Baghdad Bob of Freddie Mac Merits Mention As Mideast Erupts
For a brief time in April 2003, Saddam Hussein’s charismatic Information Minister, Mohammed Saeed al-Sahhaf, became a worldwide pop-culture icon. During the invasion of Iraq, al-Sahhaf faced reporters on the roof of a Baghdad hotel. All around him, columns of smoke billowed and sirens blared. Glide bombs shook the earth. American and British coalition forces poured into the city.
Denying reality, al-Sahhaf insisted: “There are no American troops in Baghdad!” The next day, Baghdad fell. But al-Sahhaf’s gift for bombastic metaphors and outrageous superlatives eclipsed his mendacity. He’d gained the nickname “Baghdad Bob.” (The British called him “Comical Ali” – a spoof on another of Saddam’s ministers ominously nicknamed “Chemical Ali.”)
More than two decades later, as troubles in the Mideast again mount, a government-sponsored purveyor of equal talent can be found much closer to home. Like Baghdad Bob, he, too, deserves to be featured on memes, fan pages, coffee mugs and T-shirts.
Unlike Baghdad Bob, he’s still on the job. His name is Scott Reuter. The results of his handiwork are buried in a portfolio of more than $2.2 trillion in mortgage-backed securities purchased by the U.S. Federal Reserve. While no one was paying attention, America’s central bank became Fannie and Freddie’s biggest customer. More on Reuter in a minute.
Since 2023, government-backed mortgage giant Freddie Mac has maintained a nonpublic and growing list of words it has expunged from appraisal reports with the help, and potentially the coercion, of vendors. The censorship has turned many appraisal reports into misleading gibberish and eliminated salient facts about properties that serve as collateral for trillions in taxpayer-backed mortgages. The distorted reports have been relied on by underwriters, lending institutions and ultimately purchasers of mortgage-backed securities – now largely the Federal Reserve.
Initially under the pretext of removing perceived “problematic” words and phrases somehow related to DEI, employees at Freddie Mac soon expanded the word ban to eliminate words that could cause any form of “transactional friction.” This friction is the very point of the appraisal, which serves as a consumer protection and a safeguard of the U.S. taxpayer – the deep pocket of last resort in the arrangement. It also serves as a bulwark against home-price inflation.
Freddie Mac has incentivized or arm-twisted vendors to incorporate textual analysis into third-party software. Independent real property appraisers are hired by lenders uniquely for their independence. They become the eyes and ears of the lending institutions. The appraisers have no relationship with Freddie Mac or the mortgage giant’s promiscuous big sister, Fannie Mae.
Freddie Mac’s answer to Baghdad Bob, the aforementioned Scott Reuter, has been the public face of the appraisal tampering. Because Freddie Mac’s unpublished list of banned words and phrases has been built into pre-approved third-party underwriting software, investors in mortgages purchased or guaranteed by Fannie and the Federal Housing Administration have also been affected by the doctoring of appraisals. This was the point all along.
The censorship has turned appraisers’ observations on such things as markets, submarkets, sales trends and school districts into gobbledygook by expurgating basic words in the English language. This wasn’t an accident. Appraisers report that some of the banned words are known to them. They include “good,” “bad,” “high,” “low,” “strong,” “weak,” “slow,” and “rapid.” Banned are other words and terms, much of the censorship clearly designed to mask economic realities relating to the properties being appraised. Banned words include “crime,” “school district” “neighborhood,” “blight,” “student,” “preferred,” “up-and-coming,” “well-kept,” “graffiti” and “desirable” and many puzzlingly innocuous phrases like “convenient to,” “walking distance” and “demographer.”
Ironically, Freddie Mac’s own public advice to home buyers uses many of the words and phrases that the mortgage giant requires to be censored from third-party appraisal reports. The difference? Freddie Mac executives want to push through loan originations to please their political bosses in Washington and members of the housing lobby – the lenders, Realtors and homebuilders. The housing lobby has wanted nothing more than to eliminate independent appraisers.
The bowdlerization and misrepresentation by omission have meant basic observations like, “The appraised property has a high-gabled roof with two dormers” or “The property is located in the Houston Independent School District” or “The property contains an abandoned home covered in graffiti” are excised from reports. The results have created a form of “liar loan.”
Appraisers are kept from opining on neighborhood characteristics that influence value: the perceived efficiency of local government, response times for police and fire, crime rates, the performance of school districts as demonstrated by standardized test scores and levels of deferred maintenance and property abandonment.
Since Freddie and Fannie can blacklist appraisers and punish the lenders who hire them, the censorship has real teeth. The twins can also blacklist the software developers who create appraisal software which requires the use of forms licensed to them by the mortgage giants.
The appraisal tampering is an example of nongovernment actors working with individuals in government, like Sandra L. Thompson, the mortgage twins’ Biden-era federal regulator, to promote censorship of a class of citizens uniquely engaged for their independence. Months into the Trump administration, the tampering is still going on.
This is just one way Freddie and Fannie have been subverting market processes in recent years. Perched outside government but operating with the implicit support of government, the inner workings of the mortgage giants have increasingly come to resemble those of a criminal enterprise. They act as political fixers. The twins have always operated with little accountability.
Characters like Mr. Reuter have helped add to the nation’s current home-price inflation by ensuring, through institutionalized censorship, that the opinions of independent third-party appraisers are sufficiently silenced to the benefit of his enterprise’s political and business priorities.
The late Iraqi strongman Saddam Hussein was known to imprison members of Iraq’s national soccer team after a loss. For good measure, he had them caned on the soles of their feet. What awaited al-Sahhaf, were he to have gotten too close to the truth, was obvious. The corruption is more nuanced at Freddie Mac.
- Baghdad Bob of Freddie Mac Merits Mention As Mideast Erupts - June 26, 2025
- Fannie Mae Fraud and Abuse Exposed - April 18, 2025
- Is a Horde of Deadbeat Borrowers Again Walking Among Us? - November 4, 2024
