. Price is fact, list price, contract price. There will be a difference in opinion of value among appraisers. Competent appraisers should reach about same conclusions.

A Perry: There is an intrinsic value of whiteness which we see when a white person stands in for black owner (in the appraisal inspection). This shows that appraiser sees higher home value if the home has a white owner. HUD, government should do tests for this effect.

Sherman: Let me explain the appraisal process and appraisers. Appraisers are asked to appraise for market value based on specific requirements. How do we improve black areas. Maybe there are other types of values that should be measured. A value that excludes the location could be applied to certain lending situations for disadvantaged neighborhoods. We (appraisers) do use value, investment value, terms you, Andre Perry, are not familiar with. If the government, legislation determines there are different types of value to measure, we'll do it. We are flexible. We appraisers are willing to participate in other value methods.

Bunce: Appraisals, appraising is not a science. If it were more science and less opinion, we can use data and science to remove bias.

A Perry: I met Sherman talking about AVMs on Capitol Hill. Software developers may also have bias besides lenders, appraisers. Credit score, education, crime matter but there is additional penalties to black areas. Black people have lower credit scores because they have less access to wealth. We were denied access to wealth. We have no (savings) so must take on debt. This leads to a lower credit score. (Credit scores are based on math. The lower the score, the less likely someone is able to pay back a loan. The less savings you have, the more likely you are to default on a loan. The credit score is to help the lender determine risk. Defaulting on a loan hurts the lender and the homeowner) My aim is to improve the community, not blame this or that group. (He has specifically blamed appraisers)

Bunce: There is no blame. We just must make all aware of the issues. Does the sales comparison approach carry forward past effects of historical redlining?

Sherman: The sales comparison approach is the most applicable to value. Buyers have choices. They compare one property to another to choose what to buy. Appraisers do the same. Recent sales transactions represent the best way to appraise property. Banning it would have negative dramatic effect on home values. It would fuel an asset bubble. Maybe one can add a value besides appraisal value for future value in revitalizing areas.

Other approaches of value. The cost approach. I'm an instructor. The cost to build a new house minus depreciation plus the value of land is the cost market value. We consider three types of depreciation, (1) physical. (2) Functional depreciation. An old style floor plan with one bedroom through another doesn't work today. (3) External depreciation, influences. Is the subject near a noxious use industrial area? The cost approach isn't the answer to your question. (Besides the fact that land value is based on location and sales market approach. It's generally determined by extraction method). The answer is markets have to change. How can we change the nature of neighborhoods. We need public and private partnerships and legislation.  If we (as real estate appraisers) don't do our jobs correctly, people will get hurt. (Lenders and homeowners could lose money in foreclosures causing negative ripple effect on overall market, real estate market of the neighborhood and negative financial effect on minority families. 2008 bubble anyone?). Over all (improper home values) put family wealth at risk. There will be more foreclosures. The appraisal must be accurate for all to prosper. (The appraisal protects the lender and homeowner from loss)

Bunce: Freddie Mac has millions of appraisals. Freddie can investigate the appraisal gaps. What are you doing? (to P Perry)

P Perry: I agree. The appraised value is an opinion. The appraiser has discretion. How does this impact minority communities? We want more consistent valuations. Maybe we'll use some AVMs. We won't just tech our way out of it. Intrinsic racism is causing valuation issues. 

Bunce: AVMs, automated valuation models. Hybrids can eliminate bias and discrimination? Thoughts?

Sherman: I echo Dr Perry. AVM is multiple regression model, algorithm analysis of sales. The software writer can be biased. We don't eliminate bias that way. Our appraiser members (of the Appraisal Institute) are the gold standard in the industry. Our members may use AVM as an additional tool. The real gold standard is a live appraiser who physically examines the property and subject market.

