The Censorship of Appraisers
Thirty-seven hours after President Biden took the oath of office, White House officials met with executives at social media companies. The officials threatened restraint-of-trade lawsuits and regulatory action if the companies failed to censor what the White House deemed “misinformation.”
In a parallel development, we can now connect the dots that similar talks 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 and firms in the mortgage industry engaged specifically for their independence. The latter serve as bulwarks in federally backed mortgage transactions.
In the social media censorship case, a federal judge last year enjoined cabinet agencies and federal officials from working with YouTube, Facebook, Instagram and Twitter to shape what subscribers could see and not see. The suit claimed federal officials had exceeded their authority in attempting to persuade social media companies to throttle posts. U.S. District Court Judge Terry Doughty cited evidence of a far-reaching censorship campaign that “depicts an almost dystopian scenario.” He likened it to an Orwellian “Ministry of Truth.”
Arguments were heard last month by the Supreme Court in Murthy v. Missouri.
In the realm of mortgage finance, we now know that executive branch officials, employees of Freddie Mac and Fannie Mae and their vendors, working to promote an illusory concept known as “housing equity,” began throttling what could be spoken and written about the condition of collateral and the credit history of borrowers. The censorship has done real damage to borrowers and the purchasers of bonds issued by the government-sponsored mortgage giants.
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 redefine its credit-scoring formula. The same group has imposed 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.
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.
The censorship of appraisers is occurring under the pretext of a make-believe concept the partisan task force calls “appraisal bias.” It’s similar to the way public health was invoked as the pretext for the White House censorship of social media platforms, which then quickly led to political censorship.
The FHFA announced the fruits of its censorship of the Fair Isaac Corporation in February. The FHFA censored the company’s FICO score algorithm, bullying it into creating a “more inclusive” score known as the “FICO 10T” score. Government officials then compelled the company to dilute the value of its long-accepted original credit score – known simply as the FICO score – through compelled speech, coercing Fair Isaac to rename it the “Classic FICO.”
But by far the most disturbing is the censorship of the nation’s 80,000 state-licensed appraisers by primarily Freddie Mac under the urging of the FHFA and PAVE task force.
Since the beginning of November of last year, government-sponsored mortgage hegemon Freddie Mac, currently in conservatorship with the FHFA, has begun screening appraisal reports for a lengthy list of forbidden words and phrases used by independent real property appraisers engaged by lenders whose loans the mortgage giant buys or guarantees.
A Freddie Mac employee named Scott Reuter is the mortgage giant’s point man for the coercive program.
Like the administration’s arm-twisting of the social media companies, Mr. Reuter 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. At the same time, says Mr. Reuter, the appraisers can be safe from career-destroying accusations of bias. 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 and terms. They include “crime,” “school district” “student,” “preferred,” “well-kept” and “desirable,” and many puzzlingly innocuous phrases like “convenient to.”
“Some of this language is subjective in nature, while some is potentially biased,” writes Mr. Reuter without explaining the methods by which Freddie has determined words and terms like “place of worship” or “well-kept” or “student” to be potentially biased when used by appraisers.
Freddie’s new sanitized language means an appraiser can no longer make 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 is adjacent to a church parking lot.”
Freddie’s new censorship program is an example of nongovernment actors – Freddie Mac employees are not civil servants – working with individuals in government, like Sandra L. Thompson of Freddie’s federal regulator, to chill the protected speech of a class of citizens uniquely engaged for their independence.
The new policy is contained in Freddie’s Soviet-like directive “5603.4 Unacceptable Appraisal Practices.” It went into effect November 1, 2023. The true crackdown began at the end of January 2024.
In the social media case, Judge Doughty cited “substantial evidence” of a far-reaching censorship campaign by the executive branch. No less can be said about these bowdlerizers and what they are doing to deceive individual borrowers and investors in Freddie and Fannie’s mortgage-backed securities.
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SPOT ON, Jeremy!!!
Thanks so much
Samuel Adams January 21, 1776 in a letter to John Pitts:
“How strangely will the tools of a Tyrant pervert the plain Meaning of Words!”
Awesome quote
So is there a magic list printed someone with all the terms appraiser are not allowed to use?
No. There are only complied lists that a shared and compared of the infraction’s. FNMA has a complete list, but won’t share. We are trying to hit a moving train.
I got flagged for using the words school and family.
I got lender spanked for using “mature landscaping”. Its a specific description, and not a generalization.
