Teaching Appraisers to be Biased?

[CGinMN]

I like it. I disagree, but I like it nonetheless. I believe the initial redlining practices created a wealth gap that has persisted - and been exacerbated - to this day. I do not disagree, however, that opportunity gap is also responsible. I further agree that it is all circular.

I'm sure we'll continue to disagree, but I would say the only thing impacting home values should be home prices (i.e. market behavior). I think it is dangerous to say anything else (redlining, schools, wealth gap, appraisers, appraiser methodology, etc) is responsible for home values. Maybe it's semantics, but I think it's an important distinction because right now we are being accused of making markets.

 

[CGinMN]

Why would working on an assignment that was to be used for a 125% or 140% LTV mortgage be unethical if that program was tolerated or enabled or encouraged or required by the govt? If this is the direction our society has chosen to move then who are we to say it's professionally unethical to answer the questions which are actually being asked?

It sounds like you're using the Nuremberg defense. Just because something is required by the government and our society has accepted it doesn't remove our personal and professional ethical obligations.

 

[shrubberyvaluation]

If the politicians want to enable or compel lenders to increase their LTVs above MV there's no appraiser who has any (non-political) reason to object to that. I don't care what the lenders do or what happens to them if they engage in 125% LTVs as an entitlement to certain groups. It's none of my business how those decisions are made or how they play out IRL.

I don't see appraisers getting emotionally worked up over the entitlement aspects of the VA underwriting for the SFRs or Section 8 rents with the multi-family. Nobody cares. The same apathy would logically apply to any parallel application.

What I do object to is coercing the appraisers to cross the line into client advocacy in order to amplify - on the undisclosed basis - the discretion being used in these transactions. I don't want to get involved with client advocacy. If they are required or desirous of providing the benefit then I want the responsibility for that discretion to be fairly and accurately attributed to the people making those decisions , and not obscured from view by pressuring the appraisers to say one thing (impartial) vs doing another (advocate for).

Matter of fact, I wouldn't mind one little bit if the definition of MV being used was swapped out and replaced with (or supplemented with) a different definition which speaks to equitable instead of equal. You do you, Ms Activist. You ask the question and I'll do my best to answer it in good faith. And competency.

As for the self-proclaimed intellectual aristocracy among the activist set, your problem isn't actually with the SCA or with the principle of substitution. Your problem is with the definition of value itself which is being used in those appraisals. The most direct and honest solution for your ends-justifies-the-means goals lies in actually moving that goalpost from fair/equal to entitled/equitable. If you knew what your were talking about with appraisals you would have figured this out a long time ago.

Every mortgage lending appraisal *could* include 2 value conclusions, complete with 2 separate definitions of value used therein:
Market Value = $zzz
Equitable Value = $yyy

After that, let the users figure out what they want to do. Once our job is done we have no reason to care about how they proceed.

I only care as so far as my liability as an appraiser and as a taxpayer. Maybe when I see these people putting up their own money to put out 125%+ LTV loans I will pay attention. And the notion of "forgivable loans" is just a payoff trying to make it sound like its ot.

 

[George Hatch]

It sounds like you're using the Nuremberg defense. Just because something is required by the government and our society has accepted it doesn't remove our personal and professional ethical obligations.

Lemme flip the script a little, just for the sake of being obstinate. If the WH leaned on the FHFA to lean on the GSEs to underwrite 125% LTVs for certain borrowers (or for all borrowers) then do you think it would it be ethical for an appraiser to deny service to those borrowers? If so, on what basis? On the basis of appraisers knowing better than everyone else WRT the economic or political or social goals involved at those institutions?

I think that would be a tough argument to make under such circumstances or any variation thereof.

 

[CGinMN]

You deny service to FHA borrowers already, do you not? Is that ethical?

 

[shrubberyvaluation]

I'm sure we'll continue to disagree, but I would say the only thing impacting home values should be home prices (i.e. market behavior). I think it is dangerous to say anything else (redlining, schools, wealth gap, appraisers, appraiser methodology, etc) is responsible for home values. Maybe it's semantics, but I think it's an important distinction because right now we are being accused of making markets.

And like others have said increasing home prices makes rent more expensive, taxes more expensive if they own the property already, etc. A lot of pandering going on depending on the audience.

 

[shrubberyvaluation]

Lemme flip the script a little, just for the sake of being obstinate. If the WH leaned on the FHFA to lean on the GSEs to underwrite 125% LTVs for certain borrowers (or for all borrowers) then do you think it would it be ethical for an appraiser to deny service to those borrowers? If so, on what basis? On the basis of appraisers knowing better than everyone else WRT the economic or political or social goals involved at those institutions?

I think that would be a tough argument to make under such circumstances or any variation thereof.

When certain people more than others can destroy your livlihood based on an accusation without any proof I don't see an ethical problem personally. If you are doing it for racist reasons, yea thats unethical.

 

[George Hatch]

You deny service to FHA borrowers already, do you not? Is that ethical?

I don't work in the Conventional/GSE/VA/FHA pipelines. But the reason I don't work in those pipelines has nothing to do with the people or the politics or any other factor involved other than I'm not trying to compete with the SFR appraisers in a grossly oversupplied market for services.

If my own business dried up then I probably would buy an appraisalware package and convert over to spending 100% of my time/effort in those pipelines. I quite enjoy appraising homes and aside from avoiding the criminals or high maintenance clients it doesn't much matter to me what those lenders do with ATMs or branch operations or credit checks or privacy leaks or whatever other articles djd is posting about this week.

 

[alebrewer]

I'm sure we'll continue to disagree, but I would say the only thing impacting home values should be home prices (i.e. market behavior). I think it is dangerous to say anything else (redlining, schools, wealth gap, appraisers, appraiser methodology, etc) is responsible for home values. Maybe it's semantics, but I think it's an important distinction because right now we are being accused of making markets.

As I know you know - we report markets, not create them. Those markets, however, were (in many instances) created by redlining. To wit: Anyplace USA decided in the early 1900's that their little town would function more efficiently if the white folks were on the north side of the RR tracks and the black folks (along with any other minorities) would be better suited on the south side of the RR tracks. The green space south of the tracks was inferior to that on the north. The schools on the south side were inferior as compared to the north side. The town spent WAY less money on infrastructure on the south side WRT sidewalks, street maintenance, curbs/gutters, etc. Fast forward 100 years - the CURRENT difference in property values are, in large part, a result of the redlining that took place a hundred years ago. The market DOES prefer one neighborhood to the other - as a direct result of the redlining practices performed a hundred years ago. There's just no way around that.

 

[George Hatch]

When certain people more than others can destroy your livlihood based on an accusation without any proof I don't see an ethical problem personally. If you are doing it for racist reasons, yea thats unethical.

But that's not the discussion at hand. We're not talking about the actions of some of the borrowers.

What we're talking about is if appraisers have any reason to care which definition of value is being used for an appraisal assignment. So long as we're allowed to say what we do in those assignments and are not being required to lie in advocacy of someone's undisclosed interests.