Foreclosures in Black Communities Due to Overvaluation
About 2 years before the crash of ‘08, I ran across a company out of DC called “Metro Grapevine” and “Metro Dream Homes.” It was a Ponzi scheme marketed by a black to blacks only. It was by invitation only. They promised if you bought your home through their program, they’d pay it off in seven years and you never had to make a payment.
The requirement was to buy a home of your choice, offer $50,000 to $150,000 more than it’s list price with the caveat that at least the amount you offered over list plus $25,000+ would be paid to Metro Dream Homes at closing. Viola, just like that, you’d own the home in 7 years without ever making one mortgage payment.
The guy leading this show was vitriolic in accusing whites keeping the blacks down and this was to help the black man. (I watched many of his speeches in churches. It was vitriol).
I tried turning them into the FBI twice. They said they didn’t have the manpower for it until it reached a higher dollar theft. So it continued, despite warnings on the few social media sights that was around at the time, until there was not enough money coming in to float the top.
What were the results? Most had foreclosures. They bought a house worth much less than they paid for it and never planned or budgeted to make a mortgage payment in the first place.
I could go on. This was a soapbox for me back then and no one cared much.
It’s just one example of valuing real estate higher just for the black community, by sucking them in to think they have been disparaged in the past, was detrimental.
Side note – After it fell only one couple took me up on my offer to review their appraisal for free. They provided me everything- contract, appraisal, loan docs. It was fraud through and through. The young couple were so sweet and desperate. It turned out after the lawsuit, Wells Fargo paid their lawyer fees, wiped their credit clean (as if it never happened), and because Wells drug their feet, they got an added $25,000 paid to them in damages.
Thanks for sharing! Yet another instance of gov’t ineptitude.
I came across a fraud scheme several years ago involving a community of fourplexes, where the sellers falsely purchased a few model matches for well-above market – with fraudulent appraisals – to then use as comps for real sales. I tried to report it but the extensive paperwork OREA required, about like doing an appraisal, made it not worth it. Of course it all fell apart with several purchasers losing a lot.
The free (real) market always wins.
Yes, was looking at this yesterday. Searching is a little tough, just have to use the quotation marks.
Keyword; “Metro Dream Homes” / Many articles to read.
https://archives.fbi.gov/archives/baltimore/press-releases/2012/owner-and-founder-of-metro-dream-homes-sentenced-to-150-years-in-prison-in-78-million-mortgage-fraud-scheme\
‘Third party companies’. What could ever go wrong?
Aha, so much for white racist appraisers under valuing a minority owned property. Now they can not only be accused of under valuing but over valuating, lol. Wait, this will be next. I’m sure they will twist this to be some master appraiser scheme to disinfranchise the minorities in the hope they will be foreclosed on. It’s our fault wait and see. So now they go after us for both because we have no clue what we are doing and they have all the answers.
I believe that the political forces pushing appraisal modernization are purposely muddying up independent appraisers in order to go fully digital with Government controlled technology companies creating algorithms to take over the real estate market. Hope it’s better than Zillow
Hey thanks Baggins for that thread. He only got 150 years, yikes. Good enough for him.
This article brought to you by Anna. In my usual approach, just googled it and look here, a plethora of additional data and information. Thanks though. The Brookings institute findings and positions that the appraisal community hurts minority groups defy logic. We’re often the only ones standing in between them and the inevitable presence of predatory lenders and swindler hustlers. What exactly is wrong with lower prices? When I shop for consumer goods, I seek to get the best product for the lowest price. Housing is no different. Advocating for anyone to pay higher prices when they could pay less is nothing short of cruel and unusual punishment.
I saw a lot of scams like that committed by some against their own people. I was yelling from mountain tops about Latinos ripping off other Latinos. I’m Latina and speak Spanish so I saw it first hand. Agents would buy horrible properties cheaply, do the cheapest Home Depot cosmetic job then offer it over market value from their holding company. Because the properties were the lowest priced in the area they looked like a good deal to first time buyers.
The agents would hook up the buyers with nonprofit down payment grants, hidden borrowed down payments, cheap loans with low teaser rates and other incredibly risky purchase components. I think some got friendly with a couple of appraisers because I reappraised some properties just a year after purchase. The properties were generally in the worst part of the neighborhood, the smallest, funkiest floor plan, had lots of hidden repairs and other negative issues like being next to industrial, major roads, side of the freeway…
When the borrowers complained about my appraisal they gave me the old appraisals. Those appraisers used much larger homes in great condition in superior locations. I explained it to the people in detail showing them comps from a year ago and today. Then they admitted the other components of the previous transaction to me. It was so sad. They lost what little money they had and their house.
“Affinity Fraud” is the worst fraud.
That’s a new term. What is that?
https://www.sec.gov/securities-topics/affinity-fraud
Wow. So it turns out that the race of the appraiser is actually a non issue? Thought so. Thanks.
I can’t believe this article made it into a national magazine. It’s a pet peeve article. Talk about all the predatory lending in the black communities, not just one you have an irk about. This is better as a comment, NOT a stand alone article. Expected more.
I have said it before and will say it again…. IMHO there is more bias in appraisals that come in at contract price for purchases than any other appraisal type. Reason? coming in at the contract price means nobody complains, and if nobody complains then they can’t blame racial bias. Yet that may be the bias that actually exists if either of the parties is a minority and the appraisal stretches to support the contract price (overvalue) so as to avoid a complaint of racial bias. But we will never know, because nobody complains about racial bias so long as the report comes in high enough.
Does racial bias exist in appraising? of course it does.
Is it systemic to the process? of course it is not
Are appraisals that come in below expectations likely to be racially bias? No, while some are, most are in fact appraisers actually doing their jobs and avoiding the push to attain a particular value (contract price) merely to avoid complaints. In large part, it is the good appraisers that are ethical and moral that are being accused of bias because they refuse to kowtow to the GSE’s and social media.
There is a whole lot of truth in what you are saying. Excellent points! I ask 100% of the time how did you arrive at the contract price? 99.999 of the time the answer is “that is what the seller wanted”. When they are told that the market will not support the contract price they become indigent. They do not care about if the appraisal is accurate as long as they get a value to close the sale.
This really ticks me off. These people claim to be advocates for a certain group of people when they are actually ripping them off. They claim systemic racism yet they are doing this to their own people.
For the government to allow this to go on causing harm to people is beyond me. Is it not one of the basic rules is to protect the citizens? Of course, this is a rhetorical question.