The PC police are pants on head silly. I can only conclude they want robots if they want us at all.
Use seasoned landscaping. I was working with Solidifi on an order and they did the same thing. It was the chief appraiser that called and explained things for me. He hated to make the call and thought it was a joke too, but obviously has to play the game. I said I could use seasoned landscaping instead and he said that a good idea and was going to use that himself moving forward.
Mature would possibly describe living fauna. Presuming nothing new was planted. This is also a human term. Try specifics; well established landscaping, xeriscaping, natural fauna, shrubs, bushes, small, large trees, garden, retaining wall, grass and sprinkler system, drip lines, trellace, shed, patios, new fence. Specifics help answer misconceptions about generalizations, can help prove value, and verify legal use.
Seasoned landscaping? Thyme, cilantro, peppers, salt? How does one season a pine tree or desidous plant? At what point in the life cycle of a plant does it become seasoned? The seed, germination, growth, reproduction, pollination or seed spreading stages? Is this an agricultural land appraisal? Arrakis, that spice? Is the home owner running a spice production business out of the house? Is that legal use? Was all the lot seasoned, or just a portion?
The chief amc appraiser? The controlling appraiser amc’s are legally required to hire in order to serve as a safeguard to appraiser independence and ethics? Approved a revision he did not agree with? The conversation went like this; Amc management and owners to controlling appraiser; The lender said they will use another amc if these problems continue to happen. Get this appraiser in line immediately or we’ll replace you both.
Always appreciate your takes and views.
I have been using ‘established landscaping’ going forward. Also, I’ve been using ‘Updated landscaping’ with specifics for xeriscape and newer yard improvements.
The remediation of the AMC’s by the lender is real thing. Even realtors to specific lenders (locally) have threated no future business if you don’t remove a specific appraiser. It’s all so mundane and tiresome, lol.
Thanks Eric. That’s where more photos come in, fewer generalizations, more specific writing, less pre write. Takes longer to review, less time for nit picking, better describes every component of the home, generally keeps revision clarification requests very low Aim for 100 to 150 photos per inspect, sometimes to 200+. Never stop clicking. Drop them on 15 photos per page, with a few 6 per page for feature items. Skip the stips.
What is an appraisal? How the subject home specifically relates to the local market in terms of value. What is a home? A collection of components and features, all with varying values, underlying market appeals or lack there of, in various states of diminishing effective age.
So take inventory of the home. A photo of every room, every feature, all utility, every bath, every bed, built ins, tech center items, appliances, windows, doors, electric, meters, yards, sheds, roof, siding, foundation inside and out, sprinkler system, porches, concretes, driveways, attachments, facia material, adornments, hardwood and tile floor, kitchen counters, backspash, cabs, lights, exterior surroundings, view from rear, from front porch, street all directions, nearby area and park views, etc.
Bags I had an AMC recently reject a report due to too many photos… said they couldn’t upload it. I told them my PC could handle it and I hadn’t heard of a download problem in at least 10 years… they came back asking me to downsize them and take out about 50%. Idgits.
Yes, Honest Appraiser, I have dealt with this as well. The issue is due to their internal software platforms which place limits on report size. Mercury set those limits much higher than the various more simple interface type of appraisal management software.
What happens with the xml conversion process is although the data rich photos such as .jpg files appear in a uniform size because the image is compressed to fit in those certain sized photo squares on the appraisal software selected photo pages, the actual kb size of the photo is not altered, but rather only downsized visually. So if your camera settings are pushing so many kb’s of photo size, that translates into a much larger total xml appraisal file.
On the back end the users of the reports can extract the full size .jpg from the xml, and then blow up and zoom on the photo. I’ve taken the approach that lenders don’t need high resolution data rich photos, because the intention of the appraisal is to provide a pdf type product. Adjust your camera settings down. Reasons to use a traditional simple camera and not a smart device or phone. Not sure about other software but Alamode also offers an automatic downsize photo option as you enter them in, where it actually takes the kb’s down, you’ll want to also use that.
Just checked a few final reports XML files for data size. I’m floating somewhere in the 10mb to 15mb file sizes. They should have advised you to downsize photos on your side rather than removing so many of them. The very act of demanding you remove photos because of processing shortcomings on the amc side is actually a violation of appraisal independence rules. Absolutely nowhere in any GSE selling guide, any amc’s stated guidelines, or any lenders stated scope of work, is there an appraisal XML report file size maximum rule or guideline.
