The AMC Industry Won’t Be Toppled by Code
We’ve entered an era where more people are giving AI broader directives, asking bigger questions, and expecting deeper responses, only to receive yet another AI-generated summary. But what, exactly, is AI doing in response? That’s the real limitation of the tech. Right now, millions are spinning their wheels in digital circles, posing complex problems to a machine built to mimic intelligence. And when the dust settles? Nothing tangible shifts. No policy reforms. No systemic corrections. Just more people mesmerized by a tool instead of taking real, committed steps toward actual change.
Think of the limitations of AI as something similar to a math equation in an educational book. All the software is capable of doing is repeating already known information to educate a student. The AI does not think per se, it is only trained on existing data, able to use existing formulas. What many people online end up doing is believing they are somehow more capable when using the AI tech, despite their inability or reluctance to form these arguments themselves in person without the AI tech assistants presence.
That’s where it’s capability ends and the responsibility to actually do something with the information falls on the human. So for every minute people spend quizzing AI tech systems about all their real world problems, is another minute gone by, that nobody is making any real world effort to actually solve the problem. AI is nothing new, it never brings anything new to the table, other than the occasional note of a human using it becoming slightly better educated on topic matter they were not equipped to use prior, based on their own previous personal education.
Wake me when the AI system forms a legal argument, writes an official case file complaint, whatever it is lawyers actually do, pays the court fees, officially represents the appraisal industry and takes the AMC industry down for known violations of multitudes of legal and procedural violations over the past two decades if not more. Can you program it to make phone calls and send two billion outbound calls and emails to AMC’s asking them for their best fee and turn time, give them a taste of their own medicine? Can it reach into their bank accounts and transfer the stolen $12 billion of market potential appraisers were deprived of and return this to the appraisal industry? Can it fix the rigged market forces that are bleeding appraisers dry and reset the scales before the entire industry collapses?
I’m not impressed with AI tech. Never will be either. There is more value in being independently capable without having to rely on these sorts of tools. We need an advocate. That’s what the appraisal trade groups are supposed to be doing, but they refuse to do so. We know that’s not happening, as AMC executives apparently pull the strings over there in a clear as day conflict of interest scenario.
If the masses of appraisers who have serviced, and continue to service, the AMC industry had been better educated on the principles of ethics, regulatory guidance, and the original spirit behind those standards, they might have collectively stopped the plunder. But they don’t truly understand ethics, regulation, or the reasoning behind either. That’s why they’ve been, and continue to be, complicit in consumer fraud, industry-wide unethical behavior, and the AMC industry’s rise as the dominant market force in appraisal.
The AMC industry, alongside the appraisers still willing to play by its rules, has commandeered the majority share of work from the largest client base on the planet: the GSE twins. And it’s not stopping there. With backroom deals and cozy alliances forged with select appraisers, the AMC industry has conspired for decades to plunder the hell out of the appraisal profession.
TAF and other groups basically begged the AMC industry to take this route, as their own long-standing procedural violations were proof positive that they prioritized personal wealth and self-dealing far above the needs of the majority of licensed appraisers. They ignored some of the most basic principals of ethics; to always be fair and honest, and never deceive or take advantage of positions of power and trust.
That’s where Jeremy Bagott came in and blew the lid off the Cosmic Cobra, exposing the never-ending, institutionalized violations of states’ administrative procedural acts. The damned rules change so often in the appraisal industry, nobody even tries to keep up. Ethical compliance in appraisal? Pure illusion. The top brass are aligned with corporations functioning as agents of lenders, raking in junk fees and deceiving consumers to the tune of billions over the years. They willingly supported every action taken by so-called ‘stakeholders,’ even when those actions blatantly contradicted the spirit of regulation and the mission of genuine consumer protection.
So when AI spits out another lifeless summary, untethered from the predatory policies, the devaluation of labor, or the compounding cost of living crisis, it’s no wonder people mistake noise for knowledge. Quantitative easing buried in housing. Artificial rates inflating prices. And still, no systems realigned, no power surrendered, no accountability restored. If we’re waiting on AI to fix what human greed broke, we’ll be waiting long past the point of no return.
The plunder continues.
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Writing that myself, without any computerized assistance beyond being online, took about an hour out of my day. The key takeaway isn’t about the time; it’s about being informed and understanding what’s actually going on. I can make these arguments in person, and I routinely do. That’s what real representation and real debate look like. There’s simply no substitute for the real thing. I keep writing letters to the so-called decision-makers, urging them to take a serious look at the appraisal industry and save it before we go over the cliff. Yes, some efforts have been made, but they haven’t moved the line an inch. Why? Because those at the top will never willingly give up their power or ill-gotten gains. They’ll torch the whole thing before they relinquish control. And that’s exactly what they did. Appraisal modernization. Again, the plunder continues.
