Very cool post. I am actually getting to the point where I realize I really don't have a clue. I don't think you can really really understand all this with out spending years and having studied a lot of other subjects beside. You actually have to be good with numbers, sociology, history and trends,etc.
BTW, Wachovia' website is having problems with balance posting etc.Perhaps they weren't ready to scale up for a big bump in traffic?
Thank you for taking the timeto write all this out.
I thought Jos. Banks was the guy who sold me those nice wrinkle free dress shirts.
Would it surprise anyone to learn that companies used to do all this "opinion shopping" to the big accounting firms?
another great post. In particular the way you tie the ugly specifics of this flawed part of the business together with things we see in all businesses is beautiful:
if someone higher-up had listened to whatever internal employee called bull on this one.
Why didnt they listen? Why doesnt any corporation ever listen? Because the WaMu account is huge, and nobody wants to stop a gravy train.
As always...Great Post...but what I don't get is that so many people don't get it. There is the way things are supposed to work and the way they do work. ANY system can be degraded and gamed and when there is a pile of $$$$ involved unless it is carefully observed and audited any system will go to hell.
I am surprised that anyone who has worked is surprised...especially after the last 7 years.
rt
As an appraiser I believe the AMC model is the best way I know of to promote independent, disinterested appraisals. The problem is, the AMCs will never get the best appraisers to work for them with the fees they offer. eAppraiseit, for example, offers only 40-50% of a typcial fee. Fidelity's LSI is only slightly better and Transunion is just slightly better than that. As an appraiser, I have the choice of working without pressure for beans or getting paid full fee, but having to run a gauntlet of shady interested parties. It's not a fun choice.
The use of Appraisal management companies has had other effects,holding down the cost of individual appraisals (they cost the same as they did 10 years ago),which in turn encouraged the greedy and unethical to take on a LOT of trainees,some as many as 30 at a time! and of course it drove many of the honest and competent Appraisers out of business.The best Appraisers I know are still hurting,while the ones who can hit the number without being too outrageous are doing fine.ANY loan Broker knows that you only have to call another shop and say,"hey this is ed,i gotta loan in your area and need an appraiser" to hear "call susie,she always hits the number".sad.
Well, the compensation issue is the key, isn't it? Why would an AMC want to pay more than minimum fees to appraisers? The AMC exists because the lenders want to outsource stuff that people like me used to get paid relatively big bucks for, plus bennies and my palatial cubicle.
My view of the mortgage business these days is that nobody's making any money except the salespeople. Or, rather, nobody was making any money except the salespeople, and that has created a situation in which nobody is making any money except the lawyers. Yeah, it wasn't any kind of obvious where that was headed . . .
Let me ask a fundamental question: Why have appraisers at all? It seems to me that the value of a property can be divided into two parts, tangible and intangible. The tangible part is easy, it's what you buy property insurance for (eg If a MOAB went off in your houses general vicinity, how much would it cost to rebuild?) Then there's the intangible. This part seems to be driven primarily by market forces such as availability of land, "location location location", and irrational economic mania. How does an appraiser supposed to quantify the irrationality of real-estate price changes? Is there some secret metric they know about that the entire banking system is ignorant of? If not, what's the point?
Was it easier for independent appraisers to hit the numbers in a rising market? If your high appraisal today is on the money or on the low side within ninety days, what do you do?
"....a situation in which nobody is making any money except the lawyers."
Can we have some lawyer topics soon? I'd like to see how the lawyers are getting into the act and whom they are targeting and so on and so forth. Cuomo is just the beginning, right?
At some level, "appraisers" are just those employees (or hired guns) who have special expertise in sizing up the collateral. As "underwriters" have special expertise in sizing up the borrowers and "closers" have special expertise in calculating the necessary funding amount for your escrows.
But other parties besides lenders need people with appraisal expertise: buyers, sellers, insurers, the IRS. So it makes a fair amount of sense that "appraiser" as a job function became more or less independent of employment directly by mortgage lenders.
Lord knows I have no desire to go back to the days when decisions about collateral acceptability were made by Jack-of-all-mortgage-trades loan officers with copy of Miller & Swift in their back pockets and a number two pencil. I have no problem with specialization of professional, well-trained appraisers. Like everybody else, I just have a big problem with training them to give expert opinions about the market value (not just replacement value) of properties and then hiring the ones that will tell me what my sleazy loan officers want to hear.
My view of the mortgage business these days is that nobody's making any money except the salespeople. Or, rather, nobody was making any money except the salespeople, and that has created a situation in which nobody is making any money except the lawyers. Yeah, it wasn't any kind of obvious where that was headed . . .
Thanks Tanta for another interesting post. So can the mortgage lending business survive or grow using the GSE's as the source for loans? or what's next as a business model?
Great Post
This just what I saw during the great S&L melt down. American Saving was famous for this and as we know they weren't the only ones. I guess all of the boy/girl wonders went in to banks after that small problem and is small compared to this
jo6pac
Was it easier for independent appraisers to hit the numbers in a rising market? If your high appraisal today is on the money or on the low side within ninety days, what do you do?
Sure. That's why a perennial annoyance of the mortgage business (bad appraisals) became a deadly epidemic in the last several years: bubbly markets mean you don't have to work very hard, and your values will get bailed out. Who cares if you came up with a value 10% too high when the loan closed, if it was 10% higher by the day we filed FC?
We're now looking at what happens when Mr. RE Market doesn't bail you out.
I did a post a while ago on mortgage fraud where I observed that you used to be able to rely on some borrower self-interest to keep things under control, too. You, burnside, didn't want to pay more than you had to for the house, and you didn't want to borrow more than you had to. So sellers priced competitively and appraisers expected some gratitude for helping to keep manias under control.
But all these buyers bought into the idea that it's a good sign if you are buying a house for 20% more than what the seller paid for it last year (the assumption being you'll make the same 20% next year). So the mania fed on itself, and borrowers started acting in totally irrational ways.
Remember the cash-back purchase deal? That's nuts. But borrowers agreed to it. Now there's a pressure on appraisers that isn't historically normal. Usually it's the sellers pushing them and the buyers pulling them. When everybody including the lenders gangs up, it's impossible to expect them to draw the line.
Besides that, lenders in the boom were doing a lot of things they never used to do, and so appraisers didn't used to have to deal with it. A cash-out refi of a three-month old loan? Unheard of just a few years ago, when nobody cashed you out at under 12 months seasoning. Zero down? Huh?
You really complicate things for appraisers when you eliminate the distinction between "creative financing" and "normal financing." It's just harder and harder to know what counts as an "inducement to sale." It's almost like all appraisals in the last few years should have had a condition of value on them that said "subject to lenders continuing to act like idiots."
Oh, wooley bugger, that's a major hoot. Indy makes this list openly available on the web, and this is the first thing you see:
Confidentiality:
The users of the "Exclusionary Appraiser List" are prohibited from distributing it to third parties
because it contains confidential information. Indymac Bank requires that individuals and companies
using the "Exclusionary Appraiser List" maintain the confidential nature of the information in it. By
using the list, users agree to indemnify Indymac Bank for any loss, damage or expense resulting
from their failure to maintain the confidentiality of the information on the list. Indymac Bank provides
the confidential information on the "Exclusionary Appraiser List" to users solely for conducting
business transactions with Indymac Bank.
Another wonderful post. Thank heavens we have an articulate thoughtful blogger who really understands the mortgage business in its guts - at street level.
Outsourcing to vendor management companies is like sending your elders to a nursing home or children to daycare. It seems like the right choice and sometimes maybe the only choice but can the risks of decision-making by a stand-in.......I don't know......looking at all the mayhem and loss....just kills me.
I buy and sell property. Just reviewed appraisals for a bank for some loans they're making elsewhere.
Appraiser pulled a res lot comp from 10 miles away - unacceptable. Its obvious the appraiser's goal was to be low.
In the early '90s, major banks pressured appraisers to lower values, simultaneously lowering LTV's -crashing our market while we dumped out of properties to increase cash. Deja vu.
I say raise the fees, lower the LTV, make the appraiser physically inspect the comps and the subject properties.
Walker, I used to have to actually sign Nondisclosure Agreements to get my hands on somebody's Exclusionary List for due diligence purposes. Cross my heart and you can sue me from here to the next county if I so much as take the thing out of the conference room and into the break room to get coffee.
I gather Indy thinks the verbiage covers them if some indignant appraiser sues.
Outstanding 'article' Tanta - really pulls aside the curtain, at least for a while.
I understand the benefits & weakness of the 'out-sourcing' issue having lived it now for almost my whole life. If done well it is very powerful. If done badly - it is suicidal for all parties. And most importantly it has to be (1) a strategic decision and (2) well managed no matter which avenue is pursued.
I read a paper by HBR on 'Strategic Sourcing' written in about 1990 or so I believe - it is as relevant today as ever. It was done by a guy working for Cummins Engines and he describes an algorithm or 'decision tree' on how an organization should make such a decision and then 'manage it' afterward. I keep the copy with me to this day .
According to the author there are four main categories of operation:
1) Those ops that are strategic and so important they need to have top priority & oversight:
... a) If you have the resources - keep in house & manage well
... b) If you don't have the resources, find a TOP LEVEL SUPPLIER and truly PARTNER with them - still needs good management attention
2) Those ops that aren't strategic:
... a) If profitable, keep in house (think cash cow)
... b) If not profitable, bid out on a cost basis
The paper provided a flow chart of how a mfg company should try and make this decision... lots of stuff on critical missions and core competencies. Buzz words but in this case at least well thought out & neatly presented buzz.
Anyway - it sounds like WaMu didn't follow his 'advice'. Sounds like they treated appraisals like (2,b) where they should have been treated from the beginning like they we 'important'... i.e. (1,a or b).
By initially treating the appraisal process as just a cost center allowed it to become susceptible to abuse & mismanagement later when conditions changed. Almost predictable.
Oh well - time for me to put storms on, a critical mission of which my wife says I'm fully competent at.
