Tag Archives: redlining

America Begins To Grow Up

BHHSNJ NJ301_H_Seal_cab_cmyk

by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

The last week in June of 2015 marked, perhaps, the beginning of the end of America’s adolescence. Three momentous Supreme Court rulings and a massacre in South Carolina have shaken some immature paradigms nationwide.

My intent, here, is not necessarily to politicize this space, or to comment on the fallout from the murderous event in the South – other than an expression of sorrow – or debate the merits and philosophies espoused in the week’s legal opinions (although I may, just a little).  I’d like to focus on the real-world implications these events have on real estate consumers and, hopefully, even as we grieve in one case, how they will mature and benefit our industry.  You can read The Supreme Court’s opinions by clicking on their underlined titles.

King v. Burwell, decided Thursday, June 25th, affirmed the Affordable Care Act’s pillar provision of tax credits in the form of subsidies on the Federal health care exchanges.  If The Court had struck down those subsidies, it is generally accepted that the health care industry would have been thrown into chaos.  Any disruption of a major sector of the economy, such as health care, would have badly negative effects on the real estate industry, among others.  The continuation of this law also marks the continuation of its effect on commercial real estate which has been felt since the law was enacted.  The health care sector has made a major capital investment in real estate for health care facilities as the ACA has changed the ways providers treat patients and as health care systems have moved into new market areas.  The mergers and acquisitions The Act has prompted within the health care industry has also had a direct impact on commercial real estate development.  Office buildings and other types of commercial real estate which have been vacant or under-used are, in many areas, being converted to health care facilities or administrative centers.  The Supreme Court ruling  validates the robust demand for owning healthcare buildings. By owning shares in healthcare REITs (real estate investment trusts) investors can benefit by gaining exposure to diversified portfolios that should produce steady and now more predictable growth in years to come.

Obamacare has also had an effect on capital gains taxes on investment properties for the wealthiest among us.  You’ll note I have not gotten into the pros and cons of this law except as it relates to real estate.  I will suffice to mention it is the beginning of a more mature system which up-ended the runaway cycle of cost vs. care.  As the effects of the law become more clear over time I believe it will afford more people the opportunity to enter the real estate market because of money saved on health care and simply because they are healthy enough to do so.

On the same day, The Court ruled on Texas Department of Housing and Community Affairs v. Inclusive Communities ProjectThe issue in Inclusive Communities was whether the Fair Housing Act allows plaintiffs’ action if they can show that a government agency or private actor in renting, selling, or otherwise making housing available on the basis of race, intended to discriminate on the basis of race, or whether the Act also forbids acts that have a “disparate impact” on housing opportunities. Disparate impact means that some policy, adopted for a non-racial reason, might end up burdening minority-housing opportunities more heavily than those provided to whites; if so, the policymaker would be required to justify the policy to a court on grounds other than race.

This decision left intact and strengthened a pillar of the Fair Housing Act that seeks to erase part of another blot on this country’s conscience: discrimination in housing, segregation of areas of real estate by race, red-lining and steering, all past real estate practices.

On Friday, June 26th The Court ruled on Obergefell v. Hodges which affirmed the legitimacy of gay marriage nationwide.  Again, it’s not my intention to debate the meaning of marriage.  Everyone is entitled to their opinion of what marriage can and cannot be. Opposition to same-sex marriage is a personal opinion or belief but it has no part in law or governance.  I think this is where a lot of religious organizations go off the rails, for example, confusing the separation of government and religious thought.  The Court ruled this right to marry as a guaranteed right, not subject to popular vote – the electorate does not get to vote on granting individual rights and liberties or “the pursuit of happiness”, regardless of Republican rhetoric. 

This ruling clears the way for rights and benefits for gay and lesbian couples that resonate throughout the real estate industry, among others.  In New Jersey, for example, if gay marriage is legal so are the rights of the couple who purchase a home to be tenants in the entirety, that is, equally entitled to the property and its inheritance, as opposed to joint tenants, tenants in common or general tenancy where those rights are calculated differently.  You can read about the differences in these forms of tenancy here.  Marriage could mean greater financial stability for Americans who previously were unable to get married, which would make it easier for this demographic to qualify for a mortgage.  A reverse mortgage for a legally married gay couple will, most likely, not exclude one partner or another.  And a greater acceptance for gay people in society could also mean gay couples will be more willing to put down roots and buy a home.  It could mean there will likely be an influx of new LGBT buyers for real estate.  The tax implications for gay couples will also be far-reaching, enabling them to file jointly and have the higher marriage exemption from capital gains taxes that male/female couples now enjoy.