A Perry: We will call for the hybrid approach. If a property falls below market rate (contract price?) it should trigger another appraisal, an AVM. We must hold appraisers accountable. Appraisers must explain the lower rate. Appeals are hard to come by. 90% of appeals are denied. We need a backup when something goes wrong. If someone feels low-balled, get a white person to stand in for them. Is it individual bias or just a bad appraiser. Is it individual bias or a structural problem. It's a structural problem if you use the price comparison approach. It can be mitigated by using data. 

Bunce: This is what New American Dream funding does (company plug). Other lenders should do the same. When we have appraisals that don't look right, the value is not coming in, it's way lower than sales price, we run an AVM to have that data to compare. That helps us talk to the appraiser. That is the fair and right thing to do. (It's also could be perceived as undo influence on an appraiser which could cause the lender to lose their license. The Dodd Frank Act was to help prevent undo influence over appraisers and the value)

P Perry: We test if hybrids offer more subjective value. AVMs are part of the solution to eliminate bias in appraisals. Appraisals should be more uniform. There should also be standardize testing of AVMs. (AVMs vary widely. Even the range price of each AVM value varies widely by over 25%. AVMs include MLS GLA which is generally larger than actual GLA)

Sherman: Diversity in appraisers and appraisals. We are supporting various minority programs to increase minorities in appraisers such as the minority in women scholarships program. We are trying to improve our diversity and understanding of the community. (Whites make up 85.4% of Appraisal Institute members. Males make up 75% of members even though the US is 50% males).

A Perry: We are doing an ashoka partnership. It's a housing development challenge with $1M prize for a valuable solution.

Bunce: There is no time for an extensive Q & A. New American Dream lending has recorded the meeting which will be available to view later.  Over 500 people attended. This is an important issue we are focused on. 

Bunce's screen then flashes to a photo of the black Florida couple, woman who stated they were racially discriminated against in a media article. After that a promotional video for the company played with only black people. It appears the company may be using this issue to sell mortgages. Many have been doing the same. 

Mary Cummins: I wrote these notes to the best of my ability. I'll post the link to the one hour video Zoom meeting when it's available. 

Below is a copy of the chat.

From Tiarra Hill to Everyone:  11:03 AM

Hello Everyone!  We are excited to have your attention regarding these hot topics. My name is Tiarra Hill a native North Carolinian, mother of twin teenage boys, a Sr. Loan Consultant and a member of the New American Dream Initiative.  I have been in banking and finance for almost 20 years and my passion is helping clients with their goal of homeownership.  


Today our panel will discuss Black Homeownership and how it is impacted by Property Valuation and Appraisal Bias.  We are taking questions during the last 10 minutes of the program, but feel free to interact in the chat with myself, Elexia Bostic or LaMonica McDuffie, Loan Originators at New American.

From Pastor Letty Butler to Everyone:  11:04 AM

Hello Everyone!

From Tiarra Hill to Everyone:  11:04 AM

Andre M. Perry is a Senior Fellow with the Brookings Metropolitan Policy Program, a scholar-in-residence at American University, and a columnist for the Hechinger Report. Perry is the author of the new book “Know Your Price: Valuing Black Lives and Property in America’s Black Cities,” which is currently available wherever books are sold. A nationally known and respected commentator on race, structural inequality, and education, Perry is a regular contributor to MSNBC and has been published by The New York Times, The Nation, The Washington Post, TheRoot.com and CNN.com. Perry has also made appearances on CNN, PBS, National Public Radio, NBC, and ABC. Perry’s research focuses on race and structural inequality, education, and economic inclusion. Perry’s recent scholarship at Brookings has analyzed Black-majority cities and institutions in America, focusing on valuable assets worthy of increased investment.

From LaMonica McDuffie to Everyone:  11:04 AM

Greetings!  My name is LaMonica McDuffie.  I am a Loan Consultant, a member of the New American Dream Initiative and I consistently provide a 5-star experience for all of my homebuyers.  Over the last year I helped 72 families achieve their dream of homeownership. 


Our discussion today will cover Property Valuation and Appraisal Bias as it pertains to Black Homeownership.  We are taking questions during the last 10 minutes of the program, but feel free to interact in the chat with myself, Tiarra Hill, or Elexia Bostic.