In the early '90s, major banks pressured appraisers to lower values, simultaneously lowering LTV's -crashing our market while we dumped out of properties to increase cash. Deja vu.
I have to say I've never worked for any lender in any period who pressured appraisers to lower values.
All I have ever had to do is go into my lending guidelines and lower my maximum LTV, or change my vacancy factor, or require two independent appraisals on every property, or whatever else I want to do that contracts. I've never had to have the appraiser lower the values.
dryfly, I think WaMu would say that it is doing 1b. It is "partnering" with eA.
eA is saying that this "partnering" boils down to trying to make eA do something illegal.
Again, we're looking at indictments, not verdicts, so there's a lot to prove here. But the allegation is not that eA is a sloppy company that WaMu outsourced a critical function to and then didn't sufficiently babysit. It's that eA had a plan but WaMu wanted them to violate it. At least that's what I think is being alleged.
So I guess the moral is, don't outsource your regulatory violations; those you should keep in-house.
I came from the old school of appraisal where setting value was an art form and not a mindless repetitive exercise in form-filling a predetermined strong-armed value. Pumping value into an asset is an easy task. The art is in knowing how much to pump before it explodes. I know the business well enough to know WaMus questionable practices have backfired -big time. I think the only way to solve the problem is to have everyone that is involved in a mortgage origination conjoined at the butt, assigning the commissioned loan sales agent in shouldering all liability and blame for the shortcomings of the others involved, and including doing jail time for the appraiser. Wamu by forcing an appraiser into such sleezzzy business practices is inexcusable. The appraiser should be allowed to develop value independent of outside agitation.
What if they put you on that list just because you won't meet their value. If you're an ethical appraiser, how do you get off that exclusionary list?
That, it seems to me, is the important argument for truly keeping these things confidential. Otherwise they become ways to punish appraisers you don't like.
If Joe Appraiser pisses off Loans R Us because he won't fudge a value, and Loans R Us puts Joe on the shit list, as long as nobody else can see that list Joe isn't really harmed: Loans R Us isn't going to hire him anyway.
Once you publish these lists, you'd best have something to back them up. If you are punishing good appraisers, they will sue you and they should.
But how can, say, IndyMac do business over the intertoobz with 8,000 different brokers without publishing the list? My argument was that the problem is tied to the wholesale and correspondent channels of operation for national (or large regional) lenders, not just lending as such.
Sure, Indy could have this behind a registration wall and I don't know why they don't. IT screw up?
Another reason we used to hide our lists from each other (exclusionary or approved) is because why do I want another lender to profit from my homework? It used to be that a really good exclusionary/approved list was a competitive edge. I guess Indy thinks that's no longer the case. I personally have gotten to the point that I no longer trust anyone else's lists, because I no longer trust anyone else's criteria.
I haven't been personally involved in appraiser selection for a long time, but I've done my time in broker and correspondent approval. I used to get that crap all the time: How come you won't approve Bubba? WaMu or Citi or BoA or Jesus Christ approved Bubba! Why not you?
And I used to say that besides the fact that those other parties can make mistakes, there is the possibility that Bubba will send its good loans to Big Dog and its cruddy loans to me, because Bubba has this pre-existing relationship with Big Dog, but only barely meets my requirements if he meets them at all. Whose good-will would he be more likely to risk losing, mine or Big Dog's?
Anyway, that appealing to each other's lists does go on a lot in the industry, usually to no useful purpose.
dryfly, I think WaMu would say that it is doing 1b. It is "partnering" with eA.
But the way you described the evolution of this thing - appraisal out-sourcing started out as just a 'cost' & logistics issue as they went from Podunk to national. Once national they had all the wrong processes in place - no surprise they found they could just lean on the appraisers (like they did when 'he' was in the cubby over back in Podunk)...
eA is saying that this "partnering" boils down to trying to make eA do something illegal.
In our business we call that being partnered as in "Hey bend over we want to 'partner' you..." Been there - no easy way to handle it.
So I guess the moral is, don't outsource your regulatory violations; those you should keep in-house.
I wonder if we would have ever known if it had stayed in-house? Those are exactly the kinds of 'internals' that only come out AFTER the failure goes public - think Enron.
But it does tell you something about the decision process between 1,a and 1,b... if it is 'really important'... who do you trust?
Like I said - I really liked the piece you wrote but it made me think - where have I seen this kinda crap before. Answer more than just this time, this industry. It is a structural issue as much as a moral & legal one. They let it happen. Suckers had it coming.
It's fascinating to observe how people/organizations will pursue policies that are not in their own long-term interest so as to realize a short-term gain. I know from my time in the corporate world that these kinds of attitudes are set at the top and trickle down through the organization in various ways, which says something about WaMu executive management.
I worked commercial loan review and appraisal review for a Federal thrift in the early-mid '90s (the pull-out from the New England RE debacle of 89-91). The best appraisers in my eyes were the ones that came in lowest, as they could justify their numbers from the meat in their reports. The high-dollar appraisers didn't supply enough meat in the report to justify the fact they were breathing.
I'm a regulator now and read resi appraisals on a regular basis. Given what I see today I can't understand how we've let the appraisers self-regulate (state licensing boards are staffed by appraisers) for so long.
Recent market volatility is a perfectly normal thing for stocks.
Volatility by itself says nothing about future stock returns.
Investors commonly make the error of getting out until things calm down or locking in the years gains. Both strategies are a disservice to longer term goals.
Yesterday stocks surged; today they sank. Its been a choppy market, particularly in light of relatively sedate performance in recent years. What are investors to do?
No one is ever certain about market direction. After hundreds of years of capital markets development, youd think investors would catch on to the notion theres a risk/return relationship to investments. (Risk is also commonly known as volatility.) Stocks have among the highest returns versus other kinds of securities; therefore, they also have higher risk. Its pretty simple. Volatility in stocks is by definition a mundane thing.
Yet, like a booming, discordant chorus, we constantly hear from the media a familiar warning: In these uncertain economic times or some derivative. For instance, GDP growth might be strong today, but in these uncertain times, investors are concerned about high oil prices. (Open up the paper and you can find countless similar examples.)
Those searching for a time when economic and market conditions appear certain had better quit the investing game now. When has the market been absolutely certain before? Hmmm
oh, yes, we remember. Its happened twice recently as a matter of fact! First in 2000 with tech stocks and the new economy. That didnt turn out well. Second, just a couple years back with the housing never goes down! and Im quitting my job as a taxi driver to become a real estate agent! craze. That didnt end well either.
Certainty is something to fear. When everyone believes something, then its priced in and thus prices have to go the way opposite to the pervasive belief.
Folks naturally fear stock volatilitybig changes carry more emotion. Since we know fear and loss are more potent than joy and gaining, big stock market moves make for more jittery investors.
In truth, volatility doesnt say anything about future stock returns. Market choppiness is just as often your friend as enemy. Stocks can go way upand in very short order. Missing those big up days is just about the worst thing you can do as a long-term stock investor.
Its the sum of the days that matter mostthats why MarketMinder often says its time in the market, not timing the market. If youre bullish, youve got to be fully invested and not let volatility or short-term moves fool you because missing the biggest up days put you behind the marketnot good!
Today felt tragic to our portfolios. But long-term investors look back on history and realize how small such lumpiness really is. Days like today look like ultra-tiny speed-bumps over the longer term.
Lumpy-Bumpy continued:
Today felt tragic to our portfolios. But long-term investors look back on history and realize how small such lumpiness really is. Days like today look like ultra-tiny speed-bumps over the longer term.
Another wrong investing philosophy is to say Oh, were nicely up already, lets just take our winnings off the table and start over in the New Year. No! kowtow-ing to the calendar to lock in gains is a big mistake. (What do calendar years really have to do with how the markets will move, anyhow? With the exception of tax planning, nothing really.) Believing in seasonal stock performance is just as mythic as fearing volatility. The only thing to really focus on is a market cyclewhen and where the bull starts and ends. Everything else is just a head-fake.
Todays market downturn was supposedly catalyzed by Financials companies downgrades and fear over high oil prices. As MarketMinder recounted often in this space, we know both these fears to be false. Thus, todays action is mere noise amid a bigger bull market. Stay in the game and dont let the bumpy, lumpy ride scare you away.
Tennis_8, what exactly are you trying to accomplish? Free publicity for Ken Fisher's website? Or you want to talk about Ken Fisher's website but on my blog's comment section? Or are you just a complusive interrupter of conversations?
If you really feel you have to go OT, a simple "here's a link to something everyone might be interested in" would suffice.
(quote)
In 2003, October Research, a private firm, conducted the National Appraisal Survey, which polled 500 appraisers in 44 states about their professional experiences. The findings were startling. The survey found that 55 percent of appraisers reported that they had felt pressures to overstate property values. A quarter of the appraisers surveyed reported feeling such pressures in half of all appraisals that they handled.
(end quote)
A pretty good and complete report.
The fraud was ignnored for as long as the values kept going up and everyone made money.
If the banks couldn`t sell those mortgages to Fannie, Freddie, etc, I can assure you that would be a different type of pressure on the appraisers. But I guess will never get over the "fiduciary" shit on this blog.
I think it is an IT mistake. If you click on some other areas of Indymac's site, you have to login to enter, but for some reason you can access that page.
I am just trying to inject some sanity and clarity into the otherwise extremely pessimistic opinions expressed by the comentators (inflation,hyper-inflation, recession, depression) and advocates of shorting stocks, gold, cash in the mattress, etc. I only quote Ken Fisher because he has an excellent long term investment record and a view which is quite contrary to the one held by the majority here. It might be thought provoking and even informative.
Why aren't you critical of those who frequently (almost daily) advocate extreme and highly unlikely economic outcomes, advocate risky investment choices,regularly use outlandish and foul language?
I have simply injected some common sense expressed by an expert. Furthermore I only post 2 or 3 times a month unlike the ones I aluded to who post rediculous views multiple times a day without your commenting.
