Mejappz
Elite Member
- Joined
- Dec 16, 2005
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- Certified Residential Appraiser
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- Florida
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HOIST BY OWN PETARD: LENDER ENSNARED IN IRONY-RICH HUD SHAKEDOWN
VENTURA, Calif. (Dec. 13, 2024) – In the run-up to the 2020 election, tens of thousands of employees at nonbank mortgage lenders funneled millions in small-dollar donations to political action committees. It proved a great investment. The Biden administration then spent four years acting in ways that benefited the mortgage industry by weakening long-established safeguards in federally backed mortgages.
But the donors may have underestimated the capacity for incompetence by federal bureaucrats.
Rocket Mortgage, the nation’s largest retail mortgage lender, has become ensnared in a discrimination case originating with the U.S. Department of Housing and Urban Development. It is the type of case Rocket Mortgage has benefited from while HUD maliciously directed such shakedowns toward the nation’s state-licensed appraisers over the past four years. The intimidation campaign by HUD and other federal agencies has led to the sidelining of appraisers and the dangerous and inflationary use of valuation waivers and AI-driven valuation tools by Fannie Mae and Freddie Mac, both of which are in federal conservatorship.
Rocket filed a lawsuit this month against HUD seeking dismissal of a bizarre complaint, which held that Rocket had acted in a discriminatory manner by not pressuring an appraiser in a federally backed mortgage to inflate a value to make a deal work for a minority borrower. In its lawsuit, Rocket correctly argues it is prohibited by federal law from pressuring appraisers to jack up values. The unspoken part? HUD was supposed to intimidate the appraisers, not the lender. That’s what all the donations were for in 2019 and 2020!
The playbook, at least as the mortgage industry intended, was first revealed in early 2020 when the nation’s real estate appraisers came under surprise attack by then-presidential candidate Joe Biden. Out of the blue, he rebuked members of the real estate appraisal profession for creating a racial wealth gap in America. Appraisers thought they were hallucinating.
Candidate Biden pronounced appraisers “unregulated” and a chief cause of racial wealth inequality. Candidate Biden would prove to know as much about real estate valuation as President Biden would later prove to know about the gas station and supermarket businesses, which he rebuked for price gouging, calling them the chief cause of consumer inflation.
Rocket Mortgage is owned by the Rocket Companies, which owns Rocket Mortgage and Quicken Loans. In 2019 and 2020, Rocket Companies employees (including those of Quicken Loans) made 11,005 separate contributions to a handful of political action committees. Guaranteed Rate employees made 4,819; Caliber Home Loans employees, 4,719; loanDepot employees, 4,103; Fairway employees, 2,430; and UWM employees, a “mere” 648 for the period.
Using a Federal Election Commission screening tool, author-appraiser Jeremy Bagott compiled an Excel spreadsheet with over 43,000 small-dollar donations totaling more than $11 million from individual employees of nonbank lenders. You can view and download the Excel file here. Or you can run the filters yourself at the Federal Election Commission’s website. The screening tool was recently upgraded.
Many of the donations are in uneven amounts and many repeat donations were made at irregular intervals – as if created by a random-number generator. This becomes apparent when the data is sorted by donor and date in Excel.
It’s reminiscent of a practice pioneered by Texas savings-and-loan kingpin Tom Gaubert in the 1980s. The idea was to have employees at his crumbling institution and those of his friends funnel a large number of small-dollar political donations from employees to his buddy, Democratic House Speaker Jim Wright.
Speaker Wright, one of the most corrupt to ever hold the position (and that’s really saying something), spread the wealth. The payola bought time and influence with Congress and increased the ultimate cost of the S&L clean-up to taxpayers. At Gaubert’s institution, one inventive employee reportedly expensed a contribution as a “weed whacker.”
The House Ethics Committee later investigated the speaker’s financial affairs at the urging of a largely unknown Georgia congressman named Newt Gingrich. The bipartisan panel charged Wright with 69 violations of House rules on reporting gifts, accepting gifts from people with an interest in legislation, and for exceeding limits on outside income.
Before Biden’s anti-appraiser bolt from the blue, a hearing of the House Subcommittee on Housing, Community Development and Insurance in June 2019 had a strangely anti-appraiser agenda.
Like the S&L employees of an earlier payola scheme, thousands of workers at loanDepot, Guaranteed Rate, Quicken Loans, Fairway Independent Mortgage, Caliber Home Loans, New American Funding and United Wholesale Mortgage funneled millions in small-dollar donations to political action committees across the political spectrum.
There are many open questions here. Were employees reimbursed or able to expense these contributions? Were employees pressured into making them? Were employees aware of the contributions made in their name? Was PPP money used in any way to make these donations?
The largely unregulated nonbank lenders have never minced words on their frustration with human appraisers. They have every interest in increasing their production velocity by sidelining the sloth-like homo sapiens involved in the collateral valuation process in federally backed mortgages.
Executives like Brian Covey, vice president of regional production for loanDepot, have voiced the industry’s collective frustration with the inability of appraisers to keep pace with the volume these largely online lenders are capable of generating (with risk exposure to the U.S. taxpayer through Fannie, Freddie and the FHA).
The 119th Congress should investigate these donations and what they purchased. The new Congress should also investigate HUD and the Federal Housing Finance Agency and the damage these agencies, along with Fannie Mae and Freddie Mac, have done to housing affordability over the past four years. If the promised Department of Government Efficiency – the DOGE – gets off the ground, it should start by eliminating HUD and kicking Freddie and Fannie out of federal conservatorship. The further these corrupt enterprises are from government coddling, the better we’ll all be.
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Jeremy Bagott, a licensed appraiser and former newspaperman, sends up a warning flare in his 2019 book “Dispatches from the Cosmic Cobra Breeding Farm.” He takes the reader deep inside a tiny Washington, D.C., foundation that has managed to have its copyrighted code of conduct enshrined in federal and state law. All 50 states, even the U.S. territories of Guam and the Northern Mariana Islands, now enforce it. The nonprofit, known as the Appraisal Foundation, has parlayed the arrangement into a lucrative publishing cartel. In his journey, the author uncovers a troubling trend deep in the plumbing of government.
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