There are many more areas that need to be defined for these couples such as adoption, parental rights, insurance benefits, end of life decisions, housing and employment discrimination, survivor benefits in Federal Law, even after United States v. Windsor struck down Federal law denying benefits to same-sex couples in 2013, and on and on.  This ruling brings the LGBT community into the financial mainstream of American life and, if I may say, it’s about time.  I have sat in many closings where gay couples have purchased property together and their money is the same as anyone else’s and denying real-world rights and benefits to this part of our population will have a deleterious effect on real estate, apart from the fundamental issue of fairness.

Finally, the shooting of nine African-Americans in Charleston, South Carolina has re-focused the country’s attention, not only, sadly, once again, on race but on heritage as symbolically embodied in the Confederate flag.  I will indulge myself, here, a little, to take a swat at all the politicians, North and South, who equivocated on the flag’s relevance until they stuck their noses into the political wind and smelled it blowing strongly against this symbol of hatred, oppression and slavery.  That is what prompted the reversal of many of our leaders on the issue as they attempted to wrap themselves in the cloak of right and wrong.  Only one politician, South Carolina State Representative, Republican Norman “Doug” Brannon, had the courage to admit he was “ashamed” he hadn’t pushed for the flag’s removal sooner and that it took the death of his friend and colleague, State Senator Clementa Pinckney to galvanize him into action.

America badly needs to grow up around the issue of race and how it regards its legacy as a slave holding nation. The echoes of this immaturity have resonated through real estate for decades.  The United States has attempted to correct its past mistakes by passing  myriad laws including The Civil Rights Act, The Fair Housing Act, The Equal Pay Act and by creating  the Federal Housing Authority, Affirmative Action and The Equal Employment Opportunity Commission, among others.  All of these efforts have a very tangible, real world goal apart from the fairness they embody:  to insure that all Americans have an equal chance at financial success, in accordance with that person’s gifts and not based on simply who they are.  The implications for real estate are enormous if everyone enjoys a level playing field in accordance with their ability.  The Confederate flag represents no such thing and belongs in a museum as a part of our history, not flying over state capitals.  We need to move past the romanticized version of that sorry chapter in our history where a so-called noble cause was defeated.  There is nothing noble about oppression.  There is nothing noble about the attempt to keep a portion of the population out of the neighborhood.  It affects us all, in our consciences and in our pocket books.

We need to continue to mature as a people, as a civilization.  We have a very long way to go. We need to attempt to be adults when it comes to our notions of equality, which are,  presumably, embodied in our founding.  As we prepare to celebrate the birth of our independence on July 4th we need to focus on what is good for all of us in the real world of finance, ownership, opportunity and fiscal security.  The events of the last week in June are, hopefully, a step toward that elusive, grown-up goal.

Can’t get enough of my opinions? Take heart. I have another (non-real estate) blog called “The World At Large by Jim Stefanile – Thoughts On Everything Else”.

May’s post was “Saddest of Smiles”  Chapter 1 of the history of my family.  I hope you can visit: 


June’s post was Chapter 2, “The Sanest One” in the continuing history of my family:


This month’s post is Chapter 3, “No Real Connection” in the continuing history of my family:



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A Return To The Past?

BHHSNJ NJ301_H_Seal_cab_cmykby James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

It has been said that evil (for lack of a better word) is often banal in nature and insidiously subtle in its application.

At the risk of being overly dramatic, that was the first thing that popped into my mind when I read Lisa Prevost’s July 18th article in The New York Times, “The Data Driven Home Search, Using Data To Find A New York Suburb That Fits”.  Here’s the link:


The article details the rise in services and websites that cater to homebuyers looking for the “right” suburb by supplying demographic data about neighborhoods including racial makeup, education levels, crime statistics, etc.

I once had a trainer who instilled in us the phrase, “I can describe the real estate in the neighborhood but not the people who live in it” as an answer to inappropriate client questions.  You’d be surprised (or maybe you wouldn’t be) at how many times I’ve used that phrase since.

Our real estate licenses prohibit us from violating the Fair Housing Laws as does the REALTOR Code of Ethics.  The fact that it’s illegal is also pertinent.  This country has had a dark past in civil liberties (contrary to the founding words of the Republic) and a long, tortuous history of civil rights violations of every kind. There is now a huge web of laws prohibiting the practices upon which this country (let’s face it) was founded, practices inconsistent with our stated principles.

