Stoked by HUD, Cottage Industry Shakes Down Mom-and-Pop Appraisers
A firm called Mizrahi Kroub is the largest filer of so-called “digital Americans with Disabilities Act lawsuits.” The New York law firm files about a quarter of all such cases nationwide, according to a provider of web-accessibility services. The firm, which employs nine lawyers, has brought more than 1,100 web-accessibility cases against small businesses for missing alt-text, incorrectly formatting lists or providing unclear labels for interactive elements on their websites. The scheme will ring familiar to the nation’s long-suffering real property appraisers.
In recent years, the number of lawsuits filed under the Americans with Disabilities Act has skyrocketed as a handful of law firms have opted to target small businesses for alleged violations of website accessibility standards. Mizrahi Kroub sometimes files dozens of lawsuits on behalf of a single plaintiff against small businesses that sell everything from e-bikes to cooking kits for kids. The firm filed 26 lawsuits in the New York Supreme Court in Queens County on a single day. Defense lawyers criticize the firm for what they say are boilerplate pleadings designed to liberate quick settlements while not helping those the federal statute is designed to help.
U.S. Department of Housing and Urban Development has spawned a similar shakedown under the Biden administration through a network of contractors, nonprofits, law firms and other cronies. The HUD Office of Inspector General appears to be taking an interest in the abuse, but more on that in a minute.
The 10,000-employee federal agency, flush with cash from the Coronavirus Response and Relief Supplemental Appropriations Act, the American Rescue Plan and the Inflation Reduction Act, hires outside contractors who have ensnared at least 300, but possibly as many as 1,000, state-licensed real property appraisers in federal investigations.
The complaints appear to be mostly set-ups filed by nonprofits that have received grants from HUD or are filed by straitened borrowers encouraged by HUD-promoted attorneys. The appraisers were merely doing their jobs. With its $214 billion in budgetary resources, HUD, acting as judge, jury and executioner, has forced these mom-and-pop appraisers to run a gauntlet in yearslong investigations.
The harassment campaign benefits a number of odd bedfellow… they see appraisals as an unnecessary bottleneck; The harassment campaign benefits a number of odd bedfellows: the housing lobby, which wants unfettered access to federal funds and taxpayer-backed mortgage guarantees through Freddie, Fannie and the FHA – they see appraisals as an unnecessary bottleneck; a number of niche law firms that prey on the appraisers’ insurers; a number of specialized law firms that extract settlements over purported civil rights violations; zealots at HUD who believe mortgages should be an entitlement program with credit extended regardless of a borrower’s ability to repay the loan. For this to occur, they want the collateral in such mortgages to be assigned something Ohio appraiser and podcaster Phil Crawford has dubbed “universal basic value.” This group wants the appraised value to be replaced by a social score.
The harassment campaign helps members of the housing lobby… by pushing through more loans and at a greater velocity. The harassment campaign helps members of the housing lobby – bank and nonbank lenders, fintechs, Realtors and home builders – by pushing through more loans and at a greater velocity. Under recently departed HUD Secretary Marcia Fudge, lobbyists for hundreds of these special interests beat a path to HUD’s door, paying tens of millions to get their issues before this federal agency. Their influence has contributed to current housing inflation.
Fudge is now cashing in as partner and chair of public policy at Taft Stettinius & Hollister, one of the nation’s up-and-coming lobbying firms. Two former employees at HUD went through the revolving door along with her.
Until late April, a HUD web portal benefiting cronies was operated by an agency whose stated mission was to provide resources for wounded, ill and injured service members and their families. The HUD Exchange is used as a clearing house to connect attorneys and HUD-affiliated nonprofits with each other and with disgruntled borrowers willing to serve as plaintiffs. Many of the latter are willing to claim civil rights violations in a Hail Mary attempt at just one more refi or for the prospect of a cash settlement.
The attack on appraisers has been stage-managed to perfection. Employees at HUD, including Secretary Fudge, have identified and exploited weaknesses, manipulated public perception, sowed internal divisions, amplified grievances, discredited achievements, promoted alternatives and staged assorted crises.
Incredibly, HUD has even worked to allow convicted perjurers and white-collar criminals to become so-called “discrimination testers.” In a rulemaking notice in 2023, HUD signaled it wanted to allow convicted felons to be involved in the entrapment of appraisers. (You can’t make this up.)
All of this has helped lead to housing inflation as commissioned salespeople and bonused executives – and their representatives on “K” Street – have had a greater hand in determining the values of homes in federally backed mortgages. The credit-rating agency Fitch reported early this year that it believed homes nationwide were overvalued by 11.1%. Nick Gerli, CEO of Reventure Consulting, believes home prices in Tennessee, Georgia, and Florida are as much as 30% overvalued compared to their long-term norms.
At least some of this inflationary effect is the result of HUD’s campaign to intimidate, delegitimize and sideline appraisers.
“If you are an appraiser who has been targeted in a HUD investigation for simply doing your job,” recommends appraiser Ken Mullinix, “you should immediately file a complaint with the HUD Office of Inspector General. The HUD OIG’s hotline is (800) 347-3735. You’ll then need to follow up with a written online complaint. The HUD OIG will then provide you a case number. It’s critical that you reference that case number in all further contacts with the OIG,” said Mullinix.
“As with anything else, you will need to be your own best advocate,” he said. “You may need to file a Freedom of Information Act request with the OIG regarding the progress of your counter-complaint. You will need to cite your case number when dealing with them or if you take the matter to your member of Congress or your U.S. Senator.”
