Objectionable Valuations Become Hate Speech, Inflating Home Prices
Attacks on free speech are on the rise in the English-speaking world.
A bill introduced in Canada to thwart online “anarchy and lawlessness” would create a Canadian Ministry of Truth empowered to punish authors Ottawa politicians find problematic. In response to the worst rioting in Britain in years, about 4,000 people have reportedly been jailed for online thought crimes. U.K. Prime Minister Keir Starmer has vowed to prosecute anyone his government believes is whipping up people’s emotions on the Internet. There’s even talk of Britain trying to extradite Elon Musk for comments he made on X.
The United States has hardly been immune to the trend. Just hours after President Biden took the oath of office in 2021, White House officials reportedly met with executives at social media companies. U.S. officials reportedly threatened them with restraint-of-trade lawsuits and regulatory action if the companies failed to censor what the White House deemed “misinformation” about Covid. This spread to misinformation about the elections and then misinformation in general.
Similar censorship talks appear to have occurred among White House officials, employees of government-sponsored mortgage giants Fannie Mae and Freddie Mac and private vendors to throttle the protected speech of individuals in the mortgage industry engaged uniquely for their independence. These truthtellers serve as key bulwarks in federally backed mortgage transactions.
In service to an illusory concept known as “housing equity,” executive branch officials, employees of Freddie Mac and Fannie Mae and their vendors began throttling what could be spoken and written about the condition of collateral and the credit history of borrowers. Zealots at the U.S. Department of Housing and Urban Development began soliciting nonprofits and private attorneys to find appraisers who could be made examples of.
White House officials are engaging in the censorship campaign as part of a federal valuation task force known as PAVE. The latter includes employees of 13 federal agencies and offices, including the politically appointed head of the Federal Housing Finance Agency, Freddie and Fannie’s regulator and conservator.
Members of the housing lobby have long wanted a world in which the values of all homes would comically be “above average” – that is, all homes would meet the value required by commissioned salespeople to make the underlying deal work. In this bizarro world, all homes would be valued at levels that supported their respective federally backed mortgage deals, but probably not their actual value.
The plan could be accomplished by rounding up a relative few appraisers – say fewer than 1,000 of the nation’s 70,000 or so state licensees – and subjecting them to lengthy and malicious federal investigations on suspicion of discrimination. Word of the investigations would quickly spread. The upshot has been the removal of the safe space appraisers once had to conclude values that sent the buyer and seller back to the negotiating table. An insufficient value would henceforth be viewed as a potential hate crime. The understandable reluctance by appraisers to risk HUD complaints has been a big and underexamined cause behind the current U.S. housing inflation. Few Americans know about it.
An online trail of press releases and policy documents demonstrate members of the administration and employees of the mortgage giants bullied a private company, Fair Isaac Company, to rename and re-define its credit-scoring formula. The same group has imposed actual censorship on tens of thousands of state-licensed appraisers whose independent value opinions serve as a key guardrail in the $14 trillion residential mortgage market.
Consider:
- Through outside contractors, HUD has ensnared at least 300, but possibly as many as 1,000, state-licensed real property appraisers in federal investigations based, by all accounts, only on the fact that an appraiser failed to hit a predetermined value required to make a real estate transaction pencil.
- A coercive program run by Freddie Mac resorts to open censorship. The mortgage giant assures appraisers that by expurgating many of the most common words in the English language from their appraisal reports, words like “good,” “bad,” “high,” “low,” “strong,” “weak,” “slow,” “rapid,” appraisers will be freed to be more descriptive. You can’t make this up. At the same time, says the mortgage giant, appraisers can be safe from career-destroying accusations of bias (hint, hint). Since Freddie Mac, and its twin, Fannie Mae, can blacklist appraisers and punish the lenders who hire them, the censorship has real teeth. Banned are many other words. They include “crime,” “school district” “student,” “preferred,” “well-kept” and “desirable,” and many puzzlingly innocuous phrases like “convenient to.”
- To avoid claims of censorship, Freddie and Fannie have been simply waiving appraisals under a program dishonestly called “value acceptance.” It’s the new “liar loan.” This time, the lying is about the value of the collateral (in the run-up to the 2007-2008 financial crisis, it was the borrower stating his or her own income with no third-party verification). Among other things, the waived appraisals have allowed predatory closing costs to be hidden in inflated contract prices as sellers try to recoup concessions paid on behalf of cash-strapped buyers. Appraisers are required to adjust out atypical concessions in their valuations. “Often, agents attempt to have the seller pay for the buyer’s closing costs, which inflates the true market value of the property being appraised,” said appraiser Richard Hagar, who has taught classes on real estate, mortgage, and appraisal fraud to law enforcement officials since 2004.