> Can you program it to make phone calls and send two billion outbound calls and emails to AMC’s asking them for their best fee and turn time, give them a taste of their own medicine?
Yes, I get spam calls and texts all the time (fake real estate buyers, unpaid parking tickets, etc). Just takes a big pile of cash and some anonymity.
While I don’t recommend that particular approach (prison is just not for me), there’s ways we can improve/open the ordering process – combine some of the new artificial intelligence capabilities with good ole’ fashioned database design, giving lenders the option to directly order appraisals, bypassing the predatory AMC model:
https://appraisersblogs.com/bye-bye-amc-a-script-2-sideline-appraisal-middlemen
“Police Brutality against James Caan from Thief 1981”
Frank (Jimmy Caan) said it best in this YouTube video. Be like Frank.
Back in the day when it was more admirable to resist fraud than to accept it.
Just found this on twitter today. Could not resist, lol.
The third party AMC model is not unique to our appraisal profession. It is now utilized in many if not most professional services, including the legal and accounting professions. While that does not maket it any better for those impacted by AMCs, we as appraisers are not alone in these 3rd party service connectors who profit from their non-traditional client-vendor management and engagement services. Unfortunately, with constantly emerging technologies and market motivations, there will be ongoing and forthcoming disruptions to traditional client engagement relationships. Since horseless carriages to computing, from computing to machine programming, from Blockbuster to Netflix, the only constant is change and the need to be adaptive and creative to stay relevant.
The only thing you’re saying is that there will always be market parasites/extortionists wherever profit is found. They really provide no service or “management”. We didn’t ask for management and we don’t need management. THEY decided that we needed to be “managed” which simply translates to taking our money. Appraisal is now almost not appraisal as the AMC’s have literally destroyed it. Actual appraising has disappeared. There’s little or nothing but intractable rule following, duplicitous requirements, Newspeak instructions, misleading “bidding opportunities”, etc., etc., etc. But, whatever, go ahead and “adapt”.
Agree, we didn’t ask for mangement and don’t need management. Simply delete the AMC bid request emails and don’t click on their vendor invite links, that has worked very well for many of us. That is likely the only way to impact the AMC industry and set you free from their tyranical management.
Not the same. The GSE program is in place by way of congressional charter. It is backstopped by the tax payer. The amc’s presence alongside regulatory changes which diminished the appraisers presence has caused a breakdown of fundamental consumer protection mechanisms which were supposed to be firmly in place via the regulatory structure to protect the stability and open access to the lending programs, to protect the taxpayer back stop.
Unlike mortgage lending, people whom seek an available vendor in other professional realms, they have the opportunity to shop and qualify the servicers or third party companies which may be in place, and can readily substitute them out for better quality or various different values, as they so wish, when they so wish. They are far more likely to have a more transparent understanding of the fee distribution structures.
They don’t face the impossible situation of having to walk away from their mortgage qualification, to need to walk into an entirely different lending institution where none of their money or finances are in place, in order to simply acquire a more competent and ethical appraiser valuation professional. They are forced into the system without choices.
If you wanted a more straight forward analogy to the model of third party servicers throughout the broader business world, consumers would need to be able to have a choice to source their own appraiser that the lender would then have their own choice of accepting their work or not. You’ve mentioned several free market changes through history. Where is the free market for mortgage lending consumers needing or wanting appraisers services? It’s not there.
Reverse the analogy, when will the GSE programs simply go away as being recognized as having made themselves irrelevant, or having been outpaced by new technology? Would lenders operate the same way without the safety net? Policy for sale. Hands out for more government money. Bail ins, bail outs. A pay to play system. Current status of GSE program managers; tap dancing on a bubble, cigar and whiskey in hand.
https://appraisersblogs.com/the-parea-program-costly-promises-empty-support/#comment-45552
The system has been broken since i started in 1991. Each time making changes that do not work. They about doing a cost approach. I would like to have 25 appraisers go into a home and come out saying how many years left it has. I guarantee the answers would be so random it would make everyone laugh. Assigning depreciation is not a easy guess because we are not to be experts in structural and other miscellaneous issues. Not only that I surveyed several builders and they don’t agree with the publications we have to look at for that short cost approach one size fit all. They want us to do an income approach even though the rents may not be correctly reported on the MLS. If you even find any. I see new kitchens on MLS reports. But when you look at the pictures You see 50-year-old Pine cabinets painted white. A total whitewash, remember you cannot lose your bias or else. i stopped taking work from Traditional means (before Covid). Did not need the BS. i feel sorry for the newcomers, It isn’t worth 20 years. I have been warning people wanting to come into this business to look elsewhere. I predicted 2008 (I said this in 2006 the banks will break). It did and many paid a heavy price. It’s happening again. The all cash down buyers are back and flipping homes. The perfect storm is ready to happen. nothing is fixed. Just Band-Aids.
