Mejappz
Elite Member
- Joined
- Dec 16, 2005
- Professional Status
- Certified Residential Appraiser
- State
- Florida
Folks Jeremey Bagott contacted me last night and asked that I spread this far and wide. He said to tell appraisers to forward this press release to the following offices.
Dear
No matter your location, please forward this press release to the Modesto City
Attorney’s Office at jnunes@modestogov.com and to the Modesto City Council
Office at council@modestogov.com. There are many similar communities
nationwide that were ravaged in 2007-2008 and are again being set up for
blight and destabilization. Local and state challenges to the practices of the twin
mortgage giants may prove effective.
--Jeremy
Less than two decades ago, government-sponsored mortgage giants Fannie Mae and Freddie Mac visited a
pox upon the houses of Modesto, California. It culminated in the 2007-2008
financial crisis, which took a disproportionately heavy toll on the city, population
218,000. The twins are at it again, in Modesto and other exploitable
communities. This time harnessing fashionable DEI groupthink on behalf of
their allies to distort local markets. This time around, the city attorney needs to
be proactive.
In 2008, Time magazine published a piece about Modesto, in the state’s
agricultural Northern San Joaquin Valley. The city, with one of the highest
foreclosure rates in the nation, was portrayed as a cautionary tale. Abandoned
homes tainted neighborhoods citywide. Overgrown vegetation created
protective cover for vandals and squatters. The stench of human waste wafted
through neighborhoods. Once well-kept homes became graffiti-covered shells,
gutted by fire.
In places like Modesto, Freddie and Fannie created an enormous market for
toxic “Alt-A” subprime mortgages, negative-amortizing mortgages, stated-
income loans – so-called “liar loans” – and other predatory lending products. As
the trend lines went vertical, lenders, brokers and home builders packed warm
bodies into homes, squeezing out lucrative front-end fees. They then sold the
notes into a secondary market that clamored for them. In fairness, it wasn’t just
Freddie and Fannie at fault – private-label investment banks like Lehman, Bear
Stearns and Goldman Sachs did much damage as well.
So, alarms predictably sounded when Modesto cameoed on the August 2023
top 10 U.S. cities for foreclosure filings, according to the National Association of
Realtors. Modesto joined perennial bedfellows like Atlantic City, New Jersey;
Florence, South Carolina; New Haven Connecticut; Baltimore; Mobile,
Alabama; Orlando, Florida; Macon, Georgia; Philadelphia; and Peoria, Illinois.
The 2007-2008 destruction cost many Modestans their homes and billions in
lost property values. It battered fiscal coffers and eroded county tax rolls.
Modestans also helped pay at the federal level to bail out the twins for a
combined $200 billion – the highest bailouts of the crisis. The twins have been
in federal conservatorship since.
Now, Freddie and Fannie, with their allies in Congress and the Biden
administration, along with the powerful lobbies of the Realtors, home builders,
lenders and fintechs, are up to their old tricks in Modesto. They’re readying for
another dine-and-dash.
The twins, with the blessing of their patrons, whose aim is to privatize profits
and socialize risks, have been working a new soft spot – appraisals. Glomming
onto trendy DEI orthodoxies and a false narrative of systemic bias based on
now-discredited research, the mortgage giants are censoring the observations
of local appraisers, discouraging them from physically viewing the properties
they appraise and waiving appraisal requirements altogether. It is skewing
values upward, creating a derivative effect, allowing sellers to overcharge and
forcing buyers to overpay. It’s impeding price discovery. One appraiser calls the
effect “data cancer.” It has again put buyers in Modesto into homes they can’t
afford. Some go underwater immediately.
In 2008, the Modesto Police Department was getting six to 10 calls a day on
vacant homes. A city health unit was formed to deal with the blight. Burglaries
surged by 26%; police attributed the increase to the persistent assault on
vacant homes. Scavengers stole from foreclosed and non-foreclosed homes
alike. Squatters treated the yards as makeshift dumps, and about 40% of
foreclosed homes had their power stolen, reported the Modesto Irrigation
District.
