IndyMac – What Goes Around Comes Around
By David Brauner, WRE Editor
Not to kick a fella when he’s down, but following the collapse of IndyMac Bank last week, we received an email from a “blacklisted” appraiser that got us thinking.
This appraiser, who wishes to remain anonymous, is one of several who told us similar stories over the years of being placed on exclusionary lists without his knowledge. The bank he tangled with was IndyMac, and he emailed to “gloat” a bit in the wake of its collapse. To IndyMac’s credit, he was able to clear his name after much effort.
His story, and others, lead us to do a feature on the subject of blacklisting, Appraiser Blacklisting: Fighting Back (WRE Library, Volume 16). This story follows one appraiser, Mike Read, who learned two years after the fact that he had been placed on the exclusionary list of a lender. Read shares his struggle to restore his business and reputation. “There were no red flags,” said Read. “I was accused, convicted and punished without ever facing my accuser.” Many appraisers have similar stories to tell.
(For more on the bank’s collapse, you can find a report issued by the Center for Responsible Lending at WorkingRE.com Sidebar: IndyMac: What Went Wrong?)
Who Owns the Data?
In the story, Who Owns the Data? (WRE Library, Volume 18), appraiser Terry Grimes complains that at least one report was rejected by IndyMac because it included copyright licensing agreement verbiage. Grimes says he not only had his appraisal rejected but also believes he was taken off the approved list of the bank as a result. A representative of IndyMac confirmed that they do not accept appraisals which include licensing agreement language because the verbiage is unacceptable to Fannie Mae. He confirmed that the addition of licensing language would cause an appraisal to be rejected but said that it would not cause an appraiser to wind up on the bank’s exclusionary list.
IndyMac is not the only institution about which appraisers complained, just the first to collapse. In fact, IndyMac was more upfront than most in dealing with appraisers. Numerous local, regional and national mortgage originators, who were perhaps the worst offenders, have already shut down and moved on, taking the money and running.
For the 16 years this reporter has covered the industry, appraisers have complained about lender pressure. During the refi boom, the complaints escalated to include loose lending practices (liar’s loans) and increased intimidation for values and turnaround times. According to most appraisers, many lenders were more concerned about getting the deal done than about quality and accuracy.
Due to the shenanigans, many of you warned of an impending collapse equal to the Savings and Loan bailout, which cost $153 billion, according to a report by the FDIC Banking Review Board. (Find the report, The Cost of the Savings and Loan Bailout: Truth and Consequences, at WorkingRE.com Sidebar.)
Many of you who complained publicly were ridiculed by fellow appraisers who called you “Chicken Littles”; whiners who could not compete in the new world of AVMs, faster turnaround times and “enhanced” customer service. They called you Ludites, someone unwilling to accept change and adapt. Of course, the truth always lies somewhere in the murky middle.
It is a bittersweet time for appraisers; sweet to be vindicated about your prescient concerns of a lending collapse and to know that change finally is on the horizon. But it is a bitter pill to have to fight to survive in a market that is broken due to the greed and malfeasance of others. A possible collapse larger than anyone even dared imagine looms if the patch the Feds put on Fannie and Freddie doesn’t stop the bleeding. The most sober pundits are using the “D” word, as in the Great Depression, to describe what might happen if Fannie and Freddie fail.
Ironically, today the sky may indeed be falling due to the failure of Fannie Mae and Freddie Mac to keep their houses in order. In this reporter’s opinion, these two pillars of the lending industry were often dismissive of appraisers and their concerns about lender abuses when they should have been listening.
Just like the S&L Bailout was a catalyst for change, appraiser licensing is one result, so we are in a time of great flux. Many initiatives supporting appraiser independence have passed or are being considered at the state and federal levels, including the Cuomo-Fannie agreement, which is analyzed in the current edition of Working RE: Fannie/Freddie, Cuomo Agree to Appraiser Independence (Sort of).
Though flawed, the agreement offers hope that appraiser independence is finally being taken seriously. Appraisers are encouraged to fight for changes in the Home Valuation Code of Conduct, at the heart of the agreement, which calls for changes so radical that many appraisers fear it will put them out of business.
In the end though, those who can hang on and stay in business will see a brighter day. You know what they say: what doesn’t kill you, makes you stronger.
You can locate and provide feedback to your state Senators here: http://www.senate.gov/general/contact_information/senators_cfm.cfm.