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The Color of Money

Follow-ups and reaction

Black appraisers shut out
by hiring rule of major lenders

By Bill Dedman, The Atlanta Journal-Constitution

Published May 29, 1988, Page A1

Copyright 1988, The Atlanta Journal-Constitution

Several of the largest mortgage lenders in Atlanta hire real estate appraisers only if they are members of one of two national appraisal societies.

In Atlanta, those societies have no black members.

Lenders who said they have the hiring rule include the largest mortgage lender in America, the largest bank-owned mortgage company in Georgia, and the most active savings and loan in metro Atlanta, according to a sample by The Atlanta Journal-Constitution.

The lenders said they do not intend to exclude black appraisers, but require the memberships only to ensure that appraisals are done professionally. The two societies are the country's oldest and largest, with more than 12,000 members nationally.

But membership in the two societies is no guarantee of professionalism, leaders of the two groups and industry experts agree. Most of the country's appraisers belong to other societies. And they say a 600-member national black society with many Atlanta members has comparable standards.

Leaders of the two large societies say they also do not intend to exclude blacks, but none has joined in Atlanta. Black appraisers say they don't necessarily want to join the other groups; they just want to be eligible for jobs.

Requiring membership in the two societies not only bars black Atlanta appraisers from profitable business but also ensures that much of the appraising in black neighborhoods is done by whites.

Use of white appraisers who are unfamiliar with black areas has been cited by lenders and real estate agents alike as a reason that banks and savings and loans make few home loans in metro Atlanta's middle-income black areas, as detailed in recent articles in the Journal-Constitution.

Real estate agents in black areas say they have trouble closing sales with banks and savings and loans because appraisals by white appraisers often come in below the contract price for a home. A low appraisal can kill a sale; a pattern of low appraisals can depress property values.

A lender who requires membership in one of these societies as a condition of employment may be breaking federal antitrust laws, according to legal experts and U.S. Rep. Doug Barnard of Augusta, who has asked federal agencies that insure or regulate lenders to forbid discrimination.

"Obviously, the federal government should not be supporting or condoning such discrimination, by inaction or otherwise," Barnard, a high-ranking member of the House Banking Committee, wrote in March 28 letters to several federal agencies.

"This, to me, is a classic boycott," said James Ponsoldt, professor of law at the University of Georgia. "If members of a trade organization like an appraisal organization establish exclusionary guidelines or informal exclusionary practices, and membership is economically significant, that could be considered a concerted refusal to deal under the antitrust statutes."

Society designation preferred

In a Journal-Constitution telephone sample of banks, savings and loans and mortgage companies, six of nine that would identify their job requirements prefer or require membership in the Society of Real Estate Appraisers or the American Institute of Real Estate Appraisers.

"They would have to be an SRA or an RM (the membership designations of the Society and the Institute) or we wouldn't approve them," said Rita Azif, metro Atlanta appraisal manager for Citicorp Mortgage, the largest mortgage lender in America.

"We do prefer either the Institute or the Society," said Mary McKinney, a supervisor in the appraisal department of Decatur Federal Savings and Loan, the most active mortgage lender in metro Atlanta.

"We would prefer that you have a designation from the Institute or the Society, or you could get a review appraiser with a designation," said Cammie McCarvey of C&S Commercial Corp., the most active bank-owned mortgage lender in the state.

Black appraisers say some lenders require them to hire a "review appraiser," who is a member of one of the two societies, to check their work. That usually means at least $100 of the standard $250 fee goes to the other appraiser.

The newspaper conducted its sampling by having Pamela Smith, local president of the black society, call lenders and ask what qualifications were necessary to be added to the list of fee appraisers. A reporter monitored her calls, then called back later and interviewed officials of the financial institutions.

Sometimes officials gave Ms. Smith and the reporter different answers. Several of the appraisal managers who told Ms. Smith they require memberships in the two large societies were later contradicted by higher-ranking officials or spokesmen for the financial institutions, who told the reporter the first officers were mistaken.

"Our policy was not clearly communicated to you. That was an error," said Betsy Martin, public relations manager for Citicorp in St. Louis. "(The company policy) is not designed to exclude someone."

Lenders who told Ms. Smith that they require or prefer membership in the two large societies were Citicorp, C&S, Anchor Savings Bank, Bank South Mortgage, Decatur Federal and Trust Company Mortgage.

