U.S.-Sponsored Mortgage Giant Blacklists Private Analyst, Creates Dissidents-Jon DiPietra Update

[Terrel L. Shields]

I was taught that loans don't go bad, bad loans are made bad.

The only exception might be a couple suddenly divorces or one spouse dies (usually the man.) And even in divorce, many men suck it up and keep paying the mortgage or scramble to sell the property. But a few borrowers go in with the deliberate intention of not paying back. That's real common in auto loans for used autos. My brother once tracked a guy down in Denver, called a repo'r there, they got the truck and he flew to Denver and drove it back. And I recall another one they got out of OKC and the cops stopped them. His fellow banker was driving and they had to explain why there were no tags on the truck. But my favorite story was when 2 bankers went to a town about 100 miles away, and knew where this guy worked but not where it was located. They pulled into a C store to ask and lo and behold the guy pulled up to the same store, left the engine running, and went in. They seized the opportunity and one hopped in and drove off with the guy running out the store screaming. They invited him to come pick up his personal effects at the local police station where they had a warrant for his arrest. He never showed.

 

[George Hatch]

"On January 3 of this year, the Weingart Center, co-applicant with the City of Los Angeles for Homekey funds, paid $27.3M for a property at 3340 Shelby. An exclusive report by the Current showed that was $16.1 million more than the property had sold for just 12 days earlier. BBG, a national appraisal firm with offices in Los Angeles, was commissioned by Weingart to appraise the property and had turned in a $27.3 million valuation to support the elevated price Weingart paid for the property."

I have appraised various types of assisted living and group home properties over the years. Cheviot Hills is located in West L.A, directly south of Century City. For SFRs located within 1/2 mile of this facility and north of Interstate-10 the median SFR price over the last 180 days is $2.6M. The location figures into the value, just the same as for any other type of property.

Public records shows the facility having 86 units but it was previously licensed by the state for 100 beds (apparently 2/room for some of them). Having 2 beds per room is common among such facilities. The license isn't necessarily part of a sale but the mere fact that a facility has been recently licensed and operated as such speaks to its attributes and its viability in that usage. By contrast, the counties have been buying up motels for use as conversion to homeless shelters and such. Those don't have the same floorplans and facilities so they don't sell at the same pricing.

A $27.3M purchase / 100 beds = $273k/bed. I have seen pricing like that before for properties in good or remodeled condition.

Back in 2021 I appraised 2 properties 3 miles to the south, each were SFR+additions and licensed for 12 beds each but in remodeled condition. I appraised both of those properties in excess of $200k/bed and I had comps in the 8-22 bed sizes which adjusted to that general price range after consideration of their respective locations, which between them nominally bracketed the location for the properties I was appraising. In 2023 I appraised a real beater in the Wilmington area for $80k/bed and they needed some rehab.

Long story short, depending on what realty and non-realty interests were included, there might exist some sales that would line up with that kind of valuation. I didn't search real hard, but I was unable to find a listing for either of these transactions. The prior $11M transaction would have only worked out to $110k/bed (as licensed by the state), which I don't see any sales of that kind of property selling for that little. There are sales of very average properties in very average locations selling in that range, but not for a purpose built and recently remodeled facility with a premium location like Century City-adjacent.

There's no way to discern the particulars without getting all the way into it, so I don't actually know what is/isn't. I only know what I've seen in the past with these types of properties.

 

[Non Sequitur]

I have appraised various types of assisted living and group home properties over the years. Cheviot Hills is located in West L.A, directly south of Century City. For SFRs located within 1/2 mile of this facility and north of Interstate-10 the median SFR price over the last 180 days is $2.6M. The location figures into the value, just the same as for any other type of property.

Public records shows the facility having 86 units but it was previously licensed by the state for 100 beds (apparently 2/room for some of them). Having 2 beds per room is common among such facilities. The license isn't necessarily part of a sale but the mere fact that a facility has been recently licensed and operated as such speaks to its attributes and its viability in that usage. By contrast, the counties have been buying up motels for use as conversion to homeless shelters and such. Those don't have the same floorplans and facilities so they don't sell at the same pricing.

A $27.3M purchase / 100 beds = $273k/bed. I have seen pricing like that before for properties in good or remodeled condition.

Back in 2021 I appraised 2 properties 3 miles to the south, each were SFR+additions and licensed for 12 beds each but in remodeled condition. I appraised both of those properties in excess of $200k/bed and I had comps in the 8-22 bed sizes which adjusted to that general price range after consideration of their respective locations, which between them nominally bracketed the location for the properties I was appraising. In 2023 I appraised a real beater in the Wilmington area for $80k/bed and they needed some rehab.

Long story short, depending on what realty and non-realty interests were included, there might exist some sales that would line up with that kind of valuation. I didn't search real hard, but I was unable to find a listing for either of these transactions. The prior $11M transaction would have only worked out to $110k/bed (as licensed by the state), which I don't see any sales of that kind of property selling for that little. There are sales of very average properties in very average locations selling in that range, but not for a purpose built and recently remodeled facility with a premium location like Century City-adjacent.

There's no way to discern the particulars without getting all the way into it, so I don't actually know what is/isn't. I only know what I've seen in the past with these types of properties.

The report is attached as a pdf in the article if you’re interested in reading 300+ pages.

 

[George Hatch]

I might just do that in order to improve my understanding of that type of valuation. Personally, I don't appraise such properties at that scale.

I have no idea what the problem is from Freddie's perspective, but lenders usually don't cut appraisers off over a legitimate difference of opinion or even methodology because those disputes would commonly and normally be resolved during a review. It's (usually) if appraisers are caught lying cheating and stealing in an appraisal that the lenders cut them off.