You are a treasure, Jeremy. Thank you for exposing the ongoing communist “march through the institutions” in appraisal. It is a great service to the decreasing number of freedom-fighters in the USA and hopefully also a wake-up call to others who have “had a feeling something was wrong” but found it difficult to overcome a lifetime of programming to trust the “authorities”. This look behind the curtain at the bureaucrats “regulating” the industry we work in, and understand, is insightful and can lead to extrapolating the methods used in order to recognize how it is happening in every other industry. This insidious cancer has entered the end-game and we have little, if any, time left to fight back.
Do not forget this directly impacts ROV requests because said requestors are not trained in the banned terminology and thus include much of the aforementioned in the ROV requests for consideration. I had one ROV that was laced with said terms to the point where there wasn’t a single sentence I could not copy and paste into an ROV addendum on my report. Everything in their logic for comparable selections had to due directly with crime, school locations, income levels, etc. I gave the information back to the appraisal desk and asked them what they would like me to do about this. I also requested that the parties involved i the ROV re-word the entire ROV request differently so the concerns could be addressed in the report. They declined. So if appraiser’s can’t report they way buyers and sellers are actually reacting to the homes location and external factors, what is it that we are reporting? If I were to complete an estate appraisal report, magically all these reporting issues go away and I can discuss everything that every buyer and seller considers when purchasing a home, of which includes social economics, schools, proximity to businesses, crime rates, etc. So, report the market without actually reporting everything the market actually considers….a half truth if you will.
Same goes for including agent comments from within the MLS listing. I got flagged for using the word close which was used by the agent as it relates to freeway access.
Seek the truth.
This is odd. I use “the subject is in proximity to XX” all the time and no issues. I have used “comparables are closer to XX external factors” and still no issues.
They said the word close is considered an opinion and instead I should use the actual distance to what is being referenced. Whatever.
Seek the truth.
There is appraisal review (technical review), requiring a licensed appraiser. And there is administrative review, which encompasses only a limited pre defined scope of ‘review’ (QC checklist, including sufficient knowledge of the appraisal process). Does policing opinions and requiring language changes fall under acceptable administrative review? Where in the selling guide does it explicitly say that an appraisers stated opinion is prohibited practice?
One may recall CE classes on acceptable appraiser disclosure statements, which Fannie specifically approved some time ago, as appraisers were writing in highly restrictive intended user statements. The question which requires answering is whom provided the review services which led to this request? Specifically which types of review services were utilized? Under what clearly defined peramiters? Appraisers should be able to request and receive these guidelines in writing. Otherwise non licensed reviewers are acting outside of their scope of work and authority, as their administrative review tasks should be clearly defined in writing, as instructions for them to follow. Was the requested language approach clearly stated anywhere in the selling guide or the lenders engagement scope of work, or their internal review protocol instructions for non licensed administrative reviewers? Are they even intended users? Who is requesting this, specifically? One could FOIA Fannie for specific information on their review process and employees whom complete this, sending out all these letters of revision and threat of penalty warnings.
Fannie stated approved language acceptable for appraisal report disclosure; Any use of this report by any party other than the named client is considered an unauthorized use. Appraiser does not assume responsibility for unauthorized use of this report.
https://appraisalbuzz.com/appraisal-review-a-sneak-peek/
Article text; If an institution were to develop a review program outside of USPAP Standard 3, the Agencies have been very clear in previous communications that anyone conducting a review must have the same level of experience and knowledge as the appraiser whose report is being reviewed. / The review must also be sufficient in scope to determine the reasonableness of the appraisal or evaluation and whether the valuation methods, assumptions and data sources are appropriate and well supported. /
Intimidating appraisers works, and works very well. An over 90% success rate so far.
“good,” “bad,” “high,” “low,” “strong,” “weak,” “slow,” “rapid,” “crime,” “school district” “student,” “preferred,” “well-kept”, “desirable,” “place of worship,” “student”
COME AND TAKE IT.
I got red flagged for using the word “church” instead of “religious facility”. I got flagged a 2nd time even though I substituted “religious facility” for “church”. Why? Because my flood map had a building labeled “Fellowship Community Church”.
These are constitutional violations. First person to challenge this outside of the GSE’s, will win. We’re talking SCOTUS preferred type of arguments here. Appraisers have standing to challenge this. Someone write the various legal firms whom represent pro bono for constitutional issues. Many have already written them, all this will take is more appraisers to be pro active. The federal employees are acting beyond their authority.
