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| Mary Cummins, ASC, appraisal subcommittee, appraisal bias hearing, @asc.gov, real estate appraiser,real estate appraisal, los angeles, california, hud, marcia fudge, appraisal institute, aei, american enterprise institute, bias, discrimination, junia howell, paul austin, tenisha tate austin, craig steinley, Michael Fratantoni, Mortgage Bankers Association |
02/26/2024 I never got a reply about my comment. It is not public anywhere except here. I doubt anyone read my comment letter. They definitely didn't respond to any issue. If you send in a comment, post it publicly on your own. Otherwise it just ends up in a black hole. They tell you to send comments just to make it appear they are listening to you. They are not listening to appraisers. They are only listening to what fits their agenda which is the promotion of the false narrative of the old male male racist appraiser. Research by AEI has shown there is no racism in appraisals, see below.
ORIGINAL: Below is the comment letter I sent to the Appraisal Subcommittee in regard to the January 24, 2023 Appraisal Bias Hearing. It was confirmed as received. "Appraisal Bias Hearing via appsubcomm.onmicrosoft.com 2:07 PM (1 hour ago) We are in receipt of your message. Thank you for contacting the Appraisal Subcommittee." While they probably won't read it, it's now part of the Federal record for ASC and HUD.
Mary Cummins
February 7, 2023
Appraisal Subcommittee
Appraisal Bias Hearing Comment Letter
AppraisalBiasHearing@asc.gov
I watched the January 24, 2023 ASC Appraisal Bias hearing. Comments were requested after the hearing. This letter is my comment.
I've been a real estate appraiser in Los Angeles, California for 40 years. I've been a licensed California Certified Residential Appraiser since licenses were first offered in 1993/1994. I'm a Latino woman who speaks English and Spanish. I appraise property in the diverse county of Los Angeles and state of California.
There is no denying that racism exists in our country. We must do all we can to stop racism, sexism, ageism and all the other isms. As an appraiser I support fair, unbiased appraisal practices and valuations. I support using the scientific method and facts in order to identify the real problem in order to solve it.
I witnessed a lot of misinformation and disinformation during the hearing. Marcia Fudge the head of HUD and some of the specifically chosen speakers made racist and other statements which are not supported by facts and evidence. While there is an income, wealth and home value gap among whites, blacks and Latinos it's not caused by real estate appraisers. It's caused by the income gap. That is the real problem which must be solved. Blaming appraisers for the income gap will never solve the real underlying problem.
Government research has shown that there is an income gap between whites, blacks and Latinos ( AEI Housing Center Response to Perry and Rothwell, 2021, https://www.aei.org/research-products/report/aei-housing-center-response-to-perry-and-rothwell-2021/ ). Whites make and have more money than blacks and Latinos. Men make more than women. Married couples make more than singles. The income gap is the cause of the wealth gap including the generational wealth gap. It's the cause of the difference in value among white and black, Latino owned homes.
Research has shown that people who make more money have more money and buy more expensive homes (see link above). People buy homes they can afford in areas they can afford. People who make more money also buy more expensive cars. The difference in value of the cars is also not caused by real estate appraisers.
If the race and color of the homeowners were the cause of the differences in home valuations, why do identical white owned homes in the same areas of black, Latino owned homes have the same value as black, Latino owned homes? The value has nothing to do with race or skin color but location. Everyone knows the three main indicators of value are LOCATION, LOCATION, LOCATION. A home in a small town in Ohio with few amenities is generally worth less than a home of the same size in prime Beverly Hills, California. The value is mainly in the dirt.
Fudge and some of the others spent their time attacking and blaming "old white male" real estate appraisers for the home value gap. Appraisers report market value based on the sound economic theory of matched pairs analysis. This same theory has been used since the beginning of time to value all assets. This is set by the concepts of the free market and willing and able buyers and sellers. Fudge's promotion of the false narrative of the "racist appraiser" will never solve the real problem which is the income gap.
I will now reply to the individual instances of misinformation by the speakers in order starting with Marcia Fudge.
I. Marcia Fudge, HUD
Marcia Fudge is one of the heads of the PAVE Task Force. American Enterprise Institute (AEI) provided research, data and information to the Task Force ( AEI Comments on PAVE, March 2022 https://www.aei.org/research-products/report/comments-on-the-pave-report/ ) which proved the real cause of the home value gap is the income gap. Fudge knows this yet instead irresponsibly promotes the false narrative of the "racist appraiser" as the cause of the home value gap. Fudge promotes Andre Perry's false, misleading and debunked "paper" instead of independent verifiable research and facts. Perry's paper was based on robot valuations and not appraisers.