This independent guy put out an interesting piece on an apparent rise of mortgage fraud, based on statistical analysis. Quite interesting and it does appear to ride alongside major changes in gse policy that sidelines appraisers. He did a great job, an independent guy just looking at data, and identifying obvious fraud.
What he misses is because he’s not well versed on policy changes. How every major step towards increased institutionalized fraud, rides alongside policy changes that sidelines appraisers. Confirming the theory; The mere presence of the full service appraiser is what prevented most fraud in the first place. / Check out his graphs on this page, undeniable proof.
https://www.oftwominds.com/blogjun25/RE-bubble-bursts6-25.html
From “1984”. Orwell wrote this in 1949.
“How is the Dictionary getting on?’ said Winston, raising his voice to overcome the noise.
‘Slowly,’ said Syme. ‘I’m on the adjectives. It’s fascinating.’
He had brightened up immediately at the mention of Newspeak. He pushed his pannikin aside, took up his hunk of bread in one delicate hand and his cheese in the other, and leaned across the table so as to be able to speak without shouting.
‘The Eleventh Edition is the definitive edition,’ he said. ‘We’re getting the language into its final shape—the shape it’s going to have when nobody speaks anything else. When we’ve finished with it, people like you will have to learn it all over again. You think, I dare say, that our chief job is inventing new words. But not a bit of it! We’re destroying words—scores of them, hundreds of them, every day. We’re cutting the language down to the bone. The Eleventh Edition won’t contain a single word that will become obsolete before the year 2050.’
He bit hungrily into his bread and swallowed a couple of mouthfuls, then continued speaking, with a sort of pedant’s passion. His thin dark face had become animated, his eyes had lost their mocking expression and grown almost dreamy.
‘It’s a beautiful thing, the destruction of words. Of course the great wastage is in the verbs and adjectives, but there are hundreds of nouns that can be got rid of as well. It isn’t only the synonyms; there are also the antonyms. After all, what justification is there for a word which is simply the opposite of some other word? A word contains its opposite in itself. Take “good”, for instance. If you have a word like “good”, what need is there for a word like “bad”? “Ungood” will do just as well—better, because it’s an exact opposite, which the other is not. Or again, if you want a stronger version of “good”, what sense is there in having a whole string of vague useless words like “excellent” and “splendid” and all the rest of them? “Plusgood” covers the meaning, or “doubleplusgood” if you want something stronger still. Of course we use those forms already. but in the final version of Newspeak there’ll be nothing else. In the end the whole notion of goodness and badness will be covered by only six words—in reality, only one word. Don’t you see the beauty of that, Winston? It was B.B.’s idea originally, of course,’ he added as an afterthought.
A sort of vapid eagerness flitted across Winston’s face at the mention of Big Brother. Nevertheless Syme immediately detected a certain lack of enthusiasm.
‘You haven’t a real appreciation of Newspeak, Winston,’ he said almost sadly. ‘Even when you write it you’re still thinking in Oldspeak. I’ve read some of those pieces that you write in “The Times” occasionally. They’re good enough, but they’re translations. In your heart you’d prefer to stick to Oldspeak, with all its vagueness and its useless shades of meaning. You don’t grasp the beauty of the destruction of words. Do you know that Newspeak is the only language in the world whose vocabulary gets smaller every year?’