The recent demise of the Chevron Doctrine should give beleaguered appraisers their day in federal court. Targeted appraisers should consider putting their fate in the hands of a federal judge instead of letting HUD play judge, jury and executioner in its internal administrative court.
- Is a Horde of Deadbeat Borrowers Again Walking Among Us? - November 4, 2024
- How Deep Fakes Have Burrowed Into Home Finance - October 14, 2024
- Stoked by HUD, Cottage Industry Shakes Down Mom-and-Pop Appraisers - September 6, 2024
This is why we must support ARCC!!
To fund pushback and protection
Here’s the ARCC link: https://arcc-usa.org
This need more exposure! Well done!
I would like to know what connection the Heritage Foundation has to do with the war on appraisers. They want to replace all existing “experts” in the 2025 proposals…. any ideas?
There’s a particular AMC in Texas that sends me “bids”. I don’t make bids any longer on properties with sale prices that are not supported by at least two comparables (not just sales) within the subject subdivision and there are no sales or listings that negate the applicability or validity of those two comparables. The other part of this is that they extremely rarely send a bid where the sale price isn’t the highest price in the entire subdivision, sometimes in an entire zip code, city or county, over the past twelve months. And, I typically don’t mean highest by a little, but more like highest as in the sale price is $1.5 million and the highest price of similar houses in the subdivision is $1.1 million. I don’t mind doing difficult appraisals, but I don’t like burying land mines and setting time bombs. And, unfortunately, I’ve had to become extremely selective on doing appraisals involving other issues. Those other issues were never a problem in the past, but they are now. Best wishes to all of you guys and gals.
Government: Appraisers must be independent and appraise for market value based on data and facts.
Government: If the appraiser doesn’t appraise for the value wanted by the borrower, we will investigate you, you will be sued by HUD grant recipients, your reputation will be destroyed in the media and you won’t get any more work or income.
The revolving door keeps spinning. Rise of the non profits, the mechanisms to bypass legislative intent and extract monumental volumes of tax dollars. Then manufacturing problems to keep the grant money flowing. Enter the manufactured fictitious crisis of ‘racist appraisers’ as justification to install new systems, bypass existing regulation. Now the implementation of automated systems has led to national housing over valuation, fueling an ongoing affordability crisis. The people responsible for dismantling otherwise functional systems gave themselves a raise as they walked through the door. Central planning never works.
The appraisal industry insurers whom were in place to mount a defense failed to do so. Imagine attempting to set up in person meetings with a congress or senator person to save a minimum wage job, while staring down tens and possibly hundreds of thousands of dollars worth of litigation costs, state and federal fines, all based on false accusations stoked by corrupted non profits, their associated lobbyists and lawyers. As Mr Bagott previously wrote; The nightmarish end of home appraisals. aka; ‘Appraisal Modernization!’
some are now living the nightmare…these law firms have seemingly unlimited funds to keep the heat on once the lawsuit is filed..in the case that’s on going now they also moved the goal post ..it started out ” your appraised value is impossibly low “…now that they realize the lower value was correct and they want to move the goal post…I think it’s because they’re becoming desperate knowing there was never a reason to file this lawsuit in the first place …or maybe they really don’t care knowing the $$ are furnished by some agency ..over 2 years and counting ..
I hope to God that Shane countersues for libel and slander
We already see how well and how much the AMCs value their appraisers
And we wonder what’s going on …
https://www.heritage.org/jobs-and-labor/commentary/harris-pushes-gig-workers-contractors-corporate-jobs-new-rule
https://thelibreinitiative.com/wp-content/uploads/2021/04/Freelancers-Against-AB5-List-of-600-Affected-Professions-002.pdf
That is a doc linked from your article. #450, specifically notes real estate appraisers.
The issue is complicated because even under previous rules, many lenders and amc’s were already exceeding their authority and were in violation of previous IRS rules on classification of independent contractors. They have been using appraisers and forcing us into certain working conditions which should have classified us as employees, resulting in entitled benefits. They have countered that with the initial onboarding agreements and such which they make appraisers sign. We had posted all those IRS rules and talked about a similar issue many years ago. So for appraisers and that particular issue, it’s unlikely anything will really change.
https://www.dol.gov/agencies/whd/flsa/misclassification/rulemaking
On the topic of over valuation. Limiting corporate ownership of sfr’s. We should have a clearer distinction between commercial and residential property investments.
A new form of property flipping, except they continually flip the renter with lease price increases. When the corporations buy, they rarely sell. If the properties end up on the open market again, another corporate investor ends up out bidding sfr seeking individual purchasers quite often anyways. However, I have been told these companies are rich new client leads for home repair and lawn mowing services. Because they own so many houses, many of which sit vacant for months at a time in between renters.
https://www.jetsetmag.com/exclusive/finance/legislation-against-corporate-owned-single-family-homes/
https://themortgagereports.com/109150/hedge-fund-home-buying-ban
As far as the ‘downpayment toward equity act’ or another first time buyer home credit, these are bad ideas which will only contribute to the ongoing affordability crisis and drive prices even higher. What exactly is wrong with lower housing prices? If the institutions would not continually give special favors and first purchase opportunities to the investors, we would not have as much of an availability or affordability crisis and subsequently would not need the various incentives and credits. Your tax dollars, hard at work.