Fannie, Freddie’s Offshore Gambit Imperils Privacy of Millions

Fannie, Freddie's Offshore Gambit Imperils Privacy of Millions

The offshore firm will data-mine millions of images showing the personal spaces of U.S. homeowners and tenants. 

Fearing the Chinese government could access sensitive user data through the video app TikTok, House lawmakers passed a bill last month that would ban the app if it isn’t sold to new owners. But a greater peril looms.

Mortgage giants Fannie Mae and Freddie Mac are reportedly “bench-testing” an arrangement with a foreign AI firm in which the offshore firm will data-mine millions of images showing the personal spaces of U.S. homeowners and tenants.

If your home was appraised for a refinance or new mortgage in recent years, the lender likely sent a “property data collector” to take photos of your kitchen, living room, and each of your bedrooms and bathrooms. (Pressured by the Biden administration, government-backed enterprises Freddie Mac and Fannie Mae are instructing lenders they no longer need to use state-licensed appraisers for the task.) The images of your home’s interior spaces, along with identifying information, were then likely uploaded to a server run by a vendor.

Now, according to a source, Fannie Mae and Freddie Mac have potentially caused millions of these images to be made available to an artificial-intelligence company headquartered in Barcelona, Spain, known as Restb.ai. The images are then harvested for information with the help of artificial intelligence.

An automated inventory of a property’s contents, cross-referenced with the property’s address, would represent the holy grail for any advertiser, creditor, academic researcher, crime boss, investigator, sexual predator, gerrymanderer or hostile government. It represents the marriage of artificial intelligence, a visual-recognition technology known as “computer vision” and big data in the form of hundreds of millions of interior images for most of the nation’s 82 million single-family homes and 21 million apartment units. Does your home or apartment building have a mortgage? If so, its interior spaces, including all your visible possessions, have almost certainly been captured and uploaded.

The offshore firm is said to be testing, with Freddie and Fannie’s support, a portal that could be repurposed to allow unknown parties, including insiders at any of the partnering companies, to access a tagged catalog of items found in the home. While there’s no indication Restb.ai is tagging anything other than fireplaces, appliances and countertops, the source speculates an organization could simply purchase access to this data, so long as the party were willing to pay for it and integrate with the tool’s application programing interface or “API.” Or the data could be stolen by hackers.

A screening tool could be adapted to generate a list of American homes containing any conceivable combination of identifiable objects, limited only by the requester’s imagination. For example, it could compile a list of all American homes within a geographic area that contain a bassinet, shower grab bars, Black-Lives Matter imagery, a wheelchair, an image of the Dalai Lama, a Jewish menorah, a Frederic Remington bronze, a supplemental oxygen tank, a Muslim prayer rug, a framed military officer’s sword, a self-help book on combatting depression, a Ukrainian flag, a crucifix or a gun safe.

A key technology behind the tool is known as computer vision. It is a field of computer science that focuses on enabling computers to identify and understand objects and people in images and videos. The tool, which is owned by the Spanish company, was developed independently of Fannie and Freddie – though reportedly with the twins’ approval, encouragement and participation. It is said to be able to scan a single image and extract over 100 data points, ostensibly related only to the home’s quality, condition, repairs, flooring types and appliance models.

millions of interior photos to help the offshore vendor train its machine-learning model.Fannie and Freddie together buy or guarantee 70% of America’s mortgage market but effectively define all requirements for a mortgage’s resale on the secondary market. The source believes Freddie and Fannie may have already provided, or instructed vendors to supply, millions of interior photos to help the offshore vendor train its machine-learning model. There are many open questions.

There is corroborating evidence of the activities for anyone to see. In June 2023, Fannie Mae announced the use of “image recognition technology” as a check on appraisals. Inman Intel reported in August last year that Restb.ai’s valuation product suite was “geared at modernizing the appraisal process and utilizing new Fannie Mae and Freddie Mac programs.”

It is believed Fannie has already instructed, or will soon instruct, its six official property data collection firms to begin a massive transfer of data to the Spanish company. (In March 2023, Fannie announced it had named six exclusive vendors for something it calls “Value Acceptance and Property Data.”)

