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Red lining

Discussion in 'General Appraisal Discussion' started by Eli, Jul 10, 2011.

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  1. Eli

    Eli Elite Member

    225
    May 12, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Tennessee
    Do any of you remember the focus on red lining where lenders were scrutinized for not lending in certain areas? Man, we have gone a far cry from that. Hard to comprehend. Also bad marketing on lenders part and they are losing money as a result. There are a lot of credit worthy customers in those areas today that lenders are not even going after. Doesn't make sense.
     
  2. Eli

    Eli Elite Member

    225
    May 12, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Tennessee
    Investors with millions in cash in my market have always bought in bad times. If you are banker, why wouldn't you lend in bad times. There is far less risk to lend today than 5 years ago when the bubble was ready to bust. Especially to a credit worthy borrower. Credit wasn't that important back then.
     
  3. rescom

    rescom Senior Member

    0
    Jul 30, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Missouri
    If I was a lender, I wouldn't lend a single dollar to anyone in North St. Louis City. It must be 95%+ vacant/foreclosed. I would red line that entire area.
     
  4. Eli

    Eli Elite Member

    225
    May 12, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Tennessee
    Good point but remember the loan is predominantly to the borrower or should be, which has not been the case. And, do you believe that it will continue to go down? When the population keeps increasing, where are they going to live? In your neighborhood? Maybe without lending to credit worthy borrowers.
     
  5. Eli

    Eli Elite Member

    225
    May 12, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Tennessee
    And I am not just talking about owner occupants here because I know they are few are far between in depressed areas, but I am also talking about investors whom are credit worthy. The demand for housing will keep going up. If I was a lender, it is a lot safer know than 5 years ago in my opinion. Things could change, but population increase is not unless armageddon comes.
     
  6. Eli

    Eli Elite Member

    225
    May 12, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Tennessee
    Alright rescom, I had a mortgage broker before Lehman Bros bank went down tell me that if you could breath in a mirror and fog it, he could get you a mortgage loan. He said afterwards, it was like somebody turned the water hose off. What a great opportunity for banks now. They could go into N. Saint Louis and say hey...we partnered with joe the plumber to rehabilitate this block and provide safe and affordable housing for the community. I work the ghetto in appraisals and I know if individual investors can do it paying cash, banks certainly can. Think of the positive marketing campaign. I'm tired of bad news.
     
  7. normando

    normando Senior Member

    40
    May 2, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    In California, the poor areas have prices decreased like 60% from 4 years ago and the rich areas (good income jobs) have prices decreased like 15% from 4 years ago. The point is that the rich are doing well and are not affected in our current recession. However, the poor areas are struggling and have many foreclosures and short sales and getting worse. I've never seen such a wide disparity. Investors are buying bargain prices in the depressed areas but I see a continual decreasing market. For the risks investors are taking in the poor areas, I expect a higher rate of return especially with management problems.
    In the hey days, the poor had access to easy money so prices were overflated. Now prices have decreased significantly and lenders have taken a big hit. Lenders do not want to lend in a decling market and I don't blame them.
    In the past, I remembered my bank being audited in determing how many loans were being loaned in the poor areas. Now, I don't know if that's a priority of the government.
    I'm not sure if lenders are redlining but most of the borrowers who can qualify and have enough equity are the ones with well paying jobs which our current system is rewarding.
    I think the goal of the government in past few years is to strenghten the banks, whatever it takes, so the banks can lend and help our economy.
     
  8. J Grant

    J Grant Elite Member

    542
    Dec 9, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    I hope private money gets in the game and starts offering mortgages. Waiting for banks to loan in bad times is like trying to get health insurance for a pre exitsting condition, those that need it are not going to get it. That is the corpoerate mentality and the corporate mentality is all about stock holders and protecting their interests and has nothing to do with real people or doing what is right or good for the economy or good for a neighorhood or exending credit to credit worthy people. IF a bank sees more opportunity to inevest abroad that is what they will do for their stockholders. Invest in and rebuild their own country? No. Maybe the Chinese will see opportunity here in the depressed prices and form a poool of funds and lend.

    Actually, around the country, in certain areas, pools of investors are buying up large sections of property and renting them or holding them till market gets better. Perhaps some will offer owner financing as well.
     
    Last edited: Jul 11, 2011
  9. fractal7221

    fractal7221 Member

    0
    May 26, 2011
    Professional Status:
    Banking/Mortgage Industry
    State:
    Pennsylvania
    The overt redlining is all but dead. Its been replaced by "soft" redlining by some of the less scrupulous banks. Some banks will keep the isolated from low income neighborhoods by not opening any branches in the low income areas.

    This is also illegal, but far more difficult to prove. Especially since many states have restrictions on how close branches can be to one another. You may see a branch on either side of a low income community, but none inside. It might be soft redlining, but its almost impossible to prove since the bank can simply say they cannot open an office there as they have other branches that are too close.

    Another way some banks can soft redlining is to place their branch far from public transportation stops such as bus stops. Again, hard to prove that a branch location was specifically chosen to be difficult for low income people to go to.
     
  10. Eli

    Eli Elite Member

    225
    May 12, 2007
    Professional Status:
    Certified General Appraiser
    State:
    Tennessee
    I work the low income areas and I have many realtors tell me that if the loan is less than $30,000, the bank won't talk to you. How does that fit into fair lending? Yet investors are paying cash in the area and making money.
     
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