This is a pretty niffty detailed chart for finding time adjustments, we are done.

[Joe Flacco]

Appraisers should be disinterested third parties, not employees of people with a vested interest in selling their collateral risk onto the secondary market.

The problem is the government guarantee. It's not alternate methods and processes. The government should not guarantee.

 

[Mike Ault]

The problem is the government guarantee. It's not alternate methods and processes. The government should not guarantee.

Entities with a vested interest in the outcome should not be assessing other people's risk. There were a bunch of private-label securities issued that were not government-backed which precipitated the 2007-2008 financial crisis. The individual investor buying those securities had no idea of the soundness of their investment, and that was by design. Securitization deliberately obscured any and all assessment of the safety and soundness of the process, or the quality of the security being sold onto the secondary market.

 

[Joe Flacco]

Entities with a vested interest in the outcome should not be assessing other people's risk. There were a bunch of private-label securities issued that were not government-backed which precipitated the 2007-2008 financial crisis.

Do you think the private-label securities were made up of mortgages without appraisals? Were sub-prime mortgages originated without appraisals?

 

[Mike Ault]

Do you think the private-label securities were made up of mortgages without appraisals? Were sub-prime mortgages originated without appraisals?

I know most of those appraisals were ordered by mortgage brokers with a vested interest in the outcome of the appraisal, and used only appraisers who guaranteed to hit whatever value they wanted. I lost a ton of business during that period. That's why appraisal reform happened, and a substantial number of unethical appraisers lost their favorite mortgage broker clients. The answer to that problem was not eliminating appraisers, the answer was ensuring the people who ordered appraisals didn't have a vested interest in the outcome.

 

[Joe Flacco]

I know most of those appraisals were ordered by mortgage brokers with a vested interest in the outcome of the appraisal, and used only appraisers who guaranteed to hit whatever value they wanted. I lost a ton of business during that period. That's why appraisal reform happened, and a substantial number of unethical appraisers lost their favorite mortgage broker clients. The answer to that problem was not eliminating appraisers, the answer was ensuring the people who ordered appraisals didn't have a vested interest in the outcome.

So your opinion is that appraisals were responsible for the financial crisis? I don't.

 

[Zoe]

I know most of those appraisals were ordered by mortgage brokers with a vested interest in the outcome of the appraisal, and used only appraisers who guaranteed to hit whatever value they wanted. I lost a ton of business during that period. That's why appraisal reform happened, and a substantial number of unethical appraisers lost their favorite mortgage broker clients. The answer to that problem was not eliminating appraisers, the answer was ensuring the people who ordered appraisals didn't have a vested interest in the outcome.

It is hard to kill some things. I hope and pray CFPB is on separation of fees on Truth in Lending disclosures on appraisal fees.

It would change the whole market structure in appraisal business.

Banks would be forced to pay an AMC directly and it disclosed on Truth in lending disclosure.

 

[Zoe]

AMC fee $900. Appraisal fee $200. on truth in lending disclosure.

That would change whole market structure in appraisal business.

 

[Mike Ault]

So your opinion is that appraisals were responsible for the financial crisis? I don't.

No, my opinion is that people with a vested interest in the outcome of the loans they were making bypassed all the safety & soundness procedures that had been in place since FIRREA in service of this new securitization process where no one held their own collateral, and simply sold their risk onto someone else. That led to liar loans, doc shops, straw purchasers, fake down purchase payment assistance plans, and other atrocities which, combined with compliant appraisers and rating agencies, collapsed the whole house of cards and almost derailed the entire world economy. We shouldn't allow any "lender" (or GSE) to value collateral they intend to sell onto somebody else in any way, shape or form, or even control the valuation process. That will invariably lead to bad things. It's simply human nature. Watch "The Big Short" again.

 

[Joe Flacco]

No, my opinion is that people with a vested interest in the outcome of the loans they were making bypassed all the safety & soundness procedures that had been in place since FIRREA in service of this new securitization process where no one held their own collateral, and simply sold their risk onto someone else. That led to liar loans, straw purchasers, fake down purchase payment assistance plans, and other atrocities which, combined with compliant appraisers and rating agencies, collapsed the whole house of cards and almost derailed the entire world economy. We shouldn't allow any "lender" (or GSE) to value any collateral they intend to sell onto somebody else in any way, shape or form. That will invariably lead to bad things. It's just human nature. Watch "The Big Short" again.

I didn't say that the bankers should value the collateral or that the bank should not value collateral at all. I said an appraiser at the bank can determine if the value is reasonable and meets their property requirements most of the time. If anything is questionable, they would need to order an appraisal.

 

[Mike Ault]

I didn't say that the bankers should value the collateral or that the bank should not value collateral at all. I said an appraiser at the bank can determine if the value is reasonable and meets their property requirements most of the time. If anything is questionable, they would need to order an appraisal.

Is the appraiser an "employee of the bank"? Similar to an "underwriter at the bank"? The most desirable underwriter, I have been told, is a single mother with children to feed who absolutely "has to have that job", and cannot say no to her supervisor, a supervisor who is on "the bonus plan" dependent upon how many loans they approve. I have a hard time believing that most "employees of the bank" are truly capable of asserting their independence to make decisions contrary to the desires of their employer. There's always exceptions to the rule, and I'm sure you're one of them if you happen to be a bank employee. It's been my observation that most appraisers who aren't attempting to do the right thing don't hang around this forum for very long.