My advocacy of a diversity long term investment approach for more than twoyears nnow has been vastly better advice than 95% of those who frequently post on this site.
Otherwise I appologize for offending you since your and CR blogs are excellent. It's the investment advise of others that is off base and unhelpful.
Tennis_8, if you are going to elect yourself monitor of other people's unhelpful posts, you must take the time and effort to respond to those unhelpful posts when they happen, and in specifics.
Popping in once or twice a month in the middle of a perfectly serious and useful discussion of a different subject to punish us with Fisherblather because some comment last month annoyed you is not helpful.
You seem to think that we wouldn't go out on this big internet and read stuff like Fisher unless you come here and fling it in front of us.
I want you to know that I and many of our commenters are here because we're trying to avoid more investment advice. I have enough investment advice in my email inbox on an average day to wallpaper my bathroom if I printed it out.
I regularly jump on the case of people who try to turn this blog into nothing more than an investment board.
And I really don't know why you worry so much about the rest of us taking bad investment advice.
I also don't know why you think I would jump on people who occasionally use "outlandish" and foul language and shit.
Tanta - have you guys considered some "permanent" threads where people could just flame away on popular ongoing debates? (the market - bull or bear?, mortgage bankers - evil or benign? Ford versus Chevy?, etc.)
That might keep the tennis_8-type crap to a minimum.
Maybe it would spare us from excessive Jas. You never know.
OT - Nemo, you were so right about the 'shittygroup' quote. Sorry 2 have doubted you.
The longer this goes on, the more CFOs and CEOs learn to do what private equity firms are trying to teach them, which is to borrow long-term money at approximately 6%, which would cost something like 3.6% after taxes.
Later, one could buy back his own stock with a price-to-earnings ratio of 15 and an earnings yield of 6.7% after taxes, and pick up the 3% spread as free money that makes his own earnings-per-share go up
I had storms to put on... besides the hockey game hasn't started yet. Get to sit by the fire, watch hockey & wifi - wooowhoo, man is my life excitin'...
Fisher has written this column for 22 years and has been remarkably accurate. Read his past columns and see how his predictions have faired compared to those of your favorite commenters on this blog site.
Full disclosure: he manages my retirement account and $36 billions of other's money too.
Tennis_8 | 10.06.07 - 1:24 pm |
We used to pay for the appraisals up front out of an application fee, so the appraiser got paid even if the loan didnt close. These days the appraiser often never gets paid if the loan doesnt close because the broker has nothing to pay it with.
This seems a clear enough message that most appraisers won't need the point spelt out in a memo.
It amazes me that companies continue to get caught explicitly forcing someone's hand, when these more "subtle" economic-incentive techniques (combined with exclusions/inclusion lists, etc) should be quite sufficient and effective.
Tanta, at the risk of getting back on topic, the one thing that does not make sense here is why WaMu is not the one getting AG love letters. Care to speculate? Shoot at the easy targets, or is the goal to get eAppraiseIT to roll over?
(By the way, thanks from this computer scientist for making real estate appraisal intricacies scan as sweet as a Raymond Chandler short story...)
Seems to me if all properties were evaluated strictly as if they were income-generating investments -- not based simply upon how much someone with "a bucket of money and a box of stupid" wants to pay for them -- that the housing bubble wouldn't have happened.
Can't let this shill talk for Fisher pass without note of his call on housing earlier this year, per link above from his column and something I recalled reading with a chuckle when published. Stark contrast to the insightful materials presented and discussed here on housing and related topics (albeit amid typical blog static from some)...
Portfolio Strategy
Housing Boom!
Kenneth L. Fisher 02.26.07, 12:00 AM ET
Don't buy it. For months now the debate has been over whether America will have a hard landing or soft landing, the answer hinging on how big 2007's housing disaster turns out to be. Well, there won't be any housing disaster. We won't have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.
You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn't be so strong now.
Ya know after watching the impact of the credit crunch on sales volume this year, availability of money is such a huge factor on RE value. Add a new box on the appraisal form - "easy financing available - factor 1.3" "Banks closed - factor .7 for difficulty"
We can stop writing about housing and mortgage related problems. Its all over now and thanks to the foreign buyers from all over the world, home prices are about to explode!
Tanta, at the risk of getting back on topic, the one thing that does not make sense here is why WaMu is not the one getting AG love letters.
It seems to be the jurisdictional issue: the state of NY doesn't have the ability to pursue a civil suit against a federally-chartered thrift. My guess is Cuomo is trying to kick up enough dirt to force the OTS to deal with it.
tj, residential single-family dwellings are terrible income-producing properties. Why would you want to appraise them that way?
The trouble with residential appraisals is, exactly, that the things don't cash-flow, so you can't appraise them like income properties. And they are often very hard to value just on cost to replace: try doing that with a condo unit.
In fact, a good residential appraisal reconciles all three possible approaches to value (income, cost, and market-comparable). People talk about appraisals very casually as if they involve nothing but comp analysis, but that's because a lot of people really don't know all that much about formal residential appraisal than what they read on the internet (except here).
tj, residential single-family dwellings are terrible income-producing properties. Why would you want to appraise them that way?
Rents aren't subject to "irrational exuberance", and therefore didn't rise significantly during the boom. If a SFR is worth only $1000/mo rent, why should anyone approve a loan with payments vastly higher?
Me: Tanta, at the risk of getting back on topic, the one thing that does not make sense here is why WaMu is not the one getting AG love letters.
Tanta: It seems to be the jurisdictional issue: the state of NY doesn't have the ability to pursue a civil suit against a federally-chartered thrift. My guess is Cuomo is trying to kick up enough dirt to force the OTS to deal with it.
From the nasty tone of the letter that OTS sent back, sounds like they'll be about as proactive as the CPSC has been at monitoring our newly-outsourced toy manufacturing...
Tanta, do we have a future where some automated appraising program will at least serve as a checker for the appraisal report and may be replace part of the apprasier work load? I thought that is what Zillow tried to accomplish. Their estimate still suck and change too slowly given the marketing condition. But they get all the comp information in a given neighbor. And I would imagine given time, they would be able to develop an algorithm to at least get a house value in the ballpark. I do understand that there is a need for someone to visit a house to make sure the house is still in good shape etc. But the variance within a given neighbor should have an upper limit.
Thank you for this enlightening post. What you describe here reminds me a lot of the fraudulent practices at the (tech) stock market bubble around the millenium. First stock prices rose by themselves. At some point, some companies felt pressured to "hit" revenue or EPS numbers and via creative accounting we finally landed at outright balance sheet fraud. Finally, we got the Enron and the likes trials and convictions.
Exactly the same seemed to have happened in the RE bubble. First, house prices rose. Then, sellers, buyers, appraisers and lenders started to "hit" some numbers knowing they would seel the loans to willing investors. The coming stage will be the uncovering and trying of some criminal acts. I expect some high-profile trials, maybe even to the top of WAMU?
My conclusion is that whatever the current bubble in an economy is (tech stocks, RE, commodities etc.), the mechanisms at work are very similar and at the end always leading to fraud of some kind. Then there are the high profile trials. Unfortunately, this seems to be part of the free market economy, but still much better than any planned economy. Just compare West Germany with the former East Germany.
Moral of the whole article is that there are times to out-source but 'price/cost' isn't the only or even the most important consideration. He then provides a methodology to make sense of the decision.
I first saw this article on the desk of a senior exec at Deere back then. A week later I saw it on the desk of a similar exec at Cat... After that I decided I would keep a copy with me pretty much all the time. Then I kept a dog eared paper copy - now its on my stick & HD.
I saw that article too and almost had to go to the emergency room after busting a gut laughing. Foreign investors are gonna save the US housing market ... ouside of Miami, NY and maybe LA/Chicago, that's a non-starter.
And even in those lucky few, any foreign money will be concentrated in downtown exclusive types of areas. This will have zero effect on the suburbs and exurbs.
do we have a future where some automated appraising program will at least serve as a checker for the appraisal report and may be replace part of the apprasier work load?
There are a plethora of such programs. The problem is that not many of them are very good. Automated Valuation Models (AVMs) are only good in areas with easily recognizable patterns of development. In the greater Denver area, an AVM would be swell in an area like Highlands Ranch, a mega master planned community where if you've seen one home you've seen them all. Now in an area of established Denver with signifigant variances in age, style, size and quality, the AVMs chips might explode.
If you would like to test some free AVMs on properties you are familar with you can try the websites of BOA, Ditech and Zillow. Of the three, zillow is easily the worst. Oh yeah, you might also start gettings calls trying to get you to refinance as well.
As an appraiser with 25+ years experience, including reviewing thousands of appraisals, there are two main problems I see in the appraisal business today.
The quality of residential appraisals is much worse today that 15-20 years ago, before licensing, mainly due to thousands of poorly trained and poorly educated new appraisers coming into the business in the past 5 years, and
Appraisal management companies, who order appraisals mainly by the lowest fee available for a particular job, are contracting to these crappy new appraisers instead of using experienced and better trained appraisers, who have been through bad real estate markets before.
I got a nasty message from my "prime broker" on Friday. He found out that I was the same guy running two other companies that went bankrupt and stuck his bank with a bunch of bad loans.
I finally talked to him today and he said there was no reason those "other two companies" had to go bankrupt. Basically he could get me a loan for any amount if I paid a small "consulting fee" to some offshore company I'd never heard of.
I mentioned that I had a friend who had bought some investment properties a while back that had gone bad, and he said it was no problem if I used some of the money they would loan me to take them off his hands. He said there were still a "few good appraisers" out there that he could put me in touch with.
I worked up the nerve to ask him if I could somehow pay off the credit card I charged all those puts to and tried to by the apartment complex with.
He said he'd have to think about that one for a while.
. The quality of residential appraisals is much worse today that 15-20 years ago, before licensing, mainly due to thousands of poorly trained and poorly educated new appraisers coming into the business in the past 5 years, and
Appraisal management companies, who order appraisals mainly by the lowest fee available for a particular job, are contracting to these crappy new appraisers instead of using experienced and better trained appraisers, who have been through bad real estate markets before.
