Depressed home values; living on fees, fines

Moderated by Rick Badie

Today’s topics: negative home equity and court-imposed fees. A south DeKalb County resident questions depressed property values, seemingly omnipresent on that end of the county. Not so up north, he writes, and wonders why. The other column, written by a former DeKalb district attorney, looks at court-imposed fees and fines — what he deems revenue-generators for local governments.

South DeKalb’s depressed home values

By Wayne Early

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.

Court fines, fees finance government

By J. Tom Morgan

The Department of Justice investigation of the Ferguson, Mo., Police Department and court system revealed a fact those of us familiar with the criminal justice system already know: Local governments are fueled by the revenue generated by court-imposed fees and fines.

I served in the DeKalb County District Attorney’s office for 22 years. After leaving office, I began representing individuals charged with crimes.

Many of my clients are less than 25 years old and are charged with misdemeanor offenses and local ordinance violations. I spend a lot of time in municipal courts in metro Atlanta and in Athens and other college towns. Over the years, I have come to realize the vast majority of criminal cases prosecuted in local courts are prosecuted simply to raise money.In Athens-Clarke County, according to GBI crime statistics, approximately 1,000 students are arrested each year and placed on probation for nothing more than underage possession of alcohol.

Each student is given a six-month probated sentence unless the individual also had a fake ID when arrested, a crime that adds six to 12 months to the sentence. Each student is required to pay a $200 program fee plus a $45 monthly probation supervision fee. Do the math, and you see Athens-Clarke County earns about $740,000 each year from students alone.

It is not only young people charged with minor offenses who help support local governments with their fees and fines. Persons who cannot afford to pay their fines the day they are sentenced pay more into the system than offenders who pay immediately, because they are then placed on probation to pay their fines over time. Therefore, in addition to the fine already imposed that they cannot immediately pay, they must also pay a probation supervision fee.

Sometimes the probation officers add additional fees for services such as drug testing, even when the offense had nothing to do with drugs. Therefore, a fine that initially cost the offender a few hundred dollars can ultimately cost several hundred dollars.

I propose a couple of solutions — but they will reduce local governments’ revenue, and this money might need to be raised elsewhere, such as through higher taxes. First, we do not need so many people on probation for minor crimes. In North Carolina, where I am also licensed to practice, college students are given citations, not arrested, for possession of alcohol, and they are seldom placed on paid supervised probation for a first offense. In New York, there is no probation for underage possession of alcohol.

Second, most traffic offenses should be categorized as a “rules of the road violation,” with the only possible punishment being a fine. Currently in Georgia, every traffic offense is considered a misdemeanor. Judges routinely place persons on paid probation for traffic violations. Those who cannot pay the fine on their sentence date should be offered a payment plan. If they fail to pay over time, the court would have the option of holding the offender in contempt of court and imposing a jail sentence at that time.

The purpose of our criminal statutes should not be to raise money for local governments. However, over time, we have established a criminal justice system with revenue collection as its primary purpose. Young citizens and the least capable are the ones who pay the price.

J. Tom Morgan, who practices law in Georgia and North Carolina, teaches criminal law at Western Carolina University.

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