Lenders who later amended their response were Citicorp, C&S, Bank South Mortgage and Trust Company Mortgage. Senior officials at some other lenders did not return telephone calls. Many lenders would not say what criteria they required for appraisers, telling Ms. Smith to send in a resume.

Ms. Smith and the reporter inquired only about jobs as fee appraisers or staff appraisers of residential property. Black appraisers charged that membership in the two large societies is required more often for commercial appraising.

Officers of the Society and the Institute confirm that they have no blacks among the 250 designated members of their Atlanta chapters, but they said they have no rules barring blacks from joining.

"There never has been any question of, `Why don't you have any black people?' We just didn't," said Richard L. Razel, immediate past president of Atlanta Chapter 8 of the Society of Real Estate Appraisers. "Why didn't we have any Oriental people? You can put this in the record: I have lots of black friends, and I happen to be a Christian, and I don't ever turn anyone away because of the color of their skin. Jesus never did that."

Both organizations said they have black candidate members, who may attend meetings and take courses. But candidate members do not receive the designations, or initials after their names, that open the door to work at many lenders.

Leaders of the two larger societies admit their membership is no certain sign of good work.

"I know some Society appraisers that I wouldn't recommend to my own worst enemies," said Razel.

"All the banks and financial institutions recognize these two groups, but it shouldn't be a requirement," said Joseph Ferry, president of Georgia Chapter 21 of the American Institute of Real Estate Appraisers. "First of all, it would be wrong. Second, it's impractical. There are not enough designated appraisers out there to do all the work. If I was a good appraiser and I couldn't get work because I didn't have a designation, I would be mad."

The two societies and industry leaders also agree that a black appraisal society, the National Society of Real Estate Appraisers, has high standards.

"To my knowledge, their standards are completely adequate," said Bob Morin, chief legislative counsel for the Society of Real Estate Appraisers.

A 1986 study by the Mortgage Bankers Association of America found that the black society has some standards that are higher than the two larger societies.

Yet membership in the two larger groups is required by many lenders across the country, industry leaders say.

"It's definitely a significant portion of the lenders, particularly the banks and savings and loans that do conventional lending," said Brian Chappelle of Washington, senior director of the Mortgage Bankers Association of America, which represents 2,500 lenders. "But it wouldn't be a racial problem in most places, because the Institute and the Society have black members in most cities."

Rule `a frequent practice'

In Atlanta, requiring membership in one of the two large societies "is a frequent practice," said David Brantley, executive vice president of Bank South Mortgage. "Having a designation is not absolute (at Bank South), but it's a good indication (of ability). We don't do as much investigating with somebody who's designated as somebody who's not."

Black appraisers say they have no quarrel with the large societies, but would like to be eligible for more work.

They point out that they are allowed to work for any bank, savings and loan and mortgage company when the loan is government-backed, such as by the Federal Housing Administration (FHA) or the Veterans Administration (VA) -- because the government picks the appraisers.

But when the lender is putting its own money at risk, the blacks say they have trouble getting the work.

Some lenders recognize a third large society, the National Association of Independent Fee Appraisers, which has only one black member in the Southeast, according to that member, Elbert Jenkins of DeKalb County.

"You should not have to join an organization to get a job. That is not the American way," said Otis Thorpe, the Atlanta-Fulton County tax assessor and national president of the black appraisal society. "That's like telling me I can't get a job without going to the University of Georgia or Emory, when I want to go to Morehouse."

The quality of appraisals in black areas was an issue in a recent series of articles in the Journal-Constitution. The articles disclosed that banks and savings and loans make five times as many home loans in white areas as in black areas of similar income.

Nationally, qualifications of appraisers have been hotly debated in recent years because of the failure of many banks and savings and loans. Many of the failures were blamed on bad real estate loans made with faulty or fraudulent appraisals.

Barnard has submitted legislation that would establish national standards for appraisers, who are essentially unregulated. The two large societies, the black society and five others joined in helping write those standards, although appraisers differ on the need for federal regulation.

Some lenders said Barnard's bill increases the pressure to hire appraisers from recognized societies. Barnard agrees that lenders should beware of "diploma mill" societies that grant membership for nothing more than a fee, but he says more than two societies are qualified.

"None of these organizations can fairly claim to impose uniformly higher standards than the others," he wrote to federal agencies.

"Indeed, subcommittee investigations have disclosed that many of the most egregious abuses in real estate appraisals have involved appraisers with the most `prestigious' designations."


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