How can you be held liable for anything when you are using terms dictated by another entity? I see this as a valid defense against most charges. Your Honor, I am not the sole person responsible for creating this report. I was forced to use words that were not of my choosing. Don’t fail to share your liability in a court of law with your “masters” appraisers.
Really, someone at the GSEs is/are on drugs. I predict this boondoggle will be retracted soon
How many of you would be surprised to know:
“It’s funny, because FNMA’s collateral underwriter tool has a line item adjustment it makes on every comparable called the “CBG” adjustment.
CBG stands for Census Block Grid. It’s essentially a location adjustment based on the median values of homes in that CBG.
In my opinion, this adjustment the FNMA model makes is pretty much, in my personal opinion, is the equivalent of red lining. Yet they don’t even realize it.
Aa an underwriter, I usually ignore this line item adjustment that the model makes. Every now and then it can actually be informative. But, I just find it deeply ironic, and keep waiting for the day someone somewhere sues them over it.”
WOW!! This here^^
Right, like what in the actual F!!
I can’t believe no one else has made a comment about this. This to be is like finding out Darth Vader was Luke’s Father. I’m mean here you have a Government control enterprise that provide an adjustment based on the Census information, of which appraiser’s are not allowed to based anything off of and FNMA actively provides this information to the underwriter’s and GSE’s for every day use. Did anyone else know about this, or does no one care and I should just shut up?
Some words don’t belong in an appraisal, as for instance words used in promoting the sale of a property. Others do belong, as when the appraisal form asks to describe the condition of the physical elements of the property in the pertinent fields. Omission of other general terms such as places of worship might just be interpreted as misleading. Such a term does not describe any particular faith and the reader and user of the Appraisal might want to know if there’s a church, or synagogue, or a mosque, or a Buddhist temple, etc. nearby. Not everyone is an atheist and if the reader were one, why would they care. And to Mr B, a fruit needs to go through the process of maturation for it to ripen. The term is not solely for fauna but flora as well. Some of the flagged terminology is just plain asinine folly.
An appraisal is an opinion (among other things) of …
Scope of Work
The contract
The neighborhood
The site, including H & BU
The improvements (condition, deficiencies, adverse conditions and conformity)
The selection and adjustment of comparable sales
The analysis of prior subject and comp sales
Market Value indicated by the Sales Comparison Approach
Construction costs
Site value
Accrued depreciation
Value indicated by the Cost Approach
Market rents
Gross rent multipliers
Value indicated by the Income Approach
Reconciliation and Opinion of Market Value
BUT
We are not competent (“grown up”) enough to have an opinion of what good/bad, high/low, strong/weak, rapid/slow means.
This is getting out of hand. I remember being asked if certain comparables were within the same school district. Now it cannot be talked about.
Baggott, if you never disclosed your name again. I’d know who was writing still. Always a pleasure reading ypur material
The sad part about all this is that the GSEs are trying to force homogeny between all neighborhoods and forego quality of construction and locational characteristics. I’m seeing a trend with these desktop appraisals performed by non-geographically competent appraisers. It’s a shame, because location does matter, no matter the color of your skin. I have to argue my point every once in a while for an appraisal. Point in case, 3 houses sold 3 years ago, kinda the same, but 2 sold for $300,000, 1 sold for $700,000, all around the same exact time. Yet they are compared? No, no, no….why did one sell for more than double? Could it be location? Could it be quality level? An appraiser needs to be analyzing this instead of just matching bedroom/bathroom count. Locational characteristics is 100% missing from these recons, desktops, and out of state people thinking they know better than a 20 year veteran! AMCs owned by appraisers do a pretty great job at trusting their appraisers. AMCs owned by non-appraisers have no business in this industry. We don’t make the rules, the buyers make the rules. We just report it.
Jon Caldara. Censorship, five years later. Thought that was a fun re read for perspective today.
https://pagetwo.completecolorado.com/2019/07/31/caldara-csu-victim-junkies-know-political-power-of-changing-language/
Check this out, random find.
https://www.firstsource.com/wp-content/uploads/2023/07/Annual-Report-FY23.pdf
Firstsource collaborates with 5 of the top 15 ML’s in the US. Read all of page 30, keyword; mortgage. Are these the companies and tools driving changes and complaints, repurchase requests? Perhaps so.
Firstsource has successfully implemented a structured
Robotic Automation Process for a leading US mortgage
company, enabling them to overcome the challenges
associated with traditional, high-volume manual processes.