[FoCHAT] CHATNews: Missing Letters--Appeals Appraisals

Mon Jun 22 00:24:01 CDT 2009

June 21, 2009

Dear FoCHAT Members,

1. LRA/OCD: HUD Said We Had To Do It

I met with the HUD Office of the Inspector General (OIG) auditors in NOLA on Friday for 2 hours and 15 min. after giving them 25 documents to assist them.
It would not be appropriate for me to discuss this meeting now but one piece of public information that I was pointed to, I can mention because it is part of HUD’s posted guidelines. We had some information about this before but with the currently provided citation, we understand it better.

The critical phrase is “maximum feasible deference.” The citation is as follows:

http://fhasecure.gov/offices/cpd/communitydevelopment/library/stateguide/appg.pdf
24 CFR 570.480 (c) of the State CDBG regulations provides that the Secretary will give maximum feasible
deference to the state’s interpretation of the statutory requirements and the requirements of this regulation, provided that these interpretations are not plainly inconsistent with the HCDA and the Secretary’s obligation to enforce compliance with the intent of Congress contained in the Act.”

The general meaning is that for HUD CDBG-funded programs (like the Road Home, RH) the State has very much freedom to set the rules as it sees fit.

A specific application is to the rule that if an applicant gives RH an appraisal that is more than 20% higher than the pre-storm value (PSV) used for grant calculation, RH will not accept it. This detailed requirement could not have come from HUD according to the “maximum feasible deference” regulation.

This 20% rule was changed on Nov. 9, 2007 after much advocacy by CHAT. The new rule (# 188G) was that instead of rejecting the appraisal out of hand, RH would do an evaluation of how good the appraisal was by another appraisal called a field review appraisal, also done by certified appraisers but arranged by ICF.

Here are the problems associated with this 20% rule. 

1. LRA and OCD (RH state agencies) told us in meetings first that OCD decided on 20% themselves (and Mike Spletto said the number could have been 5%, 10%, or 20% and he thought they were generous to choose 20%). 

LRA later told us that HUD requires this 20% cutoff and told the Times-Picayune that HUD gave “guidance” about this 20% rule.
http://www.nola.com/news/index.ssf/2008/07/rule_changes_frustrate_road_ho.html 
Rule changes frustrate Road Home applicants, by David Hammer, Friday July 25, 2008

OCD told state legislators that “HUD allows approximately 20% over the highest valid pre-storm value to be paid to homeowners” … exceeding the 20% allowance …would not be eligible for CDBG funds.”
The legislative fiscal note to a Road Home reform bill http://www.legis.state.la.us/billdata/streamdocument.asp?did=497732

Quite a different statement was made by Mike Spletto, former head of Housing at OCD during a Louisiana Legislative Subcommittee at a Town Hall meeting on RH on Feb. 6, 2008 
On p. 17 of the official minutes available from the Municipal Affairs Committee of the Louisiana Senate, the following was written (emphasis added).

 Ms. Elkins said there have been about three policy changes on appraisals and asked Mr. Spletto to go over the most recent one.  Mr. Spletto responded, "As you heard earlier, a lot of the complaints were that when a homeowner provided an appraisal, a post-storm pre-value appraisal greater than twenty percent, the comment was that we just ignored it.  The state had us set up a policy that twenty percent was a number that we could accept a non arms length transaction.  

2. LRA said that it has two letters from HUD indicating that 20% is the highest deviation that they would consider acceptable. With considerable difficulty, I obtained one of these letters. It (the May 19, 2008 letter) is unconvincing. It refers to the state’s determination of PSV and the homeowner’s appraisal, as if they were done by similarly good methods. They are not. The state’s involves a drive-by appraisal (“market analysis”) at best and often just a broker price opinion with a drive-by. The appraiser for the market analysis and the evaluator (background unspecified) need not leave their car. Moreover, there is a mistake in the second sentence of the letter. Lastly, this letter to Suzie Elkin, former executive director of OCD, is in response to a Mar. 31, 2008 letter from her. I have been unable to obtain that letter despite a public records request to the LRA for it dating from July 1, 2008. A Freedom of Information Act request to HUD
 produced the May 19 letter from HUD but not this Mar. 31 Elkin’s letter to HUD nor any second letter from HUD about this. 

3. As to the second letter, Paul Rainwater, current head of LRA and OCD, told Sen. Murray at a meeting of the Legislative Audit Advisory Council that he had two letters from HUD about the 20% appraisal rule and would be glad to share it with the legislators.
However, he has not shared it with me despite a public records request on July 1 2009 for the second letter and a writ of mandamus (request for court hearing) as a follow-up to unanswered public records requests. I received the first letter only after insisting that LRA’s statement that there were no letters was incorrect because I had seen one of them (the May 19 letter) briefly when I gave testimony in Baton Rouge to a Senate subcommittee.

4. It is arbitrary and inconsistent for RH to accept without question for grant calculation a homeowner-supplied appraisal that is 19% higher than the PSV determined by inferior methods by RH but to reject one that is 21% higher or 60% higher. The more erroneous the PSV by RH, the less chance that an applicant gets any correction.

5. Applicants who had handed in their appraisals that were more than 20% higher than RH’s PSV were left waiting for months without field review appraisals and then the field review appraisals were summarily stopped. We were told first that HUD objected to them, which made no sense because we had earlier been told that the long delay in passing the rule in the first place was that HUD had to approve it. In fall of 2008, we were told during a meeting with RH officials that most applicants who had the field review appraisals objected to them because they were giving values LOWER than the original PSV. That was amazing because the applicants were disputing the PSV as too low and had an appraisal by a certified appraiser to back them up. Moreover, that would imply that RH’s PSVs were too high even though applicants said they were too low.

6. Core CHAT member Mindy Milam’s case helps us to understand these comments from OCD about the field review appraisals. She was mentioned in a recent article but has kindly shared more of the details with us.

http://blog.nola.com/jarvisdeberry/2009/06/jarvis_deberry_goodbye_good_ri.html
Jarvis DeBerry: Good-bye, good riddance to Road Home manager, ICF, The Times-Picayune June 11, 2009

RH did a field review appraisal of Mindy’s certified appraisal that had been rejected because it was more than 20% higher than RH’s PSV. 

One of the comparables in RH’s field review appraisal of Mindy’s home in a middle-class neighborhood came in at an incredibly low $61/sq ft. Mindy’s house had been demolished but RH has more faith in their field review appraisal of her demolished home than in a certified appraisal of the inside and outside of her home while it was still standing. This field review appraisal was done as a “favor” to Mindy because she complained at a special meeting of RH officials and CHAT leaders. This field review appraisal was not binding. If it had been binding, Mindy would have had to pay back to RH $21,000 of her grant money.

7. RH tells applicants now that field review appraisals were secretly discontinued (although if you read their website in great detail, you could have found out 2 months after they were discontinued that they were no longer available), that applicant can request a RH certified appraisal. The catch is that if RH’s appraisal comes in lower than a homeowner’s appraisal and the RH PSV the homeowner has to pay back money to RH.

All this for victims of the worst hurricane-flood in US history.

2. COX 10 TV’s Airing of the May 27 CHAT Meeting Focused on Our HUD Inspector General Complaint
Thanks to Carleen Dunn and COX 10! 
Wed., June 10, Noon-1:30 PM; Fri., June 12, Noon-1;30 PM; Sun., June 14, 10:00-11:30; Mon., June 15, 8:00-10:00; Thurs., June 18, 8:00-10:30; Sat., June 20, 11:00-1:00;  Mon., June 22, 12 - 2 PM; Fri., June 26, 8-10 AM. 

Best wishes,

Melanie Ehrlich

Co-Chairman, Citizens’ Road Home Action Team (CHAT)
http://chatushome.com

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