Racial Bias in Real Estate: Is it the Appraisers’ Fault?
The best analysis I have ever read.
By Maureen Sweeney, SRA
Bias in Housing is Not Appraisers’ Fault
Excerpt: The appraiser must be independent, impartial, and objective. In a mortgage transaction, the appraiser evaluates the property that is to be used as collateral in a mortgage finance transaction. The appraisal is provided to the lender, who uses the appraisal as one of the many criteria used to underwrite the loan and determine if a mortgage loan will be funded or not. Contrary to what some may believe, the appraiser does not make underwriting or lending decisions.
Discrimination, including the long list of anti-cultural, anti-national, and anti-ethnic terms, is a multi-layered, multi-cultural, and multi-generational issue. The systematic, historic, and institutional causes of the various business and government policies and practices need to be addressed and cured. We do not blame the doctor for a cancer diagnosis.
We do not blame the journalist as the cause of the natural disaster that is reported on the evening news. Why is the appraiser blamed for reporting on the real estate market?
To read more, click here
My comment: By far the best, understandable analysis I have read. No whining or ranting. Many appraiser comments and forwarding. Comprehensive post with many references. I had not heard about some of the references. Appraisers are not the problem. We have been told for many decades to be knowledgeable and aware of Fair Housing issues.
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NOTE: Please scroll down to read the other topics in this long blog post on Intended users, Fannie Update, Statisticsunusual homes, mortgage origination stats, etc.
12 Floating Homes in many different states
Excerpts: 2466 Westlake Ave N, Unit 12, Seattle, WA
Price: $3,000,000 (Photo above)
Hawk’s Nest: One of Seattle’s iconic Lake Union floating homes, this was built in 1992 and has been featured in the New York Times and on HGTV.
… rooftop deck with views of the city and harbor. Inside, the three-bedroom, 1,750-square-foot contemporary retreat has cherry cabinetry throughout, a sauna, a walk-in closet, and an office. The property comes with an accessory raft, boat mooring, and three city parking spots.
2394 Mariner Square Dr, Unit C1, Alameda, CA
Built in 1973 and has two bedrooms and 1,152 square feet of updated, light-filled interiors.
Views of the Oakland skyline and sits close to BART and a ferry for commuting to San Francisco.
The median price of detached homes is around $1,000,00 for the Bay Area, including Alameda). This is a low price, lots cheaper than a studio condo!!
To see more fotos and read more, click here
My comments: Of course, I had to include an Alameda Floating Home!! They are listed on the local MLS. There used to be many scattered around San Francisco Bay, in widely varying conditions. Most were required to move to marinas, but there are still some anchored out in the bay (no utilities, etc.) When I moved here in the late 1960s, there were many. Those close to Alameda were all required to move out, and none are left now. There were a few derelict boats anchored out behind my house in the 1990s. Anchor-outs started during the depression.
The invasion of institutional investors in the housing market
By Ryan Lundquist
Excerpt: A couple of weeks ago, a viral story came out about a fund called BlackRock who was reported to be buying everything in sight and paying 20-50% above market value. Let’s talk about this as well as other institutional investors right now.
The skinny on BlackRock: When viral news about BlackRock broke, I read this Wall Street Journal piece like many others. This may not be a popular take, but I felt the article was lacking data to support some of the sensational narratives being spun.
To read more, click here
My comments: Over 25 comments as of yesterday afternoon. Hot Topic!! What’s happening in your market? Lots of links to national and regional info in this article.Getting too many ad-only emails?
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Fannie Update June 2021
In the June 2021 edition, we discuss the importance of appraisals in the lending process, describe how our Appraiser Quality Monitoring (AQM) process works, and, as media reports of racial bias in appraisals increase, we consider implications of some problematic words and phrases.
- Two fundamental roles of the appraiser in the lending process
- Avoiding problematic phrases
- Appraising MH (modular homes)? Or do you want to?
- AQM letters and state tips
Excerpts: Appraisers may not realize all the ways their reports can impact their clients once the appraisals leave their desks. Lenders rely on appraisals not only for valuation but also to assist in determining property eligibility and Selling Guide compliance….
If the value is not adequately supported, as outlined in our Selling Guide, we may
mis-price the risk associated with the loan.