Kevin Hawkins of WAV Group reported last year that Fannie Mae had analyzed more than a million appraisals using image-recognition technology. This would almost certainly have been done through the offshore company. He wrote at that time that Restb.ai was already offering mortgage originators and appraisal management companies a [Fannie Mae and Freddie Mac]-compliant “image validation solution” with its computer vision technology. The site Crunchbase has also reported on Fannie Mae’s adoption of Restb.ai’s technology.

Always worrisome has been the fact that employees of government-sponsored Freddie and Fannie are not subject to Title V conflict-of-interest constraints as federal employees are. Employees of Freddie and Fannie also operate outside the U.S. Freedom of Information Act. The public is largely in the dark over much of the twins’ dealings.

“Interior photos show the location of valuables, safes, guns, security systems, security cameras, power main, children’s rooms, entrances and exits,” said Mary Cummins, a Los Angeles-based real estate appraiser and expert witness. “Appraisers blur out people, photos of people and similar items. Property inspectors do not.

“You could end up having someone in another country looking at photos of your baby in a crib,” said Cummins. “The layout of the home is included in the [report]. Sometimes there is even a 3D photo layout which shows the exact location of the baby’s room and valuables in relation to entrances and exits. This data could end up in the wrong hands directly or through security breaches and pose a threat to the people living in the home.”

Jeremy Bagott
Jeremy Bagott

Jeremy Bagott

Jeremy Bagott is a real estate appraiser and former newspaperman. His most recent book, “The Ichthyologist’s Guide to the Subprime Meltdown,” is a concise almanac that distills the cataclysmic financial crisis of 2007-2008 to its essence. This pithy guide to the upheaval includes essays, chronologies, roundups and key lists, weaving together the stories of the politics-infused Freddie and Fannie; the doomed Wall Street investment banks Lehman and Bear Stearns; the dereliction of duty by the Big Three credit-rating services; the mayhem caused by the shadowy nonbank lenders; and the massive government bailouts. It provides a rapid-fire succession of “ah-hah” moments as it lays out the meltdown, convulsion by convulsion.

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31 Responses

  1. Avatar Spencer Paul says:

    Well, this sounds like fun and all sun shine and rainbows. No lollipops though.

    5
    • Avatar Lars L Boggess says:

      umm The ” BIDEN ” administration is pushing ? come on the desk top appraisals was conceived under the Trump administration during COVID. Why get pollical?

      1
      • Avatar Urme says:

        First of all it was a necessary evil for the time it was implemented. It wasn’t to reinvent the entire appraisal industry. It was a logical conclusion it was the Biden administration given the false racist appraiser narrative being pushed to in fact reinvent the valuation industry by eliminate appraisers for mortgage transactions. And, I may add, this is not intended to be political. Only the facts and that is not political just the root cause of why we are all complaining on this blog.

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  2. Baggins Baggins says:

    RestB.AI is going to tell appraisers how complex the appraisal task really is. To ‘reduce the cost of appraisal services’. Appraisal modernization programs are better described as advances in methods to exploit consumers.

    Frame the appraisal modernization campaign in a different light. Dear consumer; Would you rather; A: Allow photos of your private interior spaces be made available to offshore data brokers, allow lenders proprietary self controlled systems to prescribe your new home value? Or option B: Maintain privacy expectations and use an independent human appraiser not controlled by the lender, support your local community and local businesses instead?

    Look at this companies other customers list. They will all buy into the data sharing. Insurance companies. Sharing private data with auto insurers worked out so well for consumers, do that with residential housing next. Premium increases. Having a problem keeping up your home? In financial distress? iBuyers and investors will know immediately.

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  3. Fannie and Freddie are under government conservatorship, yet they get away with this crap. What they are doing is an invasion of privacy and it puts US citizens in peril. There’s those at Fannie and Freddie that should be locked in cells for this injustice.

    Yet our government does nothing. Crickets! Shame on you Uncle Sam!

    13
  4. Avatar PD says:

    Fannie actions mirror the Chinese spying on their citizen’s. This is really scarry stuff. Endorsed by the US Gov or not, it’s a private company. Pure BS.

    11
  5. Avatar John says:

    If one does not believe, their constitutional “right to privacy” is gone, read the above AGAIN. Does “confidentiality of our work”, mean anything? I retired last week after 46 years in this profession. For those who are planning on staying in the business, I can only wish you the best !