From Me to All Panelists:  11:05 AM

Hello from Mary Cummins real estate appraiser in Los Angeles, California.

From Elexia Bostic to Everyone:  11:06 AM

Jefferson L. Sherman, MAI, AI-GRS, of Highland Heights, Ohio, is the 2021 immediate past president of the Appraisal Institute. He also will continue to serve in 2021 on the Appraisal Institute’s Executive Committee and on its policy-setting Board of Directors, in addition to serving as National Nominating Committee chair. He served as the organization’s vice president in 2018 and as president-elect in 2019.

Sherman has served nationally on the Board of Directors, Finance Committee, Nominating Committee, Education Committee, International Relations Committee and Strategic Planning Committee (2017). He has served nearly continuously on the Region V committee since 1993, including many years as its parliamentarian. He also has served in chapter roles, including twice as an Appraisal Institute chapter president in Ohio, and has worked on two successful chapter merger teams. Sherman is principal of Sherman Valuation & Review, LLC, in Willoughby Hills, Ohio. He has taught courses for the Appraisal Institute since 1992 in 10 states and in Saudi Arabia. He also has served on two course development teams and was chief reviewer for the apartment appraisal course.

From Elexia Bostic to Everyone:  11:06 AM

Sherman has been a real estate professional for 45 years, including as a broker in Colorado and then in Michigan. His practice concentrates on the eminent domain field with emphasis on litigation review. He opened his original appraisal business, Johnson and Sherman, Inc., in Willoughby, Ohio, in 1990. The firm changed to Sherman-Andrzejczyk Group, Inc. in 2000 transitioning to Sherman Valuation & Review in 2019. During his years as a Realtor, he twice served as president of the Battle Creek (Michigan) Board of Realtors and was named Realtor of the Year in 1982.

From Tiarra Hill to Everyone:  11:09 AM

Andre M. Perry is a Senior Fellow with the Brookings Metropolitan Policy Program, a scholar-in-residence at American University, and a columnist for the Hechinger Report. Perry is the author of the new book “Know Your Price: Valuing Black Lives and Property in America’s Black Cities,” which is currently available wherever books are sold. A nationally known and respected commentator on race, structural inequality, and education, Perry is a regular contributor to MSNBC and has been published by The New York Times, The Nation, The Washington Post, TheRoot.com and CNN.com. Perry has also made appearances on CNN, PBS, National Public Radio, NBC, and ABC. Perry’s research focuses on race and structural inequality, education, and economic inclusion. Perry’s recent scholarship at Brookings has analyzed Black-majority cities and institutions in America, focusing on valuable assets worthy of increased investment.

Since the COVID-19 pandemic began, Perry has documented the underlying causes for the outsized number of coronavirus-related deaths in Black communities. Perry’s Brookings research has illuminated how certain forms of social distancing historically accelerated economic and social disparities between Black people and the rest of the country. Perry also mapped racial inequities in housing, income, and health to underscore how policy discrimination makes Black Americans more vulnerable to COVID-19.

From Tiarra Hill to Everyone:  11:09 AM

A native of Pittsburgh, Pa., Perry earned his Ph.D. in education policy and leadership from the University of Maryland College Park.

From LaMonica McDuffie to Everyone:  11:12 AM

Hello Sonia! Great question we will get an answer for you!

From LaMonica McDuffie to Everyone:  11:18 AM

Pamela Perry is vice president of equitable housing in the Single-Family Client and Community Engagement division. She focuses on increasing Freddie Mac’s thought leadership and impact to eradicate disparities in homeownership and expand wealth for Black American families, while creating solutions for communities of color more broadly. She also oversees Single-Family’s strategic innovation to support the organization’s mission to break through historical barriers to realizing a more equitable housing system for Black Americans.


Prior to this role, Ms. Perry was a senior associate general counsel in Freddie Mac’s Legal division. For nine years, she partnered with colleagues across Freddie Mac, regulators and housing advocates in promoting fair lending and access to credit for minority borrowers. 