Oh cry me a river, this crap has been going on at least that long. I was on several drive by appraisals in the 70's by accident in the middle of the night with another drunk who was the appraiser and guess what. he's still an appraiser and I doubt if a damn thing has changed. I'd rather have a good lawyer then a good appraiser on my side any day.
Tanta, Thanks for the link - I have to admit it is past my ridiculous bedtime, but I did read far enough to see "February 2007" as the dates on some of the emails indicating that eAppraise was capitulating to WaMu's demands. February 2007!!!! Didn't we all know the game was ending by then? What were they thinking? What was WaMu thinking? Isn't there a point where one gives up and folds and hopes not to have one's bluff called? I can't get over it - February 2007! Things are worse than I thought, and I thought they were terrible.
I had storms to put on... besides the hockey game hasn't started yet. Get to sit by the fire, watch hockey & wifi - wooowhoo, man is my life excitin'...
Gophers look good tonight. Of course, from your description of where you are, you might be a Mavericks fan.
Severe OT - Say dryfly, remember that extremely bad run of possum jokes we had here after Tanta's post on Possum analytics. Well I just saw one of the buggers in my backyard here in the northern suburbs of Minneapolis as I was digging in a scrap pile for some lumber for a project. Luckily for me I seemed to have scared the bejezus out of it (it was good sized, probably 20 to 30 pounds) and it ran up a neighbor's tree. Hopefully this coming winter will be cold enough to get it moving on down the line, otherwise I'm going to have to set a live trap so large that I'll probably be more likely to catch a neighborhood tabby.
My finance was wondering what had been eating the squirrels (literally and figuratively).
Andrew I talked to a DNR guy who says its a result of Global Warming - there never used to be Possums this far north but there are now.
For awhile they suspected they were like mutant or something 'cause they see them without tails and ears and feet... all gnawed up. Then it dawned on them - frost bite. Possums don't hibernate and are out and about all winter. Even though our average temps are much warmer than a half century ago... we still get those occasional 20-30 below spells.
So while they may have more possums down where MOM lives, ours look like Freddy Kruger Possums... or the Possums of the Corn.
Gophers look good tonight. Of course, from your description of where you are, you might be a Mavericks fan.
No. Don't hate 'em but not a fan of the Mavs.
I've had season tickets to Gopher Hockey since 1975... I actually lived in the dorm complex where a lot of the 'Miracle' players lived, saw them at parties and at 'Sterbs'. That was before Lake Placid.
After I graduated there was a brief spell in the 80s when I lived out of state and gave them up (big mistake). Moved back and got back in queue and now budget the season tickets before we budget the meals. Priorities you know.
My wife and daughter were at the game tonight - I was watching it on the tube tonight. They just called in - had a blast. Our tickets are near the bench and they see everything that goes on and off the ice.
Yep, you got that right, no tail or ears. Only figured out what he was when I shined the flashlight on him and saw the white muzzle and pink nose on the face looking down from the tree. Before that he looked to me like the world's largest woodchuck scooting across the yard in the dark, but then he started climbing and I was thinking small-sized raccoon until I got close enough to light him up. Sigh Time to see what the DNR has to say about them.
". . .
For anyone worried about the global economy as a whole, the story that emerges from the metals market is far from encouraging. The strength of precious metals prices suggests that inflationary pressures are building up, while the base-metals charts indicate, at a minimum, that the manufacturing sector is losing momentum. In other words, the implication of all this is stagflation, the worst possible economic outcome for both equities and bonds."
Near the bench and had them a long time? You know Paula and Erik Biever by any chance?
I don't know any of them by name - but post a sec/row/seat number and I might recognize the 'faces'... seriously. Seats haven't turned over around us in a decade.
If there were a blogger MVP award, on mortgage and credit issues it'd be Tanta at Calculated Risk, who has another must-read post about the NY Attorney General's lawsuit on home appraisal fraud. Mish thinks WaMu is toast. And Nobel laureate Joseph Stiglitz places blame.
Dryfly,
Sounds like you live in Minnesota. I grew up there (family is still there)and had season tickets to Gopher hockey too. I remember waiting after a game and getting sticks from Pat Michelliti and the goalie at the time, I believe it was Jon Blue (sp). I even got to play play a few times in the old rink (was that Mariucci?). Ahh, those were the days. Is Doug Woog still the coach? Is the team still all Minnesotans? It's been a whilw since I've followed the old team.
Been seeing possums for several years in Ann Arbor. They wait with you for busses all over town, and there's a nesting family right outside the north entrance of the Hatcher Graduate Library, unless it's been moved recently. According to neighborly chitchat they are newcomers, at least in town.
Not unlike WAMU in Chicago, starting around 2003. Something about their assault on that town and several others around that time has always summoned echoes of the 1980s, when some of the S&Ls that scoured the earth most thoroughly in search of new deposits actually wanted them to shovel into their and their cronies' satchels.
But I guess if there's anything to such suspicions we'll find out soon enough. Did anyone already post this little note from 2006?
Sounds like you live in Minnesota. I grew up there (family is still there)and had season tickets to Gopher hockey too. I remember waiting after a game and getting sticks from Pat Michelliti and the goalie at the time, I believe it was Jon Blue (sp). I even got to play play a few times in the old rink (was that Mariucci?). Ahh, those were the days. Is Doug Woog still the coach? Is the team still all Minnesotans? It's been a whilw since I've followed the old team.
Team is all Minnesotan right now but they do actively recruit non-Minnesotans now, that is a bit of a change. Woog is a commentator for TV & the current coach is Don Lucia originally from Grand Rapids but played at Notre Dame and then coached Colorado College. Gophers have won two Nat'l Championships under him - won't this year though, rebuilding due to a number of key players making early exits to the NHL.
I remember both Blue & Micheletti - Blue was a Californian - very unusual back then.
They don't play in the Old Mariucci - you probably new that - they moved into a new state of the art arena built across the street. Very nice but not the same. I could go into some stories about the old barn... some would qualify as 'evidence' so I'll refrain.
Other than that its still the best ticket in town.
"And the backup fund will not distinguish between the assets it buys from each SIV; instead, it will assign the same risk level to all their troubled securities."
but post a sec/row/seat number and I might recognize the 'faces'
They're probably in about the tenth row. Erik's the guy who's always in the hat with the gopher ears, and Paula wears a beret.
Is Doug Woog still the coach? Is the team still all Minnesotans?
Woog is now in the broadcast booth, thank god. He suffered a severe case of burnout as the coach, as well as a couple of shenanigans, including leaving $500 under a hat for a player.
The team is currently all Minnesotans, but the commitment to that is something Don Lucia did away with as a condition of coming here. Again, thank goodness. Maybe it's just because I came up here from out-of-state to go to school, but I always hated the policy.
So on the revived MLEC, crap is sold to MLEC, because MLEC will eat anything. And this restores confidence to the market because MLEC bought crap that everyone knew was crap?
Why will the 60 institutions mentioned pony up the $75B for MLEC, based upon an agreement by BOA, Citi and JPM?
(quote)
Now, Henry M. Paulson Jr., the Treasury secretary, is describing the proposals benefits as helping at the margin. In an interview on Thursday, before the latest agreement was made, he acknowledged that the proposed backup fund would not rescue troubled SIVs, only lead to a longer and more orderly demise.
This is something that is not a savior, Mr. Paulson said, noting that he expected the fund to begin operating by the end of the year. Anything at the margin that will speed up liquidity is worth trying.
(end quote)
Yes, they will line up to donate, won't they? A manditory buy sure will act to create a a market where there is no confidence.
The great shame in Minnesota hockey was the elimination of one-tier high school tournament. Do you guys remember how cool that was? The Iron Range kids versus preppies like Edina and Bloomington Jefferson. Good times, good times.
"Wamu by forcing an appraiser into such sleezzzy business practices is inexcusable."
You can't force someone into sleazy business practices, either you have integrity or you don't. End of story.
Anonymous | 11.10.07 - 7:01 pm | #
What I meant was Appraisers that practiced honest integrity were not welcomed at WaMu -the nations largest savings and loan.
Figuring a region the size of southern California, there where probably 300 or more appraisers fee-feeding daily at Wamus welcoming pleasure. The fix is in, full steam ahead!!!
The fund, of at least $75 billion, will be structured more simply than earlier proposals had envisioned and could be up and running by the end of December, the Times reported.
Figuring a region the size of southern California, there where probably 300 or more appraisers fee-feeding daily at Wamus welcoming
Everyone of them needs to be in jail, unless the appraisers have some skin in the game and a few years in jail is skin in the game as far as I'm concerned this kind of crap will continue. I don't think paying a fine will do it either, mandatory jail time. That needs to go for loan officers, R/E agents, home inspectors and anyone else involved in real estate that gets paid a fee for their supposed service.
The demise of the RE appraiser is almost tragic. The relevance of the appraisal has been so weakened in it's scope that rarely is a good appraisal enough to justify a property's value. In today's world there are several extra steps to used to augment the accuracy of the appraisal
Appraisal is now scrutinized by an UW (not just a DU validator but an experienced UW preferrably with a DE)
The neighborhood or market risk is reviewed with some sort of flip risk software (for instance HistoryPro) this is on top of whatever market warnings DU might offer
The appraisal's valuation is checked with a AVM (there are dozens of individual AVMs so you can actually order a cascade of multiple AVMs) or a BPO
Making a third party appraisal vendor lower it's value??? You bet! Marking the Neighborhood Section of the 1004 Stable/Steady/In Balance when the property is in Detroit, MI? Do they think we're all Stupid? and don't read?!
Hsbc actually kicked off appraisers that did a super good job just because they didnt make " the value " that Hsbc wanted,,,,,I would do away with a so called Bank list
1st
joe, i'd change your name...
people are going to crucify banks
Very cool post. I am actually getting to the point where I realize I really don't have a clue. I don't think you can really really understand all this with out spending years and having studied a lot of other subjects beside. You actually have to be good with numbers, sociology, history and trends,etc.
