Fannie and Freddie, Still Stealing Data

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GSEs Stealing Data From Independent AppraisersNo matter how you sugar coat it, Fannie Mae and Freddie Mac have been stealing data from independent appraisers for years. The information gathered by licensed appraisers and delivered to their clients, is sold to one of these two GSEs, who then store all the data under the auspices of appraisal quality review. Appraisers are not even allowed to see the info because it’s only for the lenders who hire the appraisers in the first place.

Now armed with years of appraisal data (which I firmly believe is gathered illegally and an entire industry is virtually blackmailed into having no control over the data they create/own?), now this data is being used to put the very people out of work who provided the data in the first place.

The GSEs are using appraiser’s own data to take work directly away from them.Fannie and Freddie are upping the stakes as they increase their appraisal waiver programs to allow the use of more automated valuations (they say only 50,000 less appraisals next year), whenever they have a previous appraisal report in their database. In one place they state the program is a no cost service to consumers and in another, this no-cost service can be provided for only a $50.00 fee. Hmm… So, they get to use the appraiser’s report twice for only one fee? Think about this – appraisers get paid for their opinions of value – not for the individual data they collect in the process of determining that opinion of value. The GSEs are using appraiser’s own data to take work directly away from them.

There’s something downright Un-American about this whole system and the appraisal industry has been punished long enough for sins they never committed. Big Banks started the problems and, once again, the system is being driven by the “Golden Rule.” As for Big Data, it will never accurately price real estate. It simply isn’t possible using the information in public records. I am hopeful the new administration will stop the bleeding and restore some integrity to the appraisal regulation industry. No industry in history has been subjected to the turmoil imposed on the appraisal industry, that all started with the HVCC and went downhill from there. It’s time to bring back sanity to the mortgage lending process.

Hamp ThomasBy Hamp Thomas, founder and president of the Institute of Housing Technologies. He is also the president of Carolina Appraisers & Real Estate. He is the author of the American Measurement Standard; the Size Matters – Residential Square Footage books, continuing education courses (for agents and appraisers), the course Inside the New Appraisal Process; ANSI, Home Measurement & the Power of Price-Per-Square-Foot; Understanding ANSI, and numerous other real estate courses, webinars, videos, and blogs. Hamp also authored the Professional’s Dictionary of Real Estate Terms; Home Measurement Basics; Realtors and Square Footage; and his latest book Death of an Industry-Real Estate Appraisal.

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17 Responses

  1. Raymond says:

    Appraisers are pawns on a chess board. pretty sad, but what is more sad is that the appraisal profession has been unable to control their own profession from non-appraisal entities who continue to move us all over the board.

     

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  2. Diana N. says:

    I’ve been saying it for years, as soon as all the new forms came out, didn’t take a genius to figure that one out. And it will get worse not better. After 46 years in the business and all the money spent on classes and books and license fees I feel like I really wasted my time and money doing something I really enjoyed doing. Hell, I should have finished law school.

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  3. B.B. says:

    We need an attorney to file a class action suit. Someone here must know an attorney. Can we get the coalitions to look into this?

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  4. To me, this is like tilting at Windmills. There have been attempts by the lending industry to lessen their reliance on appraisals at least since the 1970’s.

    The GSE’s found that 98% of the time the appraisal comes in at the Sales Price. And, the appraisal process slows down the loan funding process.

    Publicly traded financial institutions have two types of income, Interest and Fee’s. When they have more Fee income, or when it is a larger part of their total income, their Stock Price goes up.

    Fees are generated when new loans are made.

    The more loans funded, the higher the Fee income.

    Stock Prices are enhanced when Fee income increases.

    Fund more loans, bonuses go up.

    Lenders have contractual arrangements with the GSE’s regarding underwriting and appraisal related issues. Since 2003 one could waive an appraisal on a 80% loan in a purchase transaction if the borrower had good credit.

    Instead, lenders when the other way, making more sub prime loans, and asking appraisers for their insurance, selling the loans or MBS’s saying to the investor not to worry, all their appraisers are Insured.