Winston did know that, of course. He smiled, sympathetically he hoped, not trusting himself to speak. Syme bit off another fragment of the dark-coloured bread, chewed it briefly, and went on:
‘Don’t you see that the whole aim of Newspeak is to narrow the range of thought? In the end we shall make thoughtcrime literally impossible, because there will be no words in which to express it. Every concept that can ever be needed, will be expressed by exactly one word, with its meaning rigidly defined and all its subsidiary meanings rubbed out and forgotten. Already, in the Eleventh Edition, we’re not far from that point. But the process will still be continuing long after you and I are dead. Every year fewer and fewer words, and the range of consciousness always a little smaller. Even now, of course, there’s no reason or excuse for committing thoughtcrime. It’s merely a question of self-discipline, reality-control. But in the end there won’t be any need even for that. The Revolution will be complete when the language is perfect. Newspeak is Ingsoc and Ingsoc is Newspeak,’ he added with a sort of mystical satisfaction. ‘Has it ever occurred to you, Winston, that by the year 2050, at the very latest, not a single human being will be alive who could understand such a conversation as we are having now?’ “
Given the central Texas flooding that appears as if it will have killed close to three hundred people, what will the usual suspects be saying to me when I indicate that a property is in a FEMA flood zone? Will they be saying the usual vehement disagreement as they turn red and tremble with rage? Will they be saying that their property isn’t in a GD flood zone as they turn red and tremble with rage? Will the builder be telling me that it’s not my f*****g job as he turns red and trembles with rage? Will they be telling me to lie on the 1004 as they turn red and tremble with rage? Will the agent or broker call me and ask where in the Hell I got the idea that the property is in a flood zone as they turn red and tremble with rage? I wonder.
Link below. Read or skim. This is a source document, fed paper on owner occupied investor fraud, for the above theory paper I linked in another post on how ‘housing bubble #2 bursts’.
The hard money lenders may have had capital sourcing shortcomings, as they issued so many of these apparent fraudulent investor loans, where investors receive substantially better terms by declaring themselves owner occupied applicants. In order to access the twins and run a similar game there, the investors needed; to not deal with legitimate full service in person appraisers, attain a higher ltv qualification pass through, be offered longer term loan options, expanded relief programs they could tap into when their renters defaulted, less attention to fico scoring in order to gain access to the lending source programs. Check, check, check, check, and check. Right down the line in short order. Everything which sidelined appraisers. Also known as; ‘appraisal modernization’.
Must be a coincidence when the jumps in this apparent activity seem to line up really closely with many industry changes where ‘modernized appraisal’, automated process, and various relaxed policies has been installed. Interestingly enough, where full service traditional appraisal is still in place like the VA, no such indication of fraud appears to be occurring at a similar scale. According to the fed’s own research data.
Commissioned brokers and program managers staring down substantial layoffs, substantial income reductions. Facing tough choices either shutting down their organizations due to a years long dearth of qualified borrowers, or tapping into this rich supply of investors. ‘Get the appraiser out of the way!’ Remember when I posted an MB random solicitation where when the rates rose one of the local mb groups were offering a free ham sandwich to refinance or originate with them instead? There was blood in the water and clear desperation, apparent at many outlets. Then the most interesting thing happened. There was no more desperation and everyone was busy again, housing prices never fell, additional bad policy steamrolled down the gse pipeline, sanctioned and promoted by the appraisal trade groups. Just about that time was when Mr Miller wrote his article about FNMA execs having a plan to eliminate the appraisers from the gse program. Enter the AVM final rule. Enter the 98%ltv waiver program. Enter the final stage roll out of the new digital ‘modernized’ franken-appraisal UAD form. Right on time.
Then the twins appeared to be backstopping the elevated risk with monetization of data which should otherwise be GLB protected. From lidar spacial scanning of peoples private home spaces including personal possessions, to ai assisted inspection and photo data cloud repositories, working in conjunction with third and fourth party companies whom injected themselves into the appraisal industry in order to displace traditional process; a landscape rich for exploitation arose from the ashes of the full service appraisers and manual appraisal process demise. Why would anyone care; many of the riskiest loans are homes which are not owner occupied. Per the fed paper; ‘these fraudulent borrowers make up one-third of the effective investor population.’ (what really gets me about the paper is how many likely fraudulent evidence instances were kicked out of the analysis in order to clear up the data. It’s quite likely the indicated fraud could only be a small portion of what’s actually there. They just can’t identify it in such mass data statistical analysis models.)
All other defaults are swept up tidily via the FNMA Wholesale Loan Program or given extended loan ‘relief’ program access.
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https://www.philadelphiafed.org/consumer-finance/mortgage-markets/owner-occupancy-fraud-mortgage-performance
X. Conclusion
We identify widespread occupancy fraud in residential mortgages, both during the housing bubble and also in recent origination vintages. In contrast to previous studies, we are also able to show that occupancy fraud was common in the GSE market and in loans held in portfolio, not just in private MBS. We find that mortgage borrowers who misrepresented their occupancy status performed worse than otherwise similar declared investors. Their default decisions are also more strategic than other borrower types. Our results are
economically significant and suggest that such fraud may also pose a risk in future boom-bust cycles. One area for future research is understanding whether behavioral characteristics may help explain why some borrowers were led to speculate in housing markets through fraud.