BTW, Wachovia' website is having problems with balance posting etc.Perhaps they weren't ready to scale up for a big bump in traffic?
Thank you for taking the timeto write all this out.
Regards,
Nova
I thought Jos. Banks was the guy who sold me those nice wrinkle free dress shirts.
Would it surprise anyone to learn that companies used to do all this "opinion shopping" to the big accounting firms?
another great post. In particular the way you tie the ugly specifics of this flawed part of the business together with things we see in all businesses is beautiful:
if someone higher-up had listened to whatever internal employee called bull on this one.
Why didnt they listen? Why doesnt any corporation ever listen? Because the WaMu account is huge, and nobody wants to stop a gravy train.
perfectly said.
WaMu had best hope that Coumo doesn't read this, as then he will understand completely what he's talking about.
As always...Great Post...but what I don't get is that so many people don't get it. There is the way things are supposed to work and the way they do work. ANY system can be degraded and gamed and when there is a pile of $$$$ involved unless it is carefully observed and audited any system will go to hell.
I am surprised that anyone who has worked is surprised...especially after the last 7 years.
rt
Mannn, you are the man. Happy Diwali.
-K
As an appraiser I believe the AMC model is the best way I know of to promote independent, disinterested appraisals. The problem is, the AMCs will never get the best appraisers to work for them with the fees they offer. eAppraiseit, for example, offers only 40-50% of a typcial fee. Fidelity's LSI is only slightly better and Transunion is just slightly better than that. As an appraiser, I have the choice of working without pressure for beans or getting paid full fee, but having to run a gauntlet of shady interested parties. It's not a fun choice.
The use of Appraisal management companies has had other effects,holding down the cost of individual appraisals (they cost the same as they did 10 years ago),which in turn encouraged the greedy and unethical to take on a LOT of trainees,some as many as 30 at a time! and of course it drove many of the honest and competent Appraisers out of business.The best Appraisers I know are still hurting,while the ones who can hit the number without being too outrageous are doing fine.ANY loan Broker knows that you only have to call another shop and say,"hey this is ed,i gotta loan in your area and need an appraiser" to hear "call susie,she always hits the number".sad.
Well, the compensation issue is the key, isn't it? Why would an AMC want to pay more than minimum fees to appraisers? The AMC exists because the lenders want to outsource stuff that people like me used to get paid relatively big bucks for, plus bennies and my palatial cubicle.
My view of the mortgage business these days is that nobody's making any money except the salespeople. Or, rather, nobody was making any money except the salespeople, and that has created a situation in which nobody is making any money except the lawyers. Yeah, it wasn't any kind of obvious where that was headed . . .
Let me ask a fundamental question: Why have appraisers at all? It seems to me that the value of a property can be divided into two parts, tangible and intangible. The tangible part is easy, it's what you buy property insurance for (eg If a MOAB went off in your houses general vicinity, how much would it cost to rebuild?) Then there's the intangible. This part seems to be driven primarily by market forces such as availability of land, "location location location", and irrational economic mania. How does an appraiser supposed to quantify the irrationality of real-estate price changes? Is there some secret metric they know about that the entire banking system is ignorant of? If not, what's the point?
Was it easier for independent appraisers to hit the numbers in a rising market? If your high appraisal today is on the money or on the low side within ninety days, what do you do?
"....a situation in which nobody is making any money except the lawyers."
Can we have some lawyer topics soon? I'd like to see how the lawyers are getting into the act and whom they are targeting and so on and so forth. Cuomo is just the beginning, right?
This is the place in which we found ourselves,
once shaken from the back of Geryon.
Why have appraisers at all?
At some level, "appraisers" are just those employees (or hired guns) who have special expertise in sizing up the collateral. As "underwriters" have special expertise in sizing up the borrowers and "closers" have special expertise in calculating the necessary funding amount for your escrows.
But other parties besides lenders need people with appraisal expertise: buyers, sellers, insurers, the IRS. So it makes a fair amount of sense that "appraiser" as a job function became more or less independent of employment directly by mortgage lenders.
Lord knows I have no desire to go back to the days when decisions about collateral acceptability were made by Jack-of-all-mortgage-trades loan officers with copy of Miller & Swift in their back pockets and a number two pencil. I have no problem with specialization of professional, well-trained appraisers. Like everybody else, I just have a big problem with training them to give expert opinions about the market value (not just replacement value) of properties and then hiring the ones that will tell me what my sleazy loan officers want to hear.
My view of the mortgage business these days is that nobody's making any money except the salespeople. Or, rather, nobody was making any money except the salespeople, and that has created a situation in which nobody is making any money except the lawyers. Yeah, it wasn't any kind of obvious where that was headed . . .
Thanks Tanta for another interesting post. So can the mortgage lending business survive or grow using the GSE's as the source for loans? or what's next as a business model?
Great Post
This just what I saw during the great S&L melt down. American Saving was famous for this and as we know they weren't the only ones. I guess all of the boy/girl wonders went in to banks after that small problem and is small compared to this
jo6pac
The biggest appriaser do not use list in the world C/O Indymac:
http://www.indymacb2b.com/b2bAuto/eMITS/forms/excluList.pdf#search=
Was it easier for independent appraisers to hit the numbers in a rising market? If your high appraisal today is on the money or on the low side within ninety days, what do you do?
Sure. That's why a perennial annoyance of the mortgage business (bad appraisals) became a deadly epidemic in the last several years: bubbly markets mean you don't have to work very hard, and your values will get bailed out. Who cares if you came up with a value 10% too high when the loan closed, if it was 10% higher by the day we filed FC?
We're now looking at what happens when Mr. RE Market doesn't bail you out.
I did a post a while ago on mortgage fraud where I observed that you used to be able to rely on some borrower self-interest to keep things under control, too. You, burnside, didn't want to pay more than you had to for the house, and you didn't want to borrow more than you had to. So sellers priced competitively and appraisers expected some gratitude for helping to keep manias under control.
But all these buyers bought into the idea that it's a good sign if you are buying a house for 20% more than what the seller paid for it last year (the assumption being you'll make the same 20% next year). So the mania fed on itself, and borrowers started acting in totally irrational ways.
Remember the cash-back purchase deal? That's nuts. But borrowers agreed to it. Now there's a pressure on appraisers that isn't historically normal. Usually it's the sellers pushing them and the buyers pulling them. When everybody including the lenders gangs up, it's impossible to expect them to draw the line.
Besides that, lenders in the boom were doing a lot of things they never used to do, and so appraisers didn't used to have to deal with it. A cash-out refi of a three-month old loan? Unheard of just a few years ago, when nobody cashed you out at under 12 months seasoning. Zero down? Huh?
You really complicate things for appraisers when you eliminate the distinction between "creative financing" and "normal financing." It's just harder and harder to know what counts as an "inducement to sale." It's almost like all appraisals in the last few years should have had a condition of value on them that said "subject to lenders continuing to act like idiots."
Oh, wooley bugger, that's a major hoot. Indy makes this list openly available on the web, and this is the first thing you see:
Confidentiality:
The users of the "Exclusionary Appraiser List" are prohibited from distributing it to third parties
because it contains confidential information. Indymac Bank requires that individuals and companies
using the "Exclusionary Appraiser List" maintain the confidential nature of the information in it. By
using the list, users agree to indemnify Indymac Bank for any loss, damage or expense resulting
from their failure to maintain the confidentiality of the information on the list. Indymac Bank provides
the confidential information on the "Exclusionary Appraiser List" to users solely for conducting
business transactions with Indymac Bank.
From the wooley bugger link:
The users of the "Exclusionary Appraiser List" are prohibited from distributing it to third
parties because it contains confidential information.
Why does IndyMac say this, and then make the list publicly available on the interwebs?
Another wonderful post. Thank heavens we have an articulate thoughtful blogger who really understands the mortgage business in its guts - at street level.
Outsourcing to vendor management companies is like sending your elders to a nursing home or children to daycare. It seems like the right choice and sometimes maybe the only choice but can the risks of decision-making by a stand-in.......I don't know......looking at all the mayhem and loss....just kills me.
Tanta beat me to it I see.
I buy and sell property. Just reviewed appraisals for a bank for some loans they're making elsewhere.
Appraiser pulled a res lot comp from 10 miles away - unacceptable. Its obvious the appraiser's goal was to be low.
In the early '90s, major banks pressured appraisers to lower values, simultaneously lowering LTV's -crashing our market while we dumped out of properties to increase cash. Deja vu.
I say raise the fees, lower the LTV, make the appraiser physically inspect the comps and the subject properties.
Crack houses don't show up on satellite.
Walker, I used to have to actually sign Nondisclosure Agreements to get my hands on somebody's Exclusionary List for due diligence purposes. Cross my heart and you can sue me from here to the next county if I so much as take the thing out of the conference room and into the break room to get coffee.
I gather Indy thinks the verbiage covers them if some indignant appraiser sues.
Outstanding 'article' Tanta - really pulls aside the curtain, at least for a while.
I understand the benefits & weakness of the 'out-sourcing' issue having lived it now for almost my whole life. If done well it is very powerful. If done badly - it is suicidal for all parties. And most importantly it has to be (1) a strategic decision and (2) well managed no matter which avenue is pursued.
I read a paper by HBR on 'Strategic Sourcing' written in about 1990 or so I believe - it is as relevant today as ever. It was done by a guy working for Cummins Engines and he describes an algorithm or 'decision tree' on how an organization should make such a decision and then 'manage it' afterward. I keep the copy with me to this day .
According to the author there are four main categories of operation:
1) Those ops that are strategic and so important they need to have top priority & oversight:
... a) If you have the resources - keep in house & manage well
... b) If you don't have the resources, find a TOP LEVEL SUPPLIER and truly PARTNER with them - still needs good management attention
2) Those ops that aren't strategic:
... a) If profitable, keep in house (think cash cow)
... b) If not profitable, bid out on a cost basis
The paper provided a flow chart of how a mfg company should try and make this decision... lots of stuff on critical missions and core competencies. Buzz words but in this case at least well thought out & neatly presented buzz.