Before Freddie Mac, she advised on solutions for complex transactions with firms such as J.P. Morgan Chase & Co. and the government of District of Columbia, where she served as deputy attorney general overseeing cou

From Nora Guerra to Everyone:  11:20 AM

Dr. Andre Perry's work is published in his book: Know Your Price: Valuing Black Lives and Property in America's Black Cities. 

From LaMonica McDuffie to Everyone:  11:21 AM

The devaluation of assets in Black neighborhoods

The case of residential property https://www.brookings.edu/research/devaluation-of-assets-in-black-neighborhoods/

From Tony Panciera to Everyone:  11:22 AM

^Also, strong recommendation of Dr. Perry's Book: Know Your Price https://www.brookings.edu/book/know-your-price/

From LaMonica McDuffie to Everyone:  11:23 AM

Know Your Price: Valuing Black Lives and Property in America’s Black Cities https://www.brookings.edu/book/know-your-price/

From Caitlin Green to Everyone:  11:24 AM

^I second or third that. A 2021 favorite read of mine.

From Craig Gilbert to Everyone:  11:24 AM

For Dr. Perry: 1. What is the difference between Value and Price?; 2.  Why don't buyers pay more in minority neighborhoods if 23% under priced? 3. Can appraisers require buyers to pay higher prices in minority neighborhoods? 4. What are your thoughts on Gentrification, where minorities complain that outsiders are running up prices in their neighborhoods and they can no longer afford to buy? 5. If appraisers over-value properties, and borrowers receive loans that exceed values, thereby reducing equity, is this a good thing for creating wealth?

From Susan Allen to Everyone:  11:30 AM

Can you please post or distribute a link to the Freddie research study Pam referenced? Thank you!

From roderick smith to Everyone:  11:31 AM

Will a copy of this recording be emailed out to attendees?

From Nora Guerra to Everyone:  11:33 AM

The Freddie Mac study that Pam just referenced is not yet published since we are finalizing our research. Once it is published it will be available on our website at Freddiemac.com 

From Elexia Bostic to Everyone:  11:35 AM

1. How did you hear about this event?

From LaMonica McDuffie to Everyone:  11:36 AM

What other topics would you like to discuss pertaining to increasing Black Homeownership?

From Tiarra Hill to Everyone:  11:37 AM

Did you think the information shared today was useful?

From Astrid Taylor to Everyone:  11:39 AM

I would like to see how the credit scoring models may be biased and how mortgage lending can use alternative credit for qualification instead of relying solely on credit scores from the 3 credit bureaus.

From Patricia Benavides to Everyone:  11:40 AM

As a new  Trainee,  I am interested in concepts or traits  that  can increase the trust or relationship of homeowners, in particular,  black homeowners and appraisers.   In other words, where can a Trainee begin? 

From Craig Gilbert to Everyone:  11:41 AM

Can the inclusion of Census Tract Numbers in appraisal reports work against borrowers in minority neighborhoods?

From Elexia Bostic to Everyone:  11:41 AM

Have you had an adverse experience with an appraisal?  If so, please tell us about it.

From Rachel Meadows to Everyone:  11:42 AM

I work for Councilwoman Cherelle Parker in Philadelphia. In April, she held a hearing to examine the race gap in home appraisals and its impact on homeownership and wealth accumulation in Philadelphia. After the hearing, she has now created a local Task Force to further look at this issue. The Task Force will 1) gather data at the local level, and 2) make recommendations for the local, state, and federal levels. Are any of the panelists aware of other cities that are also looking at this issue? It would be great to connect with another city/other cities to share information/best practices.

From Patricia Benavides to Everyone:  11:48 AM

@Rachel Mead- would you be able to post  a link to read more about Councilwoman Cherelle Parker's

 initiative?

From angela holman to Everyone:  11:48 AM

Homes are currently overpriced despite the CMA's supporting these overpriced homes.  We have a bubble.  