    It only takes about 4,000 pieces of market data in any given market to be able to run an AVM. In some markets appraisers were paid $1.00 per comp by early AMC vendors. One story was that in Kansas City in 2003, two appraisers provided the 4,000 sales over a weekend to a vendor.

    Change is inevitable. Technology has improved, and the use of the appraiser is changing, maybe being marginalized in the lending world.

    It is time for the vocational appraiser who only took enough course work to sit for their license exam, to either get out and go do something else, or step up and take advanced course work, maybe even get a degree in RE, and credentials, and become a professional.

    There is lots of appraisal work outside of lending.

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    • Diana N. says:

      And when the value doesn’t come in at the sales price or where the lender wants it, that’s the last assignment you get from them. Been there, had it happen a few times.

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  5. J. West says:

    If there is an attorney out there that would want to start a class action lawsuit, you can count me in.

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  6. BigAl says:

    If I recall correctly, there was a group of appraisers that won a lawsuit against AppraisalPort/FNC for data mining. Maybe we should reach out to them for help. Anyone remembers their names?

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  7. Hamp, nice article. I agree. It IS theft of our professional work product.

    The funniest part of this (and there IS a hilarious aspect) is that CU was based on appraisal data collected up to and through 2014. ALL of the analyses were based on pre 2015 data sets.

    In January 2015 FNMA announced that because most appraisers had been appraising to (adjusting to) artificial FNMA guidelines for decades, FNMA was discontinuing those guidelines with an admonition for appraisers to only appraise to actual market conditions from now on.

    So, this “Big Data” based state of the art alternative to professional appraisal is based on a fatally flawed data system. The so called “peer adjustments” turn out to be meaningless non market adjustments.

    Couple that with regression analyses that on a good day only captures about 70% of meaningful value perceptions and what could possibly go wrong?

    If you ever wondered & worried about what happened to the folks that didn’t go to jail at Enron; Lincoln Savings and Loan, Indy Mac, Aurora, Countrywide, WAMU, and a host of others you needn’t have. Apparently they are alive and well working at organizations like FNMA, FreddieMac and / or commissioned loan brokers.

    Well, not all of them. Some must have been elected to Congress and the Senate. Others were already there. Still others are regulators or rule makers with ties to associations sponsored by the very people sabotaging USPAP compliance.

    Come on now, y’all don’t think that is funny?

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  8. Bill Johnson says:

    They may not be stealing the data, but Clearbox is trying to make a buck off of the recent tragedies.

    They say.
    “Many of you will need to reach appraisers in the areas impacted by Harvey and Irma to engage appraisers for damage assessments.

    You may subscribe to the Clearbox RECRUIT™ tool by subscribing here or you may purchase data (email address) and contact appraisers directly. Email address data is $1 per valid record with a minimum purchase of $2500.00.

    So they are offering OUR e-mail addresses for only a dollar, but you must buy 2,500 of them ($2,500). When will the profit off of the appraiser ever stop.

    Seek the truth.

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    • Bill, you are right. It’s one of the reasons that I don’t have any associations with Clearbox, or those that do.

      I recently received an email from a firm offering $89 commercial QC reviews for appraisers. Subject to all the fine print, I thought this could be relatively inexpensive form for 3rd party checking of my own work with me as the client….Until I later saw they are a member of Ms. Trice’s various associations and a sponsor of Value Expo.

      I will never attend that self serving promotion of hers, nor will I willingly use any of the services that sponsor it.

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  9. mike hunts says:

    Until appraisers become like the CTA or Teamsters, nothing will happen. Ever.

    Appraisers are too smart to join as a group-“I’m smart enough to figure this out on my own, I dont need help.

    Be dumb-join or creat a group, join that group with other groups, create a national lobbying powerhouse that can affect change.

    goodness knows the AI is not on our side.

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  10. American Guild of Appraisers, OPEIU AFL/CIO

    http://www.appraisersguild.org So far in the past 1 1/2 years we have successfully represented 43 appraisers that were either falsely accused of USPAP violations; blacklisted or had payments improperly withheld.

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Fannie and Freddie, Still Stealing Data

by AppraisersBlogs time to read: 2 min
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