Freddie and Fannie are again promoting predatory lending using the following
three gimmicks that attack the appraisal:
Hybrid appraisals – This involves the use of unlicensed individuals to perform
appraisal inspections. A state-licensed appraiser is then expected to rely on the
photos, sketches and observations provided by these individuals to complete
the appraisal. (You’ll just have to trust them.) The appraiser is kept from ever
viewing any deferred maintenance, noting any smells (such as those that could
indicate mold), viewing signs of unpermitted additions or contamination, or
noticing any nearby environmental or economic influences.
Value Acceptance – This is a new twist on the stated-income loan – known
colloquially as the “liar loan” – made famous during the run-up to the last
financial crisis. Fannie uses the euphemism “Value Acceptance” to accept
lender-submitted values. This means parties whose bonuses and commissions
ride on making a given value are permitted to submit values without an
appraisal. Let’s just say, “the values fell off the back of a truck.”
Censorship – This is by far the most disturbing activity the twins are engaged
in. Freddie, in particular, is actively censoring appraisers for the use of words
like “crime,” “graffiti,” “student,” “preferred,” “school district,” “well-kept,”
“desirable,” “undesirable,” “good” and “bad.” Also being censored are words
any economist, financial analyst or market observer would use like “high,” “low,”
“strong,” “weak,” “slow,” and “rapid.” Many puzzlingly innocuous phrases like
“convenient to” are also being censored. 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 is slated to start at the
end of January 2024. Its aim is to silence appraisers and cow them into
sidestepping critical adjustments and rubber-stamping values that make deals
work.
The Modesto City Attorney has a unique opportunity, particularly with the
censorship, to sue individuals at Freddie and Fannie along with federal officials
at the Federal Housing Finance Agency, the twins’ conservator and regulator,
for limiting the First Amendment rights of local independent appraisers engaged
by lenders uniquely for their independence and knowledge of local markets.
Without action, to quote malapropism king Yogi Berra, it will seem like deja vu
all over again.
# # #
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.
Dear
No matter your location, please forward this press release to the Modesto City
Attorney’s Office at jnunes@modestogov.com and to the Modesto City Council
Office at council@modestogov.com. There are many similar communities
nationwide that were ravaged in 2007-2008 and are again being set up for
blight and destabilization. Local and state challenges to the practices of the twin
mortgage giants may prove effective.
--Jeremy
Less than two decades ago, government-sponsored mortgage giants Fannie Mae and Freddie Mac visited a
pox upon the houses of Modesto, California. It culminated in the 2007-2008
financial crisis, which took a disproportionately heavy toll on the city, population
218,000. The twins are at it again, in Modesto and other exploitable
communities. This time harnessing fashionable DEI groupthink on behalf of
their allies to distort local markets. This time around, the city attorney needs to
be proactive.
In 2008, Time magazine published a piece about Modesto, in the state’s
agricultural Northern San Joaquin Valley. The city, with one of the highest
foreclosure rates in the nation, was portrayed as a cautionary tale. Abandoned
homes tainted neighborhoods citywide. Overgrown vegetation created
protective cover for vandals and squatters. The stench of human waste wafted
through neighborhoods. Once well-kept homes became graffiti-covered shells,
gutted by fire.
In places like Modesto, Freddie and Fannie created an enormous market for
toxic “Alt-A” subprime mortgages, negative-amortizing mortgages, stated-
income loans – so-called “liar loans” – and other predatory lending products. As
the trend lines went vertical, lenders, brokers and home builders packed warm
bodies into homes, squeezing out lucrative front-end fees. They then sold the
notes into a secondary market that clamored for them. In fairness, it wasn’t just
Freddie and Fannie at fault – private-label investment banks like Lehman, Bear
Stearns and Goldman Sachs did much damage as well.