The censorship, scapegoating and sidelining of appraisers has done real damage to borrowers and the purchasers of bonds issued by the government-sponsored mortgage giants. Housing prices can no longer easily correct as the data pool has been tainted by closed transactions with rubber-stamped or contrived values due to the bullying, or the elimination, of appraisers. There will eventually be a reckoning.
- Is a Horde of Deadbeat Borrowers Again Walking Among Us? - November 4, 2024
- How Deep Fakes Have Burrowed Into Home Finance - October 14, 2024
- Stoked by HUD, Cottage Industry Shakes Down Mom-and-Pop Appraisers - September 6, 2024
Welcome to the New World Order.
What worked in America for roughly 230 years has not and will not be tolerated anymore.
What worked in Britain for roughly 470 years will not be tolerated anymore.
Very little of what has been successful will be acceptable behavior going forward. The New World Order will now, tell you what you can and cannot think. The New World Order will now, tell you what you can and cannot write.
Resistance is futile.
Freedom of Speech is only for those elected and in power.
The issue that I don’t see talked about a whole lot is the risk of this type of pressure on appraisers leading to overvalued homes in certain areas. This could result in a situation that disproportionately hurts the very same historically disadvantaged minorities that everyone seeks to help by leaving them with a huge debt burden on an upside down house that can’t be sold…
Exactly. Was just talking about this very fact the other day. Reckoning will come and it will be horrible.
They don’t care about disadvantaged minorities. That they do is the big lie underlying this whole mess. As always, they want to make the loans and force the taxpayer to bail them out when it all goes south. They blame it on us, the very minorities they lie about wanting to help, real estate agents, surveyors, title companies, home inspectors, etc.
Retiring. Period.
Best wishes for your future. None of us signed up to be social justice warriors.
So damn tired of the TAIL wagging the DOG. we have been pressured and persecuted for being the gate keepers for decades. We are the only ones who can stop financial disasters. Yes reckoning will be harsh and long and hurt the ones they are trying to protect the worst-minorities! Then they will find some way to blame us once again. Retirement very close and lender work stopped completely in 2024. Good luck to all who have to hang in there for many more years. GOD SPEED TO YOU ALL.
I don’t think they’re trying to protect anyone, especially the ones they say they’re trying to protect. They are simply promoting and forcing the Marxist agenda wherever they can. This is the way they always do it, under the guise of “helping”.
I can’t retire due to living through three of these so called collapses, but I’m retraining. I’m getting out of anything and everything that requires a certificate or license by the State. Everything I see says that they’ll be demanding more and more while paying less and less, so there is no point.
Excellent article focusing on the industry we are knowledgeable about, and can thus clearly see how it is being destroyed, as an example of a larger sweeping movement. The goal of Marxist agitators in the formerly “free-world” (aka Western Democracies) is chaos. That is, create a state of confusion where people are unable to rationally determine a response to the deteriorating social conditions surrounding them. Trying to make sense of insane government policies imposed by soulless bureaucrats or recognize a purposeful political agenda become a fools errand such that people finally just give up trying. Finally, society collapses and the Marxist revolution fills the social power vacuum with universal government control of society. The “March through the institutions” by progressives/Marxists has been going on for over 100 years since the Federal Reserve was created to overheat and then crash the economy to destroy the family farm and impose FDR’s New Deal. It picked up steam in the 1960s under the guise of “social justice”, and entered the end-game with the BLM riots. Now we have an outright communist who didn’t receive a single primary vote installed by elite oligarchs as the nominee of a major political party that shamelessly labels itself Democratic. A day of reckoning is, indeed, upon us.
Communists always go after the farmers and food production first. What we’re seeing is nothing new. Note that there have been scores of large food production fires over the past few years. Last summer, I drove past that dairy in the Texas Panhandle where, what was it, 20,000 cows were killed? It’s wasn’t back in production.
The Communist Manifesto lays it out and food production is crucial as agriculture is in part of three planks. https://greattrib.com/geo-political/10-planks-communist-manifesto-america
Control the food = control the people. The creation of Gov’t dependency in any form is tyranny.
