Residents of south DeKalb County and other south metro communities have expressed shock, frustration and the motivation to do something because of their depressed property values. The time has come for each of us to assume responsibility and take action.
Those who believe they have suffered financial loss should join our efforts to investigate appraisal companies and mortgage lenders operating in our communities. Our government officials must also support us by taking steps to end “redlining” of communities with minority populations.
Data confirms the appraised values of real estate on the Southside have not increased as they have in the north. Most Southside property owners are still considered “underwater,” and the divide appears to be getting wider.
Southside owners are trapped in their homes and mortgages and have lost billions of dollars in wealth that normally would have been used for reinvestment, retirement, relocation or inheritance.
Depressed prices also have resulted in an invasion of institutional investors buying thousands of single-family homes for “pennies on the dollar.” This trend has contributed to reduced commercial development, school performance, property tax digests and public safety. It is well-documented that absentee investors do not maintain their properties or support community development the way homeowners do.
The destruction of public housing units and increasing rents in other areas has resulted in investors steering low-income renters into predominately black communities. As a result, customary appraisal practices cause discriminatory valuations to become the industry standard.
My research, in conjunction with the South DeKalb Improvement Association, demonstrates:
• Real estate sale prices are controlled by mortgage lenders and selected appraisers.
• The term “underwater” has very little to do with the style, quality, condition or demand for homes. It is the result of subjective opinions of mortgage lenders and appraisers regarding what homes are worth and how much they are willing to lend.
• Communities north of U.S. 78 (Stone Mountain Highway) primarily have majority white populations. Communities south of U.S. 78 generally have populations consisting of 60 percent to 95 percent black and minority families.
• The number of south DeKalb homes sold in the past nine years has been 200 percent to 400 percent higher than sales in north DeKalb. Under normal market conditions, higher demand should have caused prices to increase at least as fast in the south as in the north.
• During that period, homes in the south have generally been selling for 25 percent to 50 percent of the prices of similar homes in the north. Homes in the south have lost 20 percent to 35 percent of their values since 2006.
• Most south DeKalb property owners can document at least $100,000 in lost equity due to the inability to sell or refinance.
In 1992, an important case filed by the Department of Justice against Decatur Federal Savings and Loan Association established investigative techniques and legal principles that would become standard for future mortgage redlining cases. Justice found a history of racial discrimination in Atlanta and other areas.
Cities across the nation are seeking compensation for similar harm caused by mortgage lenders and appraisal companies. Los Angeles, Providence, Miami and others are pursuing lawsuits against Bank of America, JPMorgan Chase, Wells Fargo, CitiMortgage and others for alleged discriminatory practices.
As recently as 2013, SunTrust settled a discrimination case with the Justice Department for $21 million because of redlining and other discriminatory mortgage practices. DeKalb borrowers received settlement payments as a result of this case.
Many DeKalb real estate agents can cite examples where they obtained sale contracts for south DeKalb homes from qualified buyers only to learn the appraiser and mortgage company determined the house was not worth the price the buyer was willing to pay.
The lender then required that the price be reduced by tens of thousands of dollars before it would approve the loan. Once that happened, the deal usually fell apart. This is the cause of a great number of foreclosures.
Wayne Early is CEO of Early Economics Inc.