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The investment landscape is so centralized, so massive, everyone dumps the risk into the central system. The entities like state fed groups will have a task force and research crew to identify where the fraud is happening. Then they ask the question; ‘Why some borrowers were led to speculate in housing markets through fraud.’
Let’s take a wild guess why there is a constant news cycle about excessive housing prices, an affordability and availability crisis, riding consistently alongside pr mouthpiece advertisements which promote automated process. They only mentioned ‘appraisals’ once in the entire fed paper and referred to them in the context of possibly contributing to fraud as ‘appraisal over statements’. They just don’t get it how the amc’s drove out the safeguard appraisers, how full service human appraiser’s presence in person, deterred so much of this fraud before it could even occur in the first place. How relaxed appraisal standards basically invite the fraud. How the avm substitute for appraisals and other ineffective products like hybrid appraisals allows an infinite pass through of higher than reasonable sales to pass through the system, which in turn supports excess pricing through entire markets in an infinite loop cycle.
It does not take an advanced data analytical approach to understand the basic concepts relating to the inherent risks in centralization and automation. If you leave an open door for fraud with less independent checks and balances, and less human involvement, people will find ways to game the system and do so with increased frequency until the system either collapses or those seeking fraudulent gains are prohibited from doing so. The fraud rides alongside the data cancer caused by applied appraiser pressure as well as the data cancer now spread through all markets, propagated by way of substituting independent value analysis process with automatic value analysis utilities. As well as dumbed down products such as hybrids and remote inspectors or whatever nonsense is being dreamed up to kill off what’s left of the gse servicing side of the appraisal industry.
So the next time you hear people talking about housing pricing issues, availability issues, the demand for a reduced lending rate to fire this system up again at full speed… Now that the gse appraisers are sidelined. Somewhere in the mix will be a brazen amc appraiser bragging about six digit income and how the appraisal industry is better than ever, they don’t even have to leave the office. Conveniently ignoring the fact they’re contributing to the fraud and system instability. ‘Stake holder interests’, as the appraisal trade groups, their top people, gse and amc handlers like to say.
All of that instead of maintaining a full service independent human appraiser network, where the multitudes of working appraisers in the field would simply have called to the lenders and said; This person is not an owner occupied borrower. Or otherwise the appraisers would likely have slowed the deals down and not rubber stamped the values in order to maintain a top tier amc panel approval status and disproportionate work volume. Contrasted to the other seventy five percent or more of remaining appraisers whom refuse amc service, are quitting, going out of business, or otherwise have been forced to abandon the consumer protection realm which was formerly known as the full service appraisal requirement in federally regulated transaction and government sponsored enterprise lending (frt’s & gse’s). One may question why taxpayers back any of this. We’re all collectively paying higher taxes, higher fees, higher prices, dealing with restrictive market conditions. So that ‘borrowers can save on their appraisal service fee.’ So that these investors can focus their speculation into residential housing in America. Brought to you courtesy of the ‘taxpayer gse back stop’. Central planning never works.
Independently written. Approximately 2 hours writing time. No AI systems were used or relied on.
I’ve been reading this blog since 2009, and still can’t get through a Baggins response, less is more, learn the art of brevity! Anyways when UAD 3.6 rolls out in Nov 26’ how many appraisers are still going to accept those $275 AMC fees? Bueller? Bueller?
Think of such like a bonus free article or something along those lines.
You’ll miss me when I’m gone.
Ralph the new UAD is already entertaining. All this special coding. The continuing education push surrounding. Take our class. Full price. Special meeting. Has a reduced price. Then it’s free. Learn to use a tablet. Updates, updates, updates! Please will someone get as excited about this as we are. Then a week or so passes, the portal managers are now in the mix. Take our free class!
I saved a fortune on Calypso this cycle and if I feel like figuring out the new UAD form, I’ll work with it personally and won’t need to worry about wasting time in some class. Bloatware with unnecessary technical utility overlays is not all that hard to navigate, as annoying as it is. Will still need to present a one page grid work though. Wonder if alamode will let me major form swap back and forth for an easy pdf grid print. Who’s the genius thinking it’s cool to bring back zip files? On the processing side they clearly state there is a review/edit feature during the appraisal submission process. What could go wrong?