It gives one perspective when you do a HECM appraisal and the elderly homeowner is literally crying because “their property taxes are essentially a rent to the Gov’t I can no longer afford to pay”.
Tyrannical.
This last friday’s Ron Paul with Chris Rosinni was worth a watch. / ‘why kamalas price controls will lead to shortages.’
https://www.youtube.com/c/ronpaullibertyreport
I’ve witnessed this too many times..
The Architects of Western Decline, The Frankfurt School. If you’ve never seen this, you won’t be the same after watching it. It’s not “conspiracy theory” bunk.
And the Fabians before that among others. These people told us what they were doing and going to do, but too many people thought that “It would never happen here.”
The primary thing to keep in mind is that this IS NOT about helping disadvantaged minorities. It IS about destroying the appraisal industry and forcing communism on America. Am I paranoid? Nope, just an observer of reality.
Article; ‘including the politically appointed head of the Federal Housing Finance Agency, Freddie and Fannie’s regulator and conservator.’ / Shifts in policies which drive the entire mortgage lending system from the top down. FHFA conditions GSE executive pay based on their purposeful demands to achieve certain goals known as ‘compliance with the scorecard’. Image attached.
One of those items demanded of in policy grading is to use full service human appraisers less, and use automated lender controlled avm automatic valuation model utilities more. To affirm an illusionary fictitious concept that human appraisers are biased, but lender controlled automatic values are not biased, and that using waivers and skipping the appraisal process entirely is a sound practice.
The lender is an interested party to the transaction whom stands to earn substantial amounts of money on commissions, fees, loan handling. The appraiser only gets paid a fixed fee once regardless of the appraisers market value conclusions. The appraiser is the only impartial non commissioned non advocate whom does not have an interest in the transactions final disposition, all we do is provide ‘fair market value analysis’.
There is a clear conflict of interest issue involved with the elimination of full service human appraisers or substituting appraisers out for automation. There is clear competency and qualification issues involved with substituting appraisers for non licensed persons (pdc’s property data collectors) or proprietary avm algorithms which are not subjected to meaningful or adequate oversight. (per the CFPB’s final rule on AVM’s this July. Lenders will self certify their black box proprietary avm systems are well managed with a one page form submitted every other year or so, no external auditing will be required or allowed.)
FHFA scorecard 2024.
https://www.fhfa.gov/sites/default/files/2024-03/2024-Scorecard_1.pdf
Continue efforts to minimize single-family appraisal bias and improve valuation equity, including by supporting FHFA’s implementation of the Property and Valuation Equity (PAVE) action plan
.
https://www.fhfa.gov/blog/insights/reducing-valuation-bias-by-addressing-appraiser-and-property-valuation-commentary
How it started. Scraping the entire CU database of millions of appraisals, they found a handful of examples they could form an argument around. Not much, but they did find a few examples. That was the language side.
https://www.fhfa.gov/blog/statistics/have-property-valuation-inequalities-diminished-in-black-and-hispaniclatino-neighborhoods
04/2024 update FHFA. This is the statistics side. This is junk science which means absolutely nothing. Analyzing appraisals coming in ‘higher or lower comparative to sales contract pricing’, and parsing the data by race. Market conditions changed dramatically over ‘phase 1’ (an over 10 year period) as we exited a recession and housing crash, then entered a period of historical low lending rates. Then ‘phase 2’ (1.5 years) is a cool off period where the mortgage lending rates doubled and inflation skyrocketed. The market conditions are completely different, of course there will be ratio changes in buyer seller behaviors as that relates to forming contracts and negotiating price. These people have tortured the data until it confessed what they wanted to hear. This is not a valid approach to forensic data review or meaningful statistical science.
If appraisals came in higher or lower then contracted pricing is irrelevant to any argument around ‘appraiser bias’. If anything of value can be inferred of their studies on the matter, it reveals that the appraiser provides some consistent measure of protection to shield minority groups from predatory sales and lending efforts.
For the wealth gap, that’s income education and cultural based. Appraisers only analyze the market values and price relationships others have already formed and negotiated upon. ‘Housing equity’ by tampering with valuation conclusions, ignoring underlying causes related to education, employment, income, access, the economy. Completely irresponsible and counter productive regulatory approaches which will only make the problems worse.