    7
  6. Avatar John says:

    So, what has happened to the one’s constitutional “right to privacy”, homeowners and appraisers included, how about, appraiser’s confidentiality with their work ? Pretty sure these groups don’t care. I am glad I retired last week after 46 years in this profession.

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  7. Retired Appraiser Retired Appraiser says:

    First Amazon plants their ears (Alexa) in your residence and now this? Who will be the first to shove their snoot under your door and “sell your smell” to the highest bidder?

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  8. Avatar Mark Hastert says:

    So, what documentation is there for this? Most of the sources sound like hear-say.

    2
  9. Avatar Cassandra says:

    Let keep telling everyone we know. The public needs to be aware.

    7
  10. Avatar Zee says:

    Another article stated the AI would be used to confirm condition/quality ratings. Any discrepancy between the report & AI decision results in an automatic violation/complaint letter to licensing board in appraiser’s state.

    3
  11. Avatar Spencer Paul says:

    I already know that this is going to backfire on them because the AI is going to be confused over glazed Formica counters and solid surfaces. You really can not tell the difference in photo, but you can by running your hand under the edge of the counter.

    2
    • Avatar Lindsey says:

      Actually, it’s easy to tell the difference in counter tops in a photo. Laminate always has a distinct edge compared to solid surface. At least in my area, I can tell. However, I have heard from a source that lenders are still preferring appraisers to do the inspections. Must be a liability thing.

      0
      • Avatar Spencer Paul says:

        Not when they have been glazed over. There is new coating overtop of it that makes that edge look rounded, one can no longer see that edge where to two pieces come together because it is covered up. Clearly you haven’t seen re-glazing done well. They are attempting to “fake” the look of a solid surface counter with different effects of the pour. You can also have a very hard edge with solid surface counters, wood, granite, stainless steel and cement.

        1
        • Avatar Lindsey says:

          As always, it depends on the market. I highly doubt they can program AI to analyze all the nuances that real estate brings for each market. So many, many variables that are not “standard”. No, reglazing old laminate is not a thing here. Most people get granite or quartz in my market area or basic Home Depot laminate.

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          • Baggins Baggins says:

            This is a bait and switch program. People whom engaged with lenders did not expect their data to be used in this manner. There is not much intelligent design here, except from the perspective of those whom would seek to exploit the remaining independent wealth in residential housing, to dismantle what little is left of consumer protection and privacy practice laws. The primary goal of these systems is not to identify the specifics of building materials.

            5
  12. Avatar PD says:

    One has to ask where does this reliance on “artificial intelligence” end. First of all there is no “intelligence” unlike a human being. To take the “opinion” (can’t believe I’m using that word) of a manufactured “machine” over a human being and saying that’s just okay is BS. This push into appraisal is all about big business and money. It is driven by greed and control of the lending industry. The items being discussed are the least of the problem. The real problem is the individuals conspiring in the background to advance their own self interest. FNMA for example is acting like an unbridled demagog bulling their way around and being allowed to get away with it. It is a private business for heavens sake regardless if they have the protection of our misguided government. Protection should not equate into self interest for their investors. Their ability to not be answerable to the taxpayers is an abhorrent abuse of power. “Because I say so” is more than a slippery slope and tells me they are guided by narcissism. The protection of the government to give a private company the ability to do this is unacceptable in a democracy. When they thumb their nose at a legitimate state investigation because they believe they are untouchable should not be permitted in a democracy. Why is there no oversight by the government? If there is, the fact they permit this abuse of power tells me the problem extends to the government in cooperation with a private company. Who is looking out for “we the people”?. There is an old business saying, ” don’t let anyone know what you do and your job becomes indispensible” (paraphrasing).; part of job security. See any relationship here?.

    6
    • Baggins Baggins says:

      Great points PD. To understand where we are now, perspective on the past may be helpful. I remember reading this 150 pg well researched report several years after I first started as an appraiser. ‘Guaranteed to fail. Fannie, Freddie, the debacle of mortgage finance.’ Research keywords: Fannie wind down.

