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

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. 

FOIA request was made for all information related to the complaint. Results will be posted here. 

Based on my review of a few of these alleged cases of racism in appraising it appears some of these cases partly stem from the lay person not understanding the appraisal, appraisal process or appraised value. Because they don't understand everything, have experienced racism in the past in other ways, have seen the recent false and misleading news articles about racism in appraising they assume racism must be the cause of the value. People misunderstand situations and jump to the wrong conclusions every day. It would be great if people could first ask the appraiser, lender questions before assuming it was racism and attacking the appraiser, profession and all people of a different race/color. Assuming things about people of a specific race/color without evidence is actually the definition of racism. It's hypocritical for someone claiming racism to behave in a racist manner.

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.


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, July 4, 2021

Main reasons home loans, mortgages are denied. It's not the appraiser. - by Mary Cummins

main reasons mortgage home loans denied, mary cummins, los angeles, california, real estate, home loan, 

Here are the main reasons mortgage loans are denied. It's not the appraiser or appraisal. 

1. Debt to income ratio (37.2% denial rate).

Your debt to income ratio (DTI ratio) should be no great than 43%. You can improve this by paying off debt, reducing interest rate on debt or renegotiating debt to lower the monthly debt payments. Your net assets (total assets minus liabilities) still factor into the loan so make sure the debt balance doesn't increase too much when you lower the rate or payment. 

Another thing they consider is your monthly housing cost ratio which is (monthly housing costs / monthly income). "The top ratio is calculated by dividing your new monthly mortgage payment by your monthly gross income. Typically, this ratio should not exceed 28%. The bottom ratio is equal to your new monthly mortgage payment plus your monthly debt divided by your gross income per month. Typically, this ratio should not exceed 36%." 

As a rule of thumb your monthly rent, utilities or mortgage, taxes, insurance, home maintenance, utilities should not exceed 30% of your gross monthly income. If your housing cost is over 30%, you are considered cost burdened and have a high risk of not being able to pay your rent or mortgage. All poor people, people making minimum wage, moderate earners are cost burdened paying over 50-70% of housing costs if they live in Los Angeles or similar areas. Median rent for an average one bedroom is $2,100/month here. Two minimum wage earners working full time can barely afford that if they don't eat much. You should not be buying a home at the moment. Work on increasing your income. I know it's a "let them eat cake" thing to say and I agree. It's not easy for most people.

2. Credit history 34.8%. 

You need a FICO score of 580 to 620 absolute minimum to get a home loan. You can improve this by always paying your bills on time. Make sure you have some little loans like a small balance on a credit card, gas card, department store card...to build credit. Start that at least two years before you try to buy a home. Start with one card only and make payments. After a year add another. Don't apply for a lot all at once. You'll be denied and end up with many inquiries on your credit report which is a big red flag for denial. And remember, the lower your FICO score, the higher the risk to the lender and the higher borrowing rate for you. Get your score as high as possible so you can save money. It's doesn't make sense that poor people pay higher interest rates but it's related to the higher risk for the lender. 

3. Collateral 19.7%. 

Generally the home is the collateral for the loan. You can also use other real estate or assets such as bonds, life insurance or investments. Your parents could cross collateralize their home for your home loan if they love you more than life itself. The total loan to value ratio should be about 80%. This would be about a 20% down payment. If you want to only put down 5%, the risk and cost goes up and you're much more likely to be denied. 

It's possible that the issue was not the appraised value but the fact it needs repairs, has broken windows, is in a flood, wildfire, landslide, hurricane, tsunami ... zone, has unpermitted additions, is over 150 years old, is next door to an oil refinery... If you are doing a low down payment loan, don't buy a fixer. You're more likely to be rejected because you'll need down payment money and the money to fix it. 

4. Other 12.9%

Everything other than what is listed here. The lender just can't discriminate against you based on race, religion, gender... The lender can deny you the loan based on credit, income, assets, liabilities and everything else in this article. That is legal. 

5. Credit application incomplete 8.9%

You'd think this would be a no brainer but it's not. People either don't want to complete the application or just don't. This is only for loan applications which were submitted and not for loan applications which were started but never submitted.

6. Unverifiable information 6.7%

Unverifiable information arises from inaccuracies in an applicant’s employment history or tax records or discrepancies between the application and credit report. This could be from unreported income that doesn't show up on taxes, tax returns which show no real income for years, bank statements which don't match stated income, a loan you paid off which isn't on your credit report, bills you paid which weren't reported or the person is just plain lying on the application or their taxes or both. 