From Craig Gilbert to Everyone:  11:48 AM

Please ask Dr. Perry to answer the questions posed to him

From Rachel Meadows to Everyone:  11:49 AM

@LaMonica - Re. this question: What other topics would you like to discuss pertaining to increasing Black Homeownership? Here are some answers: Addressing aging housing stock or housing stock that needs modernization (aka housing preservation), access to loans via private banks (Philly had to create a government program to address this issue), ensuring that heirs view the home as an asset and not a liability, tangled titles (aka estate planning), predatory lending, reverse mortgages, foreclosures, ensuring a healthy balance in neighborhoods between homeowners and renters, staving off an influx of investor-owned rental properties, assisting new homeowners with purchasing homes, and for some neighborhoods, the need for neighborhood-wide succession planning (some neighborhoods in Philly consist of primarily older homeowners who won’t be around in 10-15 years)

From Dean Zantow to Everyone:  11:49 AM

The appraisal body of knowledge addresses the social construct, as Jeff said, through the concept of Public Interest Value. Generally, the analysis of public interest value tends to be driven by social,  political, and public policy goals rather than economic principles. From the 15th Edition of the Appraisal of Real Estate. 

From Rachel Meadows to Everyone:  11:52 AM

@Charles Lowery - my email address is rachel.meadows@phila.gov

@Patricia Benavides - Here are some article’s re. Councilwoman Parker’s work:

https://whyy.org/articles/home-appraisals-drive-americas-racial-wealth-gap-95-of-phillys-appraisers-are-white/

From Tiarra Hill to Everyone:  11:52 AM

Did you think the information shared today was useful?

From Rachel Meadows to Everyone:  11:53 AM

https://whyy.org/articles/philly-council-moves-to-hold-hearings-on-race-gap-in-philadelphia-appraisals/

https://philly.metro.us/council-considers-racial-bias-in-home-appraisals/

From Me (Mary Cummins) to All Panelists:  11:56 AM (I also sent in the question ahead of time)

Question to Andre Perry: The data in your "Devaluation of Assets in Black Neighborhoods" report was derived from the median Zillow listing price per square foot and the American Community Survey ACS data. Both of those values come from the owner, seller of the property and not real estate appraisers. They're also not the sales price or "valuation" of the property.


At the June 20, 2019 House Finance Committee a Committee member asked the panel of  real estate appraisal experts and also you if they thought real estate appraisers whom you state are mainly white discriminate against black homeowners when appraising their homes. You were the only person who raised your hand stating that appraisers discriminate against black homeowners.


What evidence do you have which supports your claim that white real estate appraisers discriminated against black homeowners and devalued their homes in your report?

From Patricia Benavides to Everyone:  11:56 AM

@ Rachel Meadows-  THANK YOU  for the articles!!

From LaMonica McDuffie to Everyone:  11:57 AM

We have 75 questions posed to you all from attendees and we are trying to answer the trends but will get responses to everyone.

From Andre Perry  to Everyone:  11:57 AM

LaMonica McDuffie to Panelists and Attendees (2:57 PM)

We have 75 questions posed to you

From LaMonica McDuffie to Everyone:  11:57 AM

So if you don't see your answer immediately don't be alarmed!

From Nora Guerra to Everyone:  11:57 AM

Brookings-Ashoka Challenge: https://challenge.economicarchitectureproject.org

From Kermiath McClendon to Everyone:  11:58 AM

^DOPE!

From Archie Emerson to Everyone:  11:59 AM

Great Job Everyone

From Elexia Bostic to Everyone:  11:59 AM

Thank you all for attending.  You can watch the replay on FB at https://www.facebook.com/newamericandreamteam

From Patricia Benavides to Everyone:  11:59 AM

Thank you for the conference- very informative!

From Andre Perry  to Everyone:  11:59 AM

Thank you everyone: Stay in touch @andreperryedu

Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the California Department of Fish and Game and the USDA. Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.


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