Jeremy, I’m as sympathetic to the plight of appraisers as anyone but “reportedly threatened”, “talks appear to have occurred”? Cite your verified sources so we can separate fact from inuendo.
Here, posted this the other day. On ‘price’. People have this idea that price is an absolute. Observe how ‘price’ is formed in the market. The percentage figure on the far right indicates the ratio of price movement from final listed price, to final closed price. (actual real world home sale data from MLS systems) If one examines the ratios of initial listed pricing vs final closed price, the ratios can easily jump to 5%-10% ranges either way +/-. Agents adjust price through the entire sales process based on market factors such as supply, demand, and buyer acceptance. That is what over time forms market value. Judging an appraisers competency based on statistical data if appraisers copy cat realty agents pricing opinions, that is a demonstration of ignorance of the process.
Sounds like typical whining to me. Another conspiracy revealed, more bad actors out to get me, life isn’t fair to me, etc. Oh boy.
I am a busy residential appraiser and work in a large metro area, and don’t feel any of the pressures the author describes nor feel the motivations of government actors to make life more “equitable” are dishonest or misplaced.
Do a proper job on your reports and the reports withstand all scrutiny,…if one “hits the number” or not. If your reports are good than they will withstand and rebuff the Reconsideration of Value requests and substantiate your work product.
The sky is NOT falling, our profession is not being censored into nonexistence and people need to man up and stop whining and being small and spiteful…and yes, I agree it’s frustrating when one has to remove innocuous words like “the subject is in a desirable location, proximate and convenient to shopping” but this too shall pass.
Lastly, I never met an appraiser whether, biased, prejudiced or otherwise, who had the time to conjure up a biased report…
Gettin’ out the popcorn..gonna be some strong reactions to that one! LOL. 🙂
How do you handle basic ethics such as transparent billing practices and amc’s?
A curious set of contradictions with a condescending tone begging for a response (e.g., “…people need to man up and stop whining and being small and spiteful”). I’ll bite with some hope of being constructive and a bit of amusement. Just because you don’t see something, doesn’t mean it’s not there. Humans have a broad range of abilities when it comes to the recognition of patterns within seemingly random data sets; what can be obvious to some is completely unseen by others, such is life. Gaps in knowledge, wisdom, curiosity, and experience factor heavily as well. A common precipitant of creeping communism is a broad ideological sympathy with the long-term goals of a tyrannical state matched by an incuriosity about measuring its touted claims and good intentions with tangible reality and the results of those policies. Very often this isn’t entirely the sympathizer’s fault as the state and it’s army of bureaucrats makes every effort to mask its deformities and keep the fantasy in tact (as Bastiat pointed out: communism is based on the popular belief that everybody can live off of everybody else). Finally, the education system was captured by Marxists several generations ago creating another burdensome layer for those who are “educated”.
Thank you for posting. Solace lies in a notion that ‘education’ is a life long process. People can change. People do change. In the modern world they often change based on the highest and best possible outcome as they perceive most probable. The delivery mechanisms of public perception now drive policy everyone is demanded to abide. When ideological compliance becomes law. Just one problem; People still have a choice of more than one informational channel or technical app subscription.
Just wow. Do you have any idea what impact one claim can have? Especially a FALSE one against an appraiser? There is also the fact that ANYONE can file a complaint against an appraiser, with NO consequences for false claims. The financial, mental and physical health impacts, etc. Not to mention the “stories” that are in the media where appraisers received death threats? No amount of CYA and completing a bullet proof report can save anyone at this point. The ramifications of just doing our jobs, and doing them well while meeting all rules/regs/certs can come back to bite you. I have never met or seen an appraisal that was biased, flawed and not complaint-yes. I would assist any way I could to remove any biased appraiser from the profession so far I have not seen proof of one. May you never experience one of these claims-but then again maybe you need to, and go through the absolute hell that some have and are going through to humble you.
Yep! As soon as the new and improved URAR comes out, I will retire. Just wait until you see that software vendors will charge appraisers for every “scan” of the residence, every report completed, AMC’s will charge for every upload, and we will be paid leas because we didn’t do as much “work”!
appraisers have to watch out for words that are no where close to being offensive but if someone goes on national media and calls a appraiser a raciest that person is put on a pedestal for being brave and truthful..then that brave and truthful person has his legal fees payed by a federal agency while the appraiser has to make ends meet …barely i might add …
The commentary on this site feels like it is coming from Breitbart News.