Louisville Magazine

AUG 2013

Louisville Magazine is Louisville's city magazine, covering Louisville people, lifestyles, politics, sports, restaurants, entertainment and homes. Includes a monthly calendar of events.

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Russell neighborhood as well as nearby California and Portland. Lights have dimmed in windows. Weeds have invaded abandoned homes. She knew her property value would sufer. But she wasn't ready for a call that came from U.S. Bank this spring. With interest rates dipping below 4 percent, she decided it might be a good time to refnance, shave the bloat from her 6 percent rate. Ten the phone rang. A banker told her the mandatory appraisal had returned showing her house worth only $35,000. Her immediate response: "WHAT?!" Tink of a $35,000 home and whatever images surface — sagging gutters, chipped paint, sinks that wear rust like gold chains — are not what you fnd at McGruder's home. She's meticulous. Power washing, changing out air flters, snipping the stray weeds that form stubble on the curb, she does it all. To hear that the home she's nurtured, according to this bank appraisal, lost more than half its value left her rate in 2012 for these neighborhoods was nearly 11 percent, compared to roughly 4 percent countywide. Locally and nationally, foreclosures have slowed since their peak in 2009 and 2010. Headlines now tout a housing market regaining strength. While true, the turnaround has yet to embrace low-income, hard-hit urban corners. In the Highlands, St. Matthews and Germantown, bidding wars spark soon after the "For Sale" sign touches dirt. Less than 10 miles away, though, property values continue to drop. Sales have slumped. In the area encompassing Old Louisville and neighborhoods west of it, along with Shively, sales have decreased every year since 2008. West Louisville properties in great shape are being appraised, and ultimately sold, at low values, dragging neighborhoods down even further. Christie McCravy is the director of the Louisville Urban League's Center for Housing and Financial Empowerment. with rehabbing. Budgets are lean. Tey can't sell a home at a loss — no matter how dedicated to a community they are. "We might have to step away," McCravy says. "Because if we can't get our money back out of it, it's not cost-efective." Prior to that phone call from the bank, McGruder, in addition to refnancing, had also considered selling her home and moving back to Shelbyville. Now neither is an option. She still owes about $50,000 on her home. Technically she's "underwater" — owing more than what the house would likely sell for. "Tat is so discouraging," she says. U nderstanding the factors behind low property values requires a refresher in post-housing crisis policies. Lenders as well as politicians scrambled to regain trust. It's believed one of the contributing factors to the so-called housing bubble involved infated home appraisals. If a bank wanted a house to In the Highlands, St. Matthews and Germantown, bidding wars spark soon after the "For Sale" sign touches dirt. Less than 10 miles away, though, property values continue to drop. West Louisville properties in great shape are being appraised, and ultimately sold, at low values, dragging neighborhoods down even further. "very alarmed." She knew her value had decreased. In 2012, the property valuation administrator (PVA) of Jeferson County deemed her home worth $40,000. But in 2013, the PVA bumped the value up to $59,000. So she's now paying property taxes on a $59,000 home a lender considers only worth $35,000. "Tis is a damn conspiracy," she exclaims one afternoon with a laugh as she sits on her antique salmon-colored sofa, an old Western movie playing on a nearby fatscreen television. "Someone is blowing smoke up someone's tail!" In the last two years, McGruder's experience has become more common, primarily in west Louisville neighborhoods that buckled when the housing market crashed in 2008. Park DuValle, Portland and Shawnee experienced a foreclosure rate nearly twice that of Jeferson County as a whole, according to the Metropolitan Housing Coalition. Te estimated vacancy She's heard from homeowners whose homes need maintenance. Without the cash to do it, they've attempted to secure a home equity loan. Te bank appraisals come in so low, their loans are denied. "My biggest concern is for the homeowners that are there. Tey need to do some painting, a roof, little things like that," says McCravy. "If they can't get a $10,000 loan from the bank … what's going to happen?" McCravy also oversees the Urban League's REBOUND program. Recently, the group fxed up a home in Russell on Cedar Street. Tey estimated the three-bedroom home would sell for $80,000. But when potential buyers started their paperwork for an FHAinsured loan, the bank appraisal declared a value of $35,000. McCravy and REBOUND's board, along with Habitat for Humanity, another nonproft housing developer, have grown anxious. Tey must recoup costs associated appraise at a certain value to ensure that a transaction would move forward, they'd hire a generous appraiser. Property values ballooned. Homeowners now owed more than, perhaps, they should or could aford. Post housing-bust, in 2009, the Home Valuation Code of Conduct (HVCC) went into efect in an efort to curb infuenced appraisals. Te HVCC grew from a lawsuit fled by New York State Attorney General Andrew Cuomo against Washington Mutual, formerly one of the nation's largest mortgage lenders. Ultimately, variations of those guidelines were folded into the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Now, all entities tied to government-backed loans — like Fannie Mae and Freddie Mac — ensure appraisal independence. Lenders can no longer call up their favorite appraiser; such contact is forbidden. Enter appraisal management companies, or AMCs. When a house needs appraising, 8.13 LOUISVILLE MAGAZINE 35

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