7. Insufficient cash 4.0%

You must have sufficient funds to cover the down payment and closing costs and fees or lenders may deny their application. You generally can't borrow the down payment or fees. Research has shown if someone can't even save for a down payment, they are not credit worthy and there's a higher chance of the loan going under. If you haven't saved enough for a down payment, you're not ready to buy a home. Work on your debts, budget, income and save some money. You should have a 20% down payment and six months worth of monthly expenses saved before you buy a home. You should also meet all the other requirements I've listed here.

8. Employment history 1.8%

Lenders want to see that applicants have worked in the same job for at least two years. They want a stable, steady earner. This also means you can't just get your Uncle Benny to lie and state you worked for him for two years. They need an independent way to verify it usually with W2s, 1099's, bank statements, cashed checks, verifiable tax returns... In the 1980's to 2009 mortgage brokers actually forged tax returns, W2s, 1099's and bank statements or they did no document loans which didn't require them. Those are a few reasons we had three real estate busts during that time. Thanks to Obama and Dodd Frank we are less likely to have another bust because the borrowers are more creditworthy today due to independent verification. 

9. Mortgage insurance denied .1%

"Mortgage insurance protects the lender and allows borrowers making a down payment of less than 20% to still qualify for a home loan. Applicants who are denied mortgage insurance that need it are also likely to be declined for their loan." Mortgage insurance is insurance to pay the monthly Principle Interest Taxes Insurance (PITI) payment if the borrower can't make the payment. It's added to the monthly mortgage payment. As it is mortgage insurance is for high risk borrowers. To be denied that means you are a super crazy high risk borrower. If you're denied mortgage insurance, you are not credit worthy or ready to buy a home. Go work on yourself. Work to increase your income, reduce your budget and expenses, increase your savings and try again much later. 

https://constructioncoverage.com/research/top-reasons-mortgage-loans-are-denied-2021

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

Saturday, July 3, 2021

How Home Owners Associations, HOAs, condominium buildings function, order and pay for repairs - by Mary Cummins

Home Owners Association, HOA, condominium, mary cummins, los angeles, california, real estate appraiser, funds, repairs, regulations, laws, legislation, cooperative, board of directors, corporation
Home Owners Association, HOA, condominium, mary cummins, los angeles, california, real estate appraiser, funds, repairs, regulations, laws, legislation, cooperative, board of directors, corporation


People have been asking why didn't the Miami, Florida Champlain Towers South Home Owners Association  just do the recommended repairs before the building collapsed instead of wasting time arguing about it. It's not that easy. I'll explain how HOAs work. 

Condominium buildings and Cooperatives are owned collectively by the owners of all the individual units combined. Each owns a percentage based on what percentage they own of the total building. A Board of Directors controls the Home Owners Association which is a corporation made up of the condo owners. They each get a vote according to their percentage ownership of the project. If someone owns two units or a large top floor penthouse, they may have more votes or voting power than someone who just owns a small condo. 

The HOA must vote to approve major special assessments and expenditures beyond the normal monthly HOA dues or repair funds. You need money to pay for repairs especially $15,000,000 worth. 

In this case the Board didn't realize the building could soon collapse. The Board is made up of condo owners who would definitely care if their condo could collapse and be worthless or they could die. If the engineer involved thought the building could collapse, he would have reported it to Building and Safety. If Building and Safety inspected and agreed the building could collapse, they would have red tagged it stating no one is allowed in or around the building and it may have to be demolished (like they just did with the remaining part of the building as of 07/04/2021). If they thought it just needed some repairs, they would have yellow tagged it ordering the repairs. 

The HOA would have to agree to pay for, order and make repairs or people can't live in their condos. If most vote for the special assessment, it passes. If a condo owner doesn't pay, the special assessment will become a lien against their condo unit. HOA may then need to get a loan to pay for repairs if many owners refuse or just can't pay the assessment. HOA loans aren't cheap or easy. It would also be difficult to sell a condo with a huge looming special assessment or needed repairs. If you're an elderly person on a fixed income, bought your condo cheap many years ago and have no savings, you may not be able to afford the assessment. Some owners sold because they couldn't afford the assessment. They are the lucky ones today. 

I'm sure many HOAs are completely reviewing their maintenance and repair schedules, HOA dues and repair funds after this horrible disaster. So are regular apartment and office buildings. I'm sure cities, counties and states are also reviewing regulations and protocols so another tragedy can hopefully be averted in the future. 

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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