Anyway - it sounds like WaMu didn't follow his 'advice'. Sounds like they treated appraisals like (2,b) where they should have been treated from the beginning like they we 'important'... i.e. (1,a or b).
By initially treating the appraisal process as just a cost center allowed it to become susceptible to abuse & mismanagement later when conditions changed. Almost predictable.
Oh well - time for me to put storms on, a critical mission of which my wife says I'm fully competent at.
In the early '90s, major banks pressured appraisers to lower values, simultaneously lowering LTV's -crashing our market while we dumped out of properties to increase cash. Deja vu.
I have to say I've never worked for any lender in any period who pressured appraisers to lower values.
All I have ever had to do is go into my lending guidelines and lower my maximum LTV, or change my vacancy factor, or require two independent appraisals on every property, or whatever else I want to do that contracts. I've never had to have the appraiser lower the values.
Thank you woolly bugger,I recognized a few names,here and there.Amusing.
dryfly, I think WaMu would say that it is doing 1b. It is "partnering" with eA.
eA is saying that this "partnering" boils down to trying to make eA do something illegal.
Again, we're looking at indictments, not verdicts, so there's a lot to prove here. But the allegation is not that eA is a sloppy company that WaMu outsourced a critical function to and then didn't sufficiently babysit. It's that eA had a plan but WaMu wanted them to violate it. At least that's what I think is being alleged.
So I guess the moral is, don't outsource your regulatory violations; those you should keep in-house.
This is the place in which we found ourselves,
once shaken from the back of Geryon.
bacon dreamz | 11.10.07 - 3:34 pm | #
Abandon all hope ye who enter here.
What if they put you on that list just because you won't meet their value. If you're an ethical appraiser, how do you get off that exclusionary list?
Very good write up.
I came from the old school of appraisal where setting value was an art form and not a mindless repetitive exercise in form-filling a predetermined strong-armed value. Pumping value into an asset is an easy task. The art is in knowing how much to pump before it explodes. I know the business well enough to know WaMus questionable practices have backfired -big time. I think the only way to solve the problem is to have everyone that is involved in a mortgage origination conjoined at the butt, assigning the commissioned loan sales agent in shouldering all liability and blame for the shortcomings of the others involved, and including doing jail time for the appraiser. Wamu by forcing an appraiser into such sleezzzy business practices is inexcusable. The appraiser should be allowed to develop value independent of outside agitation.
What if they put you on that list just because you won't meet their value. If you're an ethical appraiser, how do you get off that exclusionary list?
That, it seems to me, is the important argument for truly keeping these things confidential. Otherwise they become ways to punish appraisers you don't like.
If Joe Appraiser pisses off Loans R Us because he won't fudge a value, and Loans R Us puts Joe on the shit list, as long as nobody else can see that list Joe isn't really harmed: Loans R Us isn't going to hire him anyway.
Once you publish these lists, you'd best have something to back them up. If you are punishing good appraisers, they will sue you and they should.
But how can, say, IndyMac do business over the intertoobz with 8,000 different brokers without publishing the list? My argument was that the problem is tied to the wholesale and correspondent channels of operation for national (or large regional) lenders, not just lending as such.
Sure, Indy could have this behind a registration wall and I don't know why they don't. IT screw up?
Another reason we used to hide our lists from each other (exclusionary or approved) is because why do I want another lender to profit from my homework? It used to be that a really good exclusionary/approved list was a competitive edge. I guess Indy thinks that's no longer the case. I personally have gotten to the point that I no longer trust anyone else's lists, because I no longer trust anyone else's criteria.
I haven't been personally involved in appraiser selection for a long time, but I've done my time in broker and correspondent approval. I used to get that crap all the time: How come you won't approve Bubba? WaMu or Citi or BoA or Jesus Christ approved Bubba! Why not you?
And I used to say that besides the fact that those other parties can make mistakes, there is the possibility that Bubba will send its good loans to Big Dog and its cruddy loans to me, because Bubba has this pre-existing relationship with Big Dog, but only barely meets my requirements if he meets them at all. Whose good-will would he be more likely to risk losing, mine or Big Dog's?
Anyway, that appealing to each other's lists does go on a lot in the industry, usually to no useful purpose.
dryfly, I think WaMu would say that it is doing 1b. It is "partnering" with eA.
But the way you described the evolution of this thing - appraisal out-sourcing started out as just a 'cost' & logistics issue as they went from Podunk to national. Once national they had all the wrong processes in place - no surprise they found they could just lean on the appraisers (like they did when 'he' was in the cubby over back in Podunk)...
eA is saying that this "partnering" boils down to trying to make eA do something illegal.
In our business we call that being partnered as in "Hey bend over we want to 'partner' you..." Been there - no easy way to handle it.
So I guess the moral is, don't outsource your regulatory violations; those you should keep in-house.
I wonder if we would have ever known if it had stayed in-house? Those are exactly the kinds of 'internals' that only come out AFTER the failure goes public - think Enron.
But it does tell you something about the decision process between 1,a and 1,b... if it is 'really important'... who do you trust?
Like I said - I really liked the piece you wrote but it made me think - where have I seen this kinda crap before. Answer more than just this time, this industry. It is a structural issue as much as a moral & legal one. They let it happen. Suckers had it coming.
What a cogent explanation of a complex subject!
It's fascinating to observe how people/organizations will pursue policies that are not in their own long-term interest so as to realize a short-term gain. I know from my time in the corporate world that these kinds of attitudes are set at the top and trickle down through the organization in various ways, which says something about WaMu executive management.
I worked commercial loan review and appraisal review for a Federal thrift in the early-mid '90s (the pull-out from the New England RE debacle of 89-91). The best appraisers in my eyes were the ones that came in lowest, as they could justify their numbers from the meat in their reports. The high-dollar appraisers didn't supply enough meat in the report to justify the fact they were breathing.
I'm a regulator now and read resi appraisals on a regular basis. Given what I see today I can't understand how we've let the appraisers self-regulate (state licensing boards are staffed by appraisers) for so long.
MarketMinder.com - Daily Commentary
Bumpy, Lumpy Bulls
11/1/2007
Story Highlights
Recent market volatility is a perfectly normal thing for stocks.
Volatility by itself says nothing about future stock returns.
Investors commonly make the error of getting out until things calm down or locking in the years gains. Both strategies are a disservice to longer term goals.
Yesterday stocks surged; today they sank. Its been a choppy market, particularly in light of relatively sedate performance in recent years. What are investors to do?
No one is ever certain about market direction. After hundreds of years of capital markets development, youd think investors would catch on to the notion theres a risk/return relationship to investments. (Risk is also commonly known as volatility.) Stocks have among the highest returns versus other kinds of securities; therefore, they also have higher risk. Its pretty simple. Volatility in stocks is by definition a mundane thing.
Yet, like a booming, discordant chorus, we constantly hear from the media a familiar warning: In these uncertain economic times or some derivative. For instance, GDP growth might be strong today, but in these uncertain times, investors are concerned about high oil prices. (Open up the paper and you can find countless similar examples.)
Those searching for a time when economic and market conditions appear certain had better quit the investing game now. When has the market been absolutely certain before? Hmmm
oh, yes, we remember. Its happened twice recently as a matter of fact! First in 2000 with tech stocks and the new economy. That didnt turn out well. Second, just a couple years back with the housing never goes down! and Im quitting my job as a taxi driver to become a real estate agent! craze. That didnt end well either.
Certainty is something to fear. When everyone believes something, then its priced in and thus prices have to go the way opposite to the pervasive belief.
Folks naturally fear stock volatilitybig changes carry more emotion. Since we know fear and loss are more potent than joy and gaining, big stock market moves make for more jittery investors.
In truth, volatility doesnt say anything about future stock returns. Market choppiness is just as often your friend as enemy. Stocks can go way upand in very short order. Missing those big up days is just about the worst thing you can do as a long-term stock investor.
Its the sum of the days that matter mostthats why MarketMinder often says its time in the market, not timing the market. If youre bullish, youve got to be fully invested and not let volatility or short-term moves fool you because missing the biggest up days put you behind the marketnot good!
Today felt tragic to our portfolios. But long-term investors look back on history and realize how small such lumpiness really is. Days like today look like ultra-tiny speed-bumps over the longer term.
t_8,
you write for money magazine?
Yoursound like a shill for the Mutual Fund industry
Ken Fisher's website: MarketMinder.com
Lumpy-Bumpy continued:
Today felt tragic to our portfolios. But long-term investors look back on history and realize how small such lumpiness really is. Days like today look like ultra-tiny speed-bumps over the longer term.
Another wrong investing philosophy is to say Oh, were nicely up already, lets just take our winnings off the table and start over in the New Year. No! kowtow-ing to the calendar to lock in gains is a big mistake. (What do calendar years really have to do with how the markets will move, anyhow? With the exception of tax planning, nothing really.) Believing in seasonal stock performance is just as mythic as fearing volatility. The only thing to really focus on is a market cyclewhen and where the bull starts and ends. Everything else is just a head-fake.
Todays market downturn was supposedly catalyzed by Financials companies downgrades and fear over high oil prices. As MarketMinder recounted often in this space, we know both these fears to be false. Thus, todays action is mere noise amid a bigger bull market. Stay in the game and dont let the bumpy, lumpy ride scare you away.
Broadway Stagehands Strike, Plays Close
in other news, NYC restaurants experience an uptick in customer satisfaction reviews
Tennis_8, what exactly are you trying to accomplish? Free publicity for Ken Fisher's website? Or you want to talk about Ken Fisher's website but on my blog's comment section? Or are you just a complusive interrupter of conversations?
If you really feel you have to go OT, a simple "here's a link to something everyone might be interested in" would suffice.
C'mon. Behave.