So, alarms predictably sounded when Modesto cameoed on the August 2023
top 10 U.S. cities for foreclosure filings, according to the National Association of
Realtors. Modesto joined perennial bedfellows like Atlantic City, New Jersey;
Florence, South Carolina; New Haven Connecticut; Baltimore; Mobile,
Alabama; Orlando, Florida; Macon, Georgia; Philadelphia; and Peoria, Illinois.
The 2007-2008 destruction cost many Modestans their homes and billions in
lost property values. It battered fiscal coffers and eroded county tax rolls.
Modestans also helped pay at the federal level to bail out the twins for a
combined $200 billion – the highest bailouts of the crisis. The twins have been
in federal conservatorship since.
Now, Freddie and Fannie, with their allies in Congress and the Biden
administration, along with the powerful lobbies of the Realtors, home builders,
lenders and fintechs, are up to their old tricks in Modesto. They’re readying for
another dine-and-dash.
The twins, with the blessing of their patrons, whose aim is to privatize profits
and socialize risks, have been working a new soft spot – appraisals. Glomming
onto trendy DEI orthodoxies and a false narrative of systemic bias based on
now-discredited research, the mortgage giants are censoring the observations
of local appraisers, discouraging them from physically viewing the properties
they appraise and waiving appraisal requirements altogether. It is skewing
values upward, creating a derivative effect, allowing sellers to overcharge and
forcing buyers to overpay. It’s impeding price discovery. One appraiser calls the
effect “data cancer.” It has again put buyers in Modesto into homes they can’t
afford. Some go underwater immediately.
In 2008, the Modesto Police Department was getting six to 10 calls a day on
vacant homes. A city health unit was formed to deal with the blight. Burglaries
surged by 26%; police attributed the increase to the persistent assault on
vacant homes. Scavengers stole from foreclosed and non-foreclosed homes
alike. Squatters treated the yards as makeshift dumps, and about 40% of
foreclosed homes had their power stolen, reported the Modesto Irrigation
District.
Freddie and Fannie are again promoting predatory lending using the following
three gimmicks that attack the appraisal:
Hybrid appraisals – This involves the use of unlicensed individuals to perform
appraisal inspections. A state-licensed appraiser is then expected to rely on the
photos, sketches and observations provided by these individuals to complete
the appraisal. (You’ll just have to trust them.) The appraiser is kept from ever
viewing any deferred maintenance, noting any smells (such as those that could
indicate mold), viewing signs of unpermitted additions or contamination, or
noticing any nearby environmental or economic influences.
Value Acceptance – This is a new twist on the stated-income loan – known
colloquially as the “liar loan” – made famous during the run-up to the last
financial crisis. Fannie uses the euphemism “Value Acceptance” to accept
lender-submitted values. This means parties whose bonuses and commissions
ride on making a given value are permitted to submit values without an
appraisal. Let’s just say, “the values fell off the back of a truck.”
Censorship – This is by far the most disturbing activity the twins are engaged
in. Freddie, in particular, is actively censoring appraisers for the use of words
like “crime,” “graffiti,” “student,” “preferred,” “school district,” “well-kept,”
“desirable,” “undesirable,” “good” and “bad.” Also being censored are words
any economist, financial analyst or market observer would use like “high,” “low,”
“strong,” “weak,” “slow,” and “rapid.” Many puzzlingly innocuous phrases like
“convenient to” are also being censored. 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 is slated to start at the
end of January 2024. Its aim is to silence appraisers and cow them into
sidestepping critical adjustments and rubber-stamping values that make deals
work.
The Modesto City Attorney has a unique opportunity, particularly with the
censorship, to sue individuals at Freddie and Fannie along with federal officials
at the Federal Housing Finance Agency, the twins’ conservator and regulator,
for limiting the First Amendment rights of local independent appraisers engaged
by lenders uniquely for their independence and knowledge of local markets.
Without action, to quote malapropism king Yogi Berra, it will seem like deja vu
all over again.
# # #
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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