I was floored when the article quoted Alison Bernstein the founder of Suburban Jungle a licensed real estate broker whose company supplies the kind of information I’ve been trained to avoid.  She said, “Having a license really conflicts with what we’re trying to do.”  Yeah – having a license means you have to abide by the law and not indulge in any forms of discrimination, however subtle.

The Times article describes how Ms. Bernstein’s staff interviews clients in-depth about their needs, values and lifestyle then suggests “appropriate” towns and refers the client to outside REALTORS who split their commission with Suburban Jungle.  Those REALTORS are also splitting their legal and ethical responsibilities.  I would never accept such a referral.

Suburban Jungle is one of a growing number of purveyors that cater to our most base instincts, tribalism and “herd mentality”.  These also include the big third-party sites such as Zillow and Trulia which offer all kinds of demographics since they have no licensing prohibitions.

Is there a legal and ethical conflict of interest for non-brokerage real estate services and  websites who readily offer such information to act as referral generators for agents? Fred Underwood, the N.A.R.’s director of diversity and community outreach said, in the article, he did not feel qualified to say one way or the other, but “it was at least worth questioning the purpose of providing such information.”  That’s a pretty bland reaction from the person at the National Association of Realtors who is, supposedly, charged with promoting diversity.

Andrew Schiller, the founder and chief executive of Location Inc., in Worcester, Mass., which owns NeighborhoodScout.com is quoted in the article saying his service “offers home buyers some protection from pushy agents who don’t necessarily have their best interests in mind.”  What is the best interests of our clients?   Is it enabling them to practice a subtle form of self-discrimination?  Sure, there are pushy agents out there (I’m told) but no consumer I’ve ever met is stupid enough to be cowed or convinced to live where they don’t want to live just because an agent might be aggressive.  If consumers need “protection” it shouldn’t arrive in the form of digital bigotry, it should be protection against their more squalid instincts.  He goes on to say that agents push properties in undesirable areas, “That’s one of the potential conflicts with the real estate industry.”  These arguments turn the whole issue on its head and are classic diversions of blame and a clumsy attempt to duck the many troubling aspects of these information services.  Here’s the kicker.  Schiller says, “Accurate data can help to break stereotypes,” he said. “It can lift up places, localities that have been bypassed.”  Even if I stand on my head and forget everything I’ve ever learned about real estate that statement makes no sense and is an archetypical diversion.

Also in the article, Jamie Moyle, the president and chief executive of RealtyTrac, which also offers demographic data says, “We don’t have an agenda with the data. The data is our agenda.”  Have you ever heard such a banal explanation of wrongdoing?  All the better that it’s cushioned in corp-speak and grammatically incorrect.

Steering and red-lining were common practices in real estate in the past.  Pandering to a home buyer’s basest instincts, prejudices, fears and sense of entitlement has no place in our, supposedly, more enlightened era in the United States.  This country has tried to reconcile its shameful past and has labored against its prejudices for half a century since the passage of Federal civil rights and fair housing legislation.  This institutionalized “cherry picking” of neighborhoods is a giant step backward from those, still incomplete, efforts.  If you think on this for a moment you may come to the conclusion that many of the growing reactionary movements in our country such as the Tea Party, the Christian Right, Creationists, Neo-Conservatives, The American Freedom Party (white supremacists), Aryan Nations and the survivalists, to name just a few, are all outgrowths of the same, fearful, lowest, tribal demons of our nature.  I regard these so-called “informational services” as simply the same thing expressed in real estate terms, facilitated by the Internet.

Ms. Prevost’s article states that HUD officials are “reviewing the issue” of these demographic real estate services and websites.  We can only hope this agency of the Federal Government, charged with upholding the laws of the land, will come to the conclusion that these services run counter to that mandate and are echoes of an ignoble past.

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New Idea, Old Objections


by James Stefanile, ABR, GRI, SRES, QSC, gCertified, Salesperson/REALTOR, Prudential NJ Properties, Montclair, NJ

The Federal Government’s programs to assist financially distressed homeowners have not performed up to expectations and have helped only a limited few.  Congress would not authorize bankruptcy judges to modify distressed mortgages by court order in order to assist homeowners in bankruptcy to fairly re-structure outdated or predatory mortgage loans.