While Fudge states she hates and fights racism Fudge's multiple comments against white people reflect her own racism. It appears that Fudge prefers to falsely state that the problem is (white) real estate appraisers because her department HUD oversees those issues. HUD has received extra funding for this issue even though the real cause of the problem is not within control of her department. Government funding should be provided to the Departments that can actually solve the income gap problem. This is why we must first determine and state the problem which is the income gap.
Fudge stated that property tax paying for police, fire and schools was unconstitutional. It's inconceivable that the head of a major US government department would make this statement which is a violation of her oath. When Fudge became the head of HUD she took an oath March 2021 stating "I will support and defend the Constitution of the United States (snip), that I will bear true faith and allegiance to the same; I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God."
Fudge inferred that she wanted property tax assessment values to rise so people would pay more property tax so they could get more police, fire protection and money for local schools. She doesn't realize that most older retired disabled people can't afford to pay more taxes and keep their homes. They'd be forced to sell with higher taxes. Appraisers don't even make property value assessments. Those are made by Tax Assessors.
Fudge stated that black people remove personal photos, items to increase home value. That is false. All real estate agents tell all home owners of every color to remove personal articles such as photos, collectibles from their home. It shows the home bigger and better. Buyers don't want to see any other person reflected in the home. They want to envision themselves in a blank slate of a home. It's not about race.
Fudge stated she started the appraisal appeal process for racial bias. Appraisal appeal, Reconsideration of Value (ROV) have ALWAYS been available to borrowers of all types. They can appeal based on any reason. A difference in appraised value and contract price is not about bias. It happens more in black, Latino areas based on the home values and not the race. Research by AEI based on government loan documents proved there is no effect of race on home value ( AEI, How Common is Appraiser Racial Bias https://www.aei.org/how-common-is-appraiser-racial-bias/ ). AEI presented this to the government in the meeting about the PAVE task force yet Fudge keeps denying these facts.
Fudge brought up her home value previously. She said her older home is worth less (than a white person's home up the street) BECAUSE SHE IS BLACK. I included a valuation of her home and of the NEW, LUXURY homes up, across the street from her in a past article. It's a private development of new luxury homes tucked away off the main street. I have no idea if the home owners are all white. I doubt Fudge does either. There is a reason why those homes are worth more. They're new, luxury, in a new development, with a clubhouse, off the main street highway... Not all homes of the same size in the same county are worth the same. An old run down home in South Los Angeles is worth less than a new one of the same size in Beverly Hills. If Fudge doesn't know this basic appraisal theory, she should resign because she's clearly unqualified to run the Department of Housing and Urban Development.
II. Dr. Junia Howell
Howell prefaced her research by basically stating without any proof that appraisers are racist and appraise homes in black, Latino areas for less than areas with more white owned homes. Howell promotes the false narrative of the racist appraiser. Howell states she did research on property values in white, black and Latino areas in Texas. Howell supports this with a chart showing the difference in home values of predominantly white vs black, Latino owned homes. We're back to the income gap. Blacks, Latinos make less money than whites. For this reason they buy less expensive homes in less expensive areas. I can only assume they promote this falsity for their personal agenda of wanting more funding to pay them for more research.
Howell doesn't understand basic real estate cycles, i.e. Growth, Stability, Decline, Revitalization. Howell stated areas which were redlined but are now mainly white owned increased in value. Areas which were not redlined but are now mainly black, Latino have decreased in value. Howell states this proves it's based on race when it actually proves it's based on real estate cycles and income. When values go up in an area, people with more money buy and own those homes. When values go down, blacks, Latinos are more likely to buy and own the homes because they make less money. When people get pushed out of more expensive areas, they buy homes in lower priced surrounding areas. Those lower priced areas are generally more black, Latino. Some call this "gentrification" but it's just a real estate cycle called "revitalization." It's all because of the income, wealth gap.
Howell misstates "redlining" as a "map based on race of inhabitants." There were many, many factors involved in the original Federal Housing Administration (FHA) lending policies. They were based on income on inhabitants, age of buildings, condition of buildings, beds/baths, location... to determine loan risks. We still use all of those factors today EXCEPT race. It's racist and against the law to use race, religions or any other similar factor.
Howell stated that whites in the US government used these risk maps to intentionally value white owned property higher than black, POC owned property. Howell is so uneducated in this matter that she doesn't even realize that back in the 1930's most areas which were mainly inhabited by POC were actually owned by whites. The risk maps prevented white property owners from receiving lower cost Federal guaranteed loans. Howell stated "White, affluent areas were appraised as most valuable." The key here is "affluent areas." It's the income wealth gap. Correlation does not equal causation.
There are poor white areas in the US. How does Howell explain the difference in property values between wealthy and less wealthy white owned properties? She doesn't. It's not the color of their skin but the income gap. Howell made many more false and uneducated statements before stating that more research should be done. Howell wants more money to do more uneducated flawed research to promote the false narrative of the "racist appraiser."
III. Paul Austin and Tenisha Tate-Austin
I have covered this case in great detail because I'm an appraiser in California where the Tate's home is located. While the Austins may feel the difference in two home appraisals was due to racial discrimination the facts show it was not. Based on my research and experience the first appraiser used the best local comparables in Marin City and came in at market value. The second higher appraisal used dissimilar comparables in a very different more affluent area in Mill Valley much farther away from the subject. That is why it came in over market value. Marin City was built on swamp land as a Federal low income poor quality housing project built by the lowest bidder. The Tate's home was built cheaply using telephone poles on very steep previously unbuildable land. Mill Valley is an upscale community with high quality larger homes and some of the best schools and amenities in the state.
The Tates stated in their testimony and lawsuit that Marin City is basically populated by African Americans while Mill Valley is white. The Tates wanted the appraiser to only use high valued comps from Mill Valley and not lower valued comps from Marin City right next to their home. That would violate Federal appraising regulations besides being bank fraud.
The Tates believe their whitewashing of their home increased the second appraisal value. It didn't. What increased the value was another appraiser with lower ethics who was most likely pressured by maybe the AMC, Lender to come in higher. The second appraiser is the reason why the first appraiser was falsely sued for coming in "low." The second appraiser should be sued for bank fraud, appraisal violations and lose their license.
IV. Michael Fratantoni, Mortgage Bankers Association
Frantantoni basically promoted the MBA. Frantantoni suggested Automated Valuation Methods (AVMs) could reduce bias in appraisals. AVMs don't reduce but increase bias. AVMs are robots that don't actually see or inspect the home. They base their value on recently sold allegedly similar homes based on home/lot size, bed/bath count and age. They don't know if the home actually exists, its condition, upgrades, view, lot type, specific location in a neighborhood, actual size, true bed/bath count, permitted/unpermitted additions... AVMs value average homes in poor condition over market value and improved homes with views under market value. Marcia Fudge stated she also supports AVMs. Zillow's AVM actually produced the false and misleading data used in Andre Perry's "paper."
V. Craig Steinley, President, the Appraisal Institute, AI
The AI is a non-government non-profit organization. It costs about $15,000 to become an MAI AI designated appraiser. For this reason AI mainly represents wealthy older white male appraisers. It does not represent the average appraiser or most appraisers in the US.
AI wants to maintain its working relationship with the government. For that reason they support many though not all falsehoods stated by Fudge, HUD and other some government agencies. In their letter they promote their own actions as supporting the government.
That said AI makes some important points about AVMs and the Sales Comparison Approach.
AVMs are not reliable. "One thing to be noted is that a good portion of the research that has been conducted on valuation bias has evaluated automated valuation model data – not appraisal data, including the contrasting research from the Brookings Institution and the American Enterprise Institute. We cannot overlook the Zillow CEO’s statement in the 4th quarter of 2021 concerning the “difficulty of accurately estimating market value” as a concern for AVM reliability."
Sales Comparison Approach is reliable. Some have called for the "elimination of the sales comparison approach in appraisal. The BRSPT suggests those recommendations be ignored, and we will go on record as being outright opposed to such efforts. The sales comparison approach is grounded in economic theory, and it is universally accepted throughout the world." Some in government have suggested getting rid of the sales comparison approach which would destroy our economy. No bank would give a loan and no investor would buy a loan that is not based on an appraisal using the sales comparison approach.
In conclusion the cause of the difference in home valuations between whites and blacks, Latinos is the direct result of the income gap. The government needs to recognize and state the real problem so it can be solved. Blaming real estate appraisers will never solve the income gap or the home value gap. Blaming appraisers for the income gap is as ridiculous as blaming appraisers for gun violence and gas prices.
Please, rely on qualified independent scientific research and facts. Promoting the false narrative and attacking appraisers instead of trying to solve the real issue hurts everyone. Throwing money at HUD won't fix the income gap. Please, fix the income gap and all its causes so we all may experience the American Dream of owning a valuable home.
Mary Cummins
California Certified Residential Appraiser
License # AR010207
Los Angeles, California
http://www.MaryCummins.com
https://www.facebook.com/CumminsRealEstateServices
Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.
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