Demos report on mortgage fraud, 2005
http://www.demos.org/pubs/home_insecurity_v3.pdf
(quote)
In 2003, October Research, a private firm, conducted the National Appraisal Survey, which polled 500 appraisers in 44 states about their professional experiences. The findings were startling. The survey found that 55 percent of appraisers reported that they had felt pressures to overstate property values. A quarter of the appraisers surveyed reported feeling such pressures in half of all appraisals that they handled.
(end quote)
A pretty good and complete report.
The fraud was ignnored for as long as the values kept going up and everyone made money.
Tanta,
Is there a link to the indictment with the email quotes? I can only find the press release. Great post, thanks.
If the banks couldn`t sell those mortgages to Fannie, Freddie, etc, I can assure you that would be a different type of pressure on the appraisers. But I guess will never get over the "fiduciary" shit on this blog.
Sorry, calvert, I should have linked to that.
It's here:
http://www.mortgagefraudblog.com/images/uploads/NYAGComplaint_First_Am.pdf
I think it is an IT mistake. If you click on some other areas of Indymac's site, you have to login to enter, but for some reason you can access that page.
I am just trying to inject some sanity and clarity into the otherwise extremely pessimistic opinions expressed by the comentators (inflation,hyper-inflation, recession, depression) and advocates of shorting stocks, gold, cash in the mattress, etc. I only quote Ken Fisher because he has an excellent long term investment record and a view which is quite contrary to the one held by the majority here. It might be thought provoking and even informative.
Why aren't you critical of those who frequently (almost daily) advocate extreme and highly unlikely economic outcomes, advocate risky investment choices,regularly use outlandish and foul language?
I have simply injected some common sense expressed by an expert. Furthermore I only post 2 or 3 times a month unlike the ones I aluded to who post rediculous views multiple times a day without your commenting.
My advocacy of a diversity long term investment approach for more than twoyears nnow has been vastly better advice than 95% of those who frequently post on this site.
Otherwise I appologize for offending you since your and CR blogs are excellent. It's the investment advise of others that is off base and unhelpful.
Tennis_8, if you are going to elect yourself monitor of other people's unhelpful posts, you must take the time and effort to respond to those unhelpful posts when they happen, and in specifics.
Popping in once or twice a month in the middle of a perfectly serious and useful discussion of a different subject to punish us with Fisherblather because some comment last month annoyed you is not helpful.
You seem to think that we wouldn't go out on this big internet and read stuff like Fisher unless you come here and fling it in front of us.
I want you to know that I and many of our commenters are here because we're trying to avoid more investment advice. I have enough investment advice in my email inbox on an average day to wallpaper my bathroom if I printed it out.
I regularly jump on the case of people who try to turn this blog into nothing more than an investment board.
And I really don't know why you worry so much about the rest of us taking bad investment advice.
I also don't know why you think I would jump on people who occasionally use "outlandish" and foul language and shit.
Tennis_8 if that is your thinking then just go away and dollar cost average into the S&P500. No need to pay for investment advice or newsletters.
Tanta - have you guys considered some "permanent" threads where people could just flame away on popular ongoing debates? (the market - bull or bear?, mortgage bankers - evil or benign? Ford versus Chevy?, etc.)
That might keep the tennis_8-type crap to a minimum.
Maybe it would spare us from excessive Jas. You never know.
OT - Nemo, you were so right about the 'shittygroup' quote. Sorry 2 have doubted you.
2 visitors online? Whaaaa?
The longer this goes on, the more CFOs and CEOs learn to do what private equity firms are trying to teach them, which is to borrow long-term money at approximately 6%, which would cost something like 3.6% after taxes.
Later, one could buy back his own stock with a price-to-earnings ratio of 15 and an earnings yield of 6.7% after taxes, and pick up the 3% spread as free money that makes his own earnings-per-share go up
this is fisher advice
that, my friends , is F****** shenanigans
"2 visitors online? Whaaaa?"
It's the weekend, no one's at work ;^)
2 visitors online? Whaaaa?
I had storms to put on... besides the hockey game hasn't started yet. Get to sit by the fire, watch hockey & wifi - wooowhoo, man is my life excitin'...
So if Wells Fargo stock does nothing for a year, I still make a 25.4% return
our famous t8
"Wamu by forcing an appraiser into such sleezzzy business practices is inexcusable."
You can't force someone into sleazy business practices, either you have integrity or you don't. End of story.
here he is again...
a shill at work
BEST FREE PROFESSIONAL INVESTMENT ADVICE ON THE WEB: Ken Fisher's monthly Forbe's column.
Fisher Investments | Ken Fisher's Forbes Portfolio Strategy Column
Fisher has written this column for 22 years and has been remarkably accurate. Read his past columns and see how his predictions have faired compared to those of your favorite commenters on this blog site.
Full disclosure: he manages my retirement account and $36 billions of other's money too.
Tennis_8 | 10.06.07 - 1:24 pm |
I personally can't stand the excitement....
please tell, please!!!
This is the best possible background for a hugh move in the stock markets.
Later this year I will let you know who I really am and you will understand why I write like this.
Tennis_8 | 07.15.07 - 12:08 pm |
We used to pay for the appraisals up front out of an application fee, so the appraiser got paid even if the loan didnt close. These days the appraiser often never gets paid if the loan doesnt close because the broker has nothing to pay it with.
This seems a clear enough message that most appraisers won't need the point spelt out in a memo.
It amazes me that companies continue to get caught explicitly forcing someone's hand, when these more "subtle" economic-incentive techniques (combined with exclusions/inclusion lists, etc) should be quite sufficient and effective.
FisherDisciple, this is not a Yahoo message board. We do not care to wade through some argument between you and tennis_8. Cut it out.
Tennis_8, this is what you started in a thread that was otherwise going along nicely.
dryfly,
I'd love a copy of that paper.
Tanta, at the risk of getting back on topic, the one thing that does not make sense here is why WaMu is not the one getting AG love letters. Care to speculate? Shoot at the easy targets, or is the goal to get eAppraiseIT to roll over?
(By the way, thanks from this computer scientist for making real estate appraisal intricacies scan as sweet as a Raymond Chandler short story...)
Tanta,
Seems to me if all properties were evaluated strictly as if they were income-generating investments -- not based simply upon how much someone with "a bucket of money and a box of stupid" wants to pay for them -- that the housing bubble wouldn't have happened.
Your thoughts?
Can't let this shill talk for Fisher pass without note of his call on housing earlier this year, per link above from his column and something I recalled reading with a chuckle when published. Stark contrast to the insightful materials presented and discussed here on housing and related topics (albeit amid typical blog static from some)...
Portfolio Strategy
Housing Boom!
Kenneth L. Fisher 02.26.07, 12:00 AM ET
Don't buy it. For months now the debate has been over whether America will have a hard landing or soft landing, the answer hinging on how big 2007's housing disaster turns out to be. Well, there won't be any housing disaster. We won't have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.
You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn't be so strong now.
Ya know after watching the impact of the credit crunch on sales volume this year, availability of money is such a huge factor on RE value. Add a new box on the appraisal form - "easy financing available - factor 1.3" "Banks closed - factor .7 for difficulty"
We can stop writing about housing and mortgage related problems. Its all over now and thanks to the foreign buyers from all over the world, home prices are about to explode!
Expired
Just like Japan was going to buy all the US real estate in the early nineties, whats old is new again.
Tanta, at the risk of getting back on topic, the one thing that does not make sense here is why WaMu is not the one getting AG love letters.
It seems to be the jurisdictional issue: the state of NY doesn't have the ability to pursue a civil suit against a federally-chartered thrift. My guess is Cuomo is trying to kick up enough dirt to force the OTS to deal with it.
tj, residential single-family dwellings are terrible income-producing properties. Why would you want to appraise them that way?
The trouble with residential appraisals is, exactly, that the things don't cash-flow, so you can't appraise them like income properties. And they are often very hard to value just on cost to replace: try doing that with a condo unit.
In fact, a good residential appraisal reconciles all three possible approaches to value (income, cost, and market-comparable). People talk about appraisals very casually as if they involve nothing but comp analysis, but that's because a lot of people really don't know all that much about formal residential appraisal than what they read on the internet (except here).
omg, bob
that's a Find
If housing were destined to fall apart in 2007 these stocks wouldn't be so strong now.
bob from la jolla
wafj
tj, residential single-family dwellings are terrible income-producing properties. Why would you want to appraise them that way?
Rents aren't subject to "irrational exuberance", and therefore didn't rise significantly during the boom. If a SFR is worth only $1000/mo rent, why should anyone approve a loan with payments vastly higher?
oops , missed teacher pointin at me, im' gone
Me: Tanta, at the risk of getting back on topic, the one thing that does not make sense here is why WaMu is not the one getting AG love letters.
Tanta: It seems to be the jurisdictional issue: the state of NY doesn't have the ability to pursue a civil suit against a federally-chartered thrift. My guess is Cuomo is trying to kick up enough dirt to force the OTS to deal with it.
From the nasty tone of the letter that OTS sent back, sounds like they'll be about as proactive as the CPSC has been at monitoring our newly-outsourced toy manufacturing...
Tanta, do we have a future where some automated appraising program will at least serve as a checker for the appraisal report and may be replace part of the apprasier work load? I thought that is what Zillow tried to accomplish. Their estimate still suck and change too slowly given the marketing condition. But they get all the comp information in a given neighbor. And I would imagine given time, they would be able to develop an algorithm to at least get a house value in the ballpark. I do understand that there is a need for someone to visit a house to make sure the house is still in good shape etc. But the variance within a given neighbor should have an upper limit.
Tanta,
Thank you for this enlightening post. What you describe here reminds me a lot of the fraudulent practices at the (tech) stock market bubble around the millenium. First stock prices rose by themselves. At some point, some companies felt pressured to "hit" revenue or EPS numbers and via creative accounting we finally landed at outright balance sheet fraud. Finally, we got the Enron and the likes trials and convictions.