      This was a highly illuminating and educational read. Reasons why for the past decade and longer many appraisers refused to engage in cost cutting, outsourcing, focusing on liability protection rather than volume. Because one day not too far into the future, the system could once again buckle under it’s own weight. Despite the complexity of the subject matter, an appraisers take away is relatively simple; We’re on our own. The system is not designed around studious risk management.

      One could write an entirely new book on the parallels from then to now, detailing the myriad of work arounds to capitalization, management, accountability, the political nature of the systems. Finish with the death blow to entire generations of youth whom languish in the age of artificially propped markets which never end. The below is a great educational tool on GSE structure and management to better understand what is happening today. History repeats.

      The miracles of fractional reserve lending. Now with a myriad of more advanced technical systems, even more derivatives, and new new new work arounds to artificially prop markets and conceal risk exposure. A key element of the emerging systems functionality is to remove the human element. Like moths to a flame the people came back, willing to believe.

      Current status of the plunge protection team; Tap dancing on a bubble. Cigar and whiskey in hand.

      https://files.stlouisfed.org/files/htdocs/conferences/gse/White.pdf

      3
      • Avatar PD says:

        And that my friend is what I’m going to do right now. A fine cigar and glass of iced down bourbon on my front porch. Waiting for the crickets to wake up.

        2
        • Baggins Baggins says:

          The ending to that document was almost perfect. So very well suited for what appraisers are dealing with today. Be sure to read that on page 138 right before the Glossary.

          Someone should tell HUD, Brookings, FHFA, PAVE, and everyone whom agreed with them… They’ve created far more risk then benefit with their attack on the appraisal industry. Monetizing the CU databases image repository will not offset the losses.

          3
  13. Avatar Mark Hastert says:

    Forward this to your Senators & Congressmen. I did.

    2
    • Avatar Clairene Mraz-Buonaiuto says:

      I don’t suppose you have a link for this – sorry, I’m not in my office, but would be happy to forward this to anyone who will listen.

      2
  14. Avatar Clairene Mraz-Buonaiuto says:

    This is a serious problem! I have had clients that did not particularly want me to take photos of some areas such as offices, etc., because they did not want photos of their private possessions to “leak out”. I assured them that photos would only be viewed by the lenders/investors who would be managing their loans. This is also a violation as appraisal information should only be used by the client and other specific intended users. Does anyone seem to care, i.e., the “powers that be” that there are rules and regulations in place for a reason?

    4
    • Avatar Julie says:

      I am really wondering of there is some sort of Disclosure that is being provided to the consumer that their personal photos are going to be fed into this AI and shared with who knows who? I am often asked who will see these photos? I feel like WE as appraisers need to disclose that we have ZERO control over where their personal photos are ending up. – I have been thinking about how to word another disclaimer in my reports on this topic. If it was me I would certainly want to OPT OUT of “them” sharing my personal photos – if that is even possible?

      1
  15. Mike Ford Mike Ford says:

    FNMA is aware they do not own and have unlimited rights to these photos I hope.

    The GSE boilerplate unlimited reliance statements do NOT constitute a permission by the property owner or borrower to use data in an appraisal PAID FOR BY THE BORROWER for other unintended purposes.

    Then there is the issue of privacy itself. I can legally take pictures from the street if a comp. What I can NEVER do without permission is to attempt to photograph a property interior.

    So FNMA is bench testing a process in which they violate property owner privacy rights in all 50 states?

    One where they misrepresent the purpose and scope of the appraisal to the borrowers or owners?

    Its time to shut FNMA down. FHA; VA and even Freddie Mac can fill that void. At least until Freddie adopts the same insanely dishonest policies.

    Yet FHFA remains silent.

    7
    • Avatar Pat Turner says:

      Exactly!

      5
    • Avatar Mark Hastert says:

      So, send this to your congress Rep and Senator.

      1
      • Avatar Lindsey says:

        It’s really cute you have hope on our government. Ain’t gonna happen though. Our government is more worthless than tits on a bull. I know, I worked for Social Security. Boy do they waste money!

        0
        • Lindsey if we write MAYBE they will respond thoughtfully or consider our concerns.

          Maybe they wont.

          One thing is absolutely certain though. If we dont tell them there is a problem we are concerned about, they cant know we want their help on it.

          0

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Fannie, Freddie’s Offshore Gambit Imperils Privacy of Millions

by Jeremy Bagott time to read: 4 min
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