To read more, click here
My comments: One of the best practical Fannie Updates I have read. For example, very little has been written on what AQM means for appraisers. Appraiser Quality Management updates include a list of appraisers not allowed to do appraisals for Fannie. No one except lenders has access to the list. I have heard there are not many names on the list. Fannie has some details for appraisers.
There’s No Correct Answer in Appraising
By Steven W. Vehmeier
Excerpt: The very first truly “knowledgeable” (one with an insight, understanding, or clear perception of a truth, fact, or subject) property purchaser I met was nearly four decades ago. In this case, he was also the client. He was buying an 1800s Victorian house in which his parents had operated a retail business for many years. His intent was to buy the house from his parents and relocate his law offices there.
He ordered appraisals from three different appraisers, and the purchase price was to be the average of the three value opinions. He knew there’s no correct answer in appraising.
To read more, click here
My comments: Very well written and relates to lender appraisal issues. Worth reading. Maybe forward to some clients?? What I always say to a client where there is more than one interested party (divorce, for example), is “If no one likes my value, it must be okay!!” I always recommend getting more than one appraisal, of course. I used to do many relocation appraisals where two (or three) appraisers appraise the same home. If our values were the same, it was suspicious. Collusion?
Is Statistics always Scary?
By George Dell, MAI, SRA
Excerpt: Statistics is a necessary part of modernized valuation, and it is very much misunderstood. The main problem with statistics is words!
First, let’s get one word out of the way – A parameter is a summary number of any data set, such as mean, median, maximum, minimum, range, quantile, or variation (standard deviation). We use parameters because it helps the human brain understand groups of data (beyond 6 or 7 data points).
The word statistics itself is used (and misused) for at least two main meanings. Statistics:
Is the study of data;
Are parameters a sample, when used to approximate population parameters.
Whenever you see the word statistics, ask yourself which meaning does the writer mean. Often the writer doesn’t really know.
To read more, click here
My comments: George is a regular contributor to the monthly Appraisal Today newsletter. He often has some different ideas!
HOW TO USE THE NUMBERS BELOW. Appraisals are ordered after the loan application. These numbers tell you the future for the next few weeks. For more information on how they are compiled, go to www.mbaa.org Note: I publish a graph of this data every month in my paid monthly newsletter, Appraisal Today. For more information or get a FREE sample issue go to https://www.appraisaltoday.com/products.htm or send an email to firstname.lastname@example.org . Or call 800-839-0227, MTW 7 AM to noon, Pacific time.
Mortgage applications increased 2.1 percent from one week earlier
WASHINGTON, D.C. (June 23, 2021) – Mortgage applications increased 2.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 18, 2021.
The Market Composite Index, a measure of mortgage loan application volume, increased 2.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 1 percent compared with the previous week. The Refinance Index increased 3 percent from the previous week and was 9 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 14 percent lower than the same week one year ago.
“Mortgage rates increased last week, with the 30-year fixed rate rising to 3.18 percent – the highest level in a month. Despite the jump in rates, refinances increased for the second consecutive week, pushed higher by a 4 percent bump in conventional refinance applications,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase applications have regained an upward trend over the past few weeks. Activity was slightly higher for the third straight week, but remained lower than the same week a year ago. Government purchase applications drove most of last week’s increase, which also contributed to a slightly lower overall average purchase loan size.”
The refinance share of mortgage activity increased to 62.5 percent of total applications from 61.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.9 percent of total applications.
The FHA share of total applications decreased to 9.5 percent from 9.6 percent the week prior. The VA share of total applications decreased to 11.2 percent from 11.5 percent the week prior. The USDA share of total applications remained unchanged from 0.5 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.18 percent from 3.11 percent, with points increasing to 0.48 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.26 percent from 3.20 percent, with points decreasing to 0.44 from 0.46 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.21 percent from 3.14 percent, with points increasing to 0.34 from 0.33 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 2.58 percent from 2.49 percent, with points increasing to 0.39 from 0.25 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs remained unchanged at 2.69 percent, with points decreasing to 0.26 from 0.38 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.
Ann O’Rourke, MAI, SRA, MBA
Appraiser and Publisher Appraisal Today
1826 Clement Ave. Suite 203 Alameda, CA 94501