Exactly the same seemed to have happened in the RE bubble. First, house prices rose. Then, sellers, buyers, appraisers and lenders started to "hit" some numbers knowing they would seel the loans to willing investors. The coming stage will be the uncovering and trying of some criminal acts. I expect some high-profile trials, maybe even to the top of WAMU?
My conclusion is that whatever the current bubble in an economy is (tech stocks, RE, commodities etc.), the mechanisms at work are very similar and at the end always leading to fraud of some kind. Then there are the high profile trials. Unfortunately, this seems to be part of the free market economy, but still much better than any planned economy. Just compare West Germany with the former East Germany.
O-Joe
tj - here's the article from HBR (costs money - $6.50)
Link to their order site for the article didn't go through but look up:
Strategic Sourcing - To Make Or Not To Make? at HBR's Online Store
Ravi Venkatesan
Nov-Dec 1992 HBR.
Reprint (Product No.) 92610
Outstanding article.
Moral of the whole article is that there are times to out-source but 'price/cost' isn't the only or even the most important consideration. He then provides a methodology to make sense of the decision.
I first saw this article on the desk of a senior exec at Deere back then. A week later I saw it on the desk of a similar exec at Cat... After that I decided I would keep a copy with me pretty much all the time. Then I kept a dog eared paper copy - now its on my stick & HD.
dryfly,
Thanks!!! That'll come in extremely useful with one of my clients right now.
JJL,
I saw that article too and almost had to go to the emergency room after busting a gut laughing. Foreign investors are gonna save the US housing market ... ouside of Miami, NY and maybe LA/Chicago, that's a non-starter.
And even in those lucky few, any foreign money will be concentrated in downtown exclusive types of areas. This will have zero effect on the suburbs and exurbs.
This link may work
Strategic Sourcing: To Make or Not to Make (HBSP) doi:10.1225/92610
do we have a future where some automated appraising program will at least serve as a checker for the appraisal report and may be replace part of the apprasier work load?
There are a plethora of such programs. The problem is that not many of them are very good. Automated Valuation Models (AVMs) are only good in areas with easily recognizable patterns of development. In the greater Denver area, an AVM would be swell in an area like Highlands Ranch, a mega master planned community where if you've seen one home you've seen them all. Now in an area of established Denver with signifigant variances in age, style, size and quality, the AVMs chips might explode.
If you would like to test some free AVMs on properties you are familar with you can try the websites of BOA, Ditech and Zillow. Of the three, zillow is easily the worst. Oh yeah, you might also start gettings calls trying to get you to refinance as well.
As an appraiser with 25+ years experience, including reviewing thousands of appraisals, there are two main problems I see in the appraisal business today.
Speaking of appraisers:
I got a nasty message from my "prime broker" on Friday. He found out that I was the same guy running two other companies that went bankrupt and stuck his bank with a bunch of bad loans.
I finally talked to him today and he said there was no reason those "other two companies" had to go bankrupt. Basically he could get me a loan for any amount if I paid a small "consulting fee" to some offshore company I'd never heard of.
I mentioned that I had a friend who had bought some investment properties a while back that had gone bad, and he said it was no problem if I used some of the money they would loan me to take them off his hands. He said there were still a "few good appraisers" out there that he could put me in touch with.
I worked up the nerve to ask him if I could somehow pay off the credit card I charged all those puts to and tried to by the apartment complex with.
He said he'd have to think about that one for a while.
. The quality of residential appraisals is much worse today that 15-20 years ago, before licensing, mainly due to thousands of poorly trained and poorly educated new appraisers coming into the business in the past 5 years, and
Oh cry me a river, this crap has been going on at least that long. I was on several drive by appraisals in the 70's by accident in the middle of the night with another drunk who was the appraiser and guess what. he's still an appraiser and I doubt if a damn thing has changed. I'd rather have a good lawyer then a good appraiser on my side any day.
Tanta, Thanks for the link - I have to admit it is past my ridiculous bedtime, but I did read far enough to see "February 2007" as the dates on some of the emails indicating that eAppraise was capitulating to WaMu's demands. February 2007!!!! Didn't we all know the game was ending by then? What were they thinking? What was WaMu thinking? Isn't there a point where one gives up and folds and hopes not to have one's bluff called? I can't get over it - February 2007! Things are worse than I thought, and I thought they were terrible.
From the nasty tone of the letter that OTS sent back, ...
DCRogers | 11.10.07 - 8:00 pm |
I think you're referring to the nasty letter that OFHEO sent to Cuomo. OTS hasn't commented, as far as I've heard.
I had storms to put on... besides the hockey game hasn't started yet. Get to sit by the fire, watch hockey & wifi - wooowhoo, man is my life excitin'...
Gophers look good tonight. Of course, from your description of where you are, you might be a Mavericks fan.
Severe OT - Say dryfly, remember that extremely bad run of possum jokes we had here after Tanta's post on Possum analytics. Well I just saw one of the buggers in my backyard here in the northern suburbs of Minneapolis as I was digging in a scrap pile for some lumber for a project. Luckily for me I seemed to have scared the bejezus out of it (it was good sized, probably 20 to 30 pounds) and it ran up a neighbor's tree. Hopefully this coming winter will be cold enough to get it moving on down the line, otherwise I'm going to have to set a live trap so large that I'll probably be more likely to catch a neighborhood tabby.
My finance was wondering what had been eating the squirrels (literally and figuratively).
Calculated Risk: Bloomberg: The Backyard Possum Theory of Financial Markets
Andrew I talked to a DNR guy who says its a result of Global Warming - there never used to be Possums this far north but there are now.
For awhile they suspected they were like mutant or something 'cause they see them without tails and ears and feet... all gnawed up. Then it dawned on them - frost bite. Possums don't hibernate and are out and about all winter. Even though our average temps are much warmer than a half century ago... we still get those occasional 20-30 below spells.
So while they may have more possums down where MOM lives, ours look like Freddy Kruger Possums... or the Possums of the Corn.
I worked up the nerve to ask him if I could somehow pay off the credit card I charged all those puts to and tried to by the apartment complex with.
He said he'd have to think about that one for a while.
ac | 11.10.07 - 8:28 pm | #
ac, are you kidding? You're leading an exciting life!
ac, are you kidding? You're leading an exciting life!
sigh
I think if the Fed has its way we'll all be living an "exciting life".
Gophers look good tonight. Of course, from your description of where you are, you might be a Mavericks fan.
No. Don't hate 'em but not a fan of the Mavs.
I've had season tickets to Gopher Hockey since 1975... I actually lived in the dorm complex where a lot of the 'Miracle' players lived, saw them at parties and at 'Sterbs'. That was before Lake Placid.
After I graduated there was a brief spell in the 80s when I lived out of state and gave them up (big mistake). Moved back and got back in queue and now budget the season tickets before we budget the meals. Priorities you know.
My wife and daughter were at the game tonight - I was watching it on the tube tonight. They just called in - had a blast. Our tickets are near the bench and they see everything that goes on and off the ice.
Yep, you got that right, no tail or ears. Only figured out what he was when I shined the flashlight on him and saw the white muzzle and pink nose on the face looking down from the tree. Before that he looked to me like the world's largest woodchuck scooting across the yard in the dark, but then he started climbing and I was thinking small-sized raccoon until I got close enough to light him up. Sigh Time to see what the DNR has to say about them.
Andrew: My finance was wondering what had been eating the squirrels (literally and figuratively).
Fiancee possibly (avec accent aigu), now if it was your finance, then is Conjure Bag your partner?
Our tickets are near the bench and they see everything that goes on and off the ice.
Near the bench and had them a long time? You know Paula and Erik Biever by any chance?
The Economist has a nice overview write-up on the problems Citi faces and ouster of Prince.
Premium content | Economist.com
Possums and global warming:
Possums moving into a warmer Vermont
Creatures of climate change: Critters shift in Michigan | Post Carbon Cities
Disclaimer: 'tis the field that I work in (not possums)
The Economist's Buttonwood on precious metals and the global economy.
Premium content | Economist.com
". . .
For anyone worried about the global economy as a whole, the story that emerges from the metals market is far from encouraging. The strength of precious metals prices suggests that inflationary pressures are building up, while the base-metals charts indicate, at a minimum, that the manufacturing sector is losing momentum. In other words, the implication of all this is stagflation, the worst possible economic outcome for both equities and bonds."
Whoops. Dropped an "e" and the appropriate accent there. Thanks for the correction and links Canuck.
Near the bench and had them a long time? You know Paula and Erik Biever by any chance?
I don't know any of them by name - but post a sec/row/seat number and I might recognize the 'faces'... seriously. Seats haven't turned over around us in a decade.
The Daily Nightly - msnbc.com
If there were a blogger MVP award, on mortgage and credit issues it'd be Tanta at Calculated Risk, who has another must-read post about the NY Attorney General's lawsuit on home appraisal fraud. Mish thinks WaMu is toast. And Nobel laureate Joseph Stiglitz places blame.
Not sure if anyone has mentioned it, but apparently MLEC is alive and well.
UBS Records a Big Write-Down and Sells a Stake - NY Times
Dryfly,
Sounds like you live in Minnesota. I grew up there (family is still there)and had season tickets to Gopher hockey too. I remember waiting after a game and getting sticks from Pat Michelliti and the goalie at the time, I believe it was Jon Blue (sp). I even got to play play a few times in the old rink (was that Mariucci?). Ahh, those were the days. Is Doug Woog still the coach? Is the team still all Minnesotans? It's been a whilw since I've followed the old team.
Been seeing possums for several years in Ann Arbor. They wait with you for busses all over town, and there's a nesting family right outside the north entrance of the Hatcher Graduate Library, unless it's been moved recently. According to neighborly chitchat they are newcomers, at least in town.
Not unlike WAMU in Chicago, starting around 2003. Something about their assault on that town and several others around that time has always summoned echoes of the 1980s, when some of the S&Ls that scoured the earth most thoroughly in search of new deposits actually wanted them to shovel into their and their cronies' satchels.
But I