The banking industry has pretty much had its way with regard to dealing with underwater and distressed mortgages.  This is despite its robo-signing, its redlining practices, betting against its own toxic securities, its part in the greatest domestic and world-wide financial collapse since the Great Depression, its rescue at every taxpayer’s expense and isolated incidents of out-and-out fraud.

Now, a few municipalities have hatched a new plan to help distressed homeowners within their borders since it’s clear the Feds aren’t going to help and the banks are a united front against these owners while large swaths of some towns disintegrate.

The plan is for the municipality to offer to buy distressed properties’ loans, pay the lender a fair market value and then sell the property back to the homeowner, after the town takes a write-down, with a modified, refinanced mortgage, most likely through a government program.  The investors who put up the money to buy the original loan and the town would benefit from the way the town writes down the loan and the homeowner may go from being underwater to actually having some equity in the property.  If the lender declines the offer the municipality would use its right of eminent domain to condemn the properties and buy the loans with the permission of a court.

The aim of this plan is to prevent neighborhoods from falling into disrepair with the presence of foreclosed or abandoned properties and to assist the town’s citizens who have suffered from outdated or predatory lending practices.

As you can imagine, the banking industry is strongly opposed and is threatening any town with the nerve to hatch this plan with the prospect of a lending embargo and lawsuits.  What’s puzzling to me, however, is the opposition of the National Association of REALTORS.

The banks are opposed because they give up domain over their customers only at the point of a gun.  They complain the eminent domain strategy is government interference in private enterprise but they were more than willing to accept the government’s interference in the form of billions of dollars in bailouts.  The REALTORS (NAR) claim this eminent domain idea (they call it a “scheme”) strikes at the heart of private home ownership and property rights.  The banks and NAR have called this “unprecedented and unconstitutional”.  In other words, they are using the old chestnuts of  “property rights” and a threat to private enterprise as opposition to this strategy which they feel will compromise their industry position.   I have come to regard this and many of NAR’s positions as knee-jerk, calcified opinions justified by their claim to be the protector of home ownership.  This is only a cover story for the real reason for NAR’s opposition – it may disrupt the flow of dollars in the real estate industry.  If NAR is the protector of home ownership it’s odd that they aren’t in favor of protecting the home ownership of the Americans affected by the financial crisis.

Sure, there are risks for abuse by homeowners under the eminent domain plan as NAR warns ominously.  But there is a court ordered step in the process which can be a protection against abuse.  Opponents of this strategy use the public’s existing fear of eminent domain to paint this very specific strategy as an example of Big Brother seizing properties.  They argue that undeserving, irresponsible homeowners will also be rescued.  This is a blanket indictment ignoring the millions of Americans who have either fallen on hard times through no fault of their own or have watched their property’s equity disappear.   As far as property rights are concerned,  I wonder if any of these distressed homeowners feel their rights are being abused.  As to the rights of their financially secure neighbors, anything that will prevent neighborhood  homes from falling into vacancy will protect their property’s values and the quality of their neighborhoods, promoting the public good and preventing the blight, crime and vandalism associated with abandoned properties.  Municipal governments have the right and the obligation to maintain a high quality of life for the constituents they represent.

Banks are terrified that eminent domain strategies could, among other things, engulf the secondary liens and equity lines of credit they hold.  They posture opposition based on morality and fairness, but, in fact, their concerns are dollar based, as always.  As far as the banks’ investors are concerned, eminent domain strategies just may be a way, possibly imperfect, but at least a valid attempt, to fix a mess that has defied solution for many years.

The National Association of REALTORS, as the largest trade organization in the country, has been very successful politically and in protecting its turf.  There are already rumblings in Congress of legislation and regulations to prevent eminent domain in these situations .  I’m sure NAR’s lobby has been busy with our leaders – elected representatives who should be concerned with their constituents and not the welfare of the National Association of REALTORS and the national banking trade organizations..

It may seem strange that I, a REALTOR, should have a favorable opinion of eminent domain as an instrument to deal with distressed mortgages.  My position is that it’s worth a look and not worthy of being murdered in its cradle because of the entrenched interests of entities with large influence.  I understand, and benefit from, the importance of the bottom line in banking and real estate.  I have also seen, in my career, the flip side of capitalism in all its gruesome glory – situations where money was the only motivator at the expense of fairness, professionalism and common sense.  I also understand that the unfettered and unregulated pursuit of profit is what almost sent the world economy off the cliff.  It’s time for new initiatives that take into account more than just the bottom line and it’s time for the trade organization that, supposedly, represents me to think beyond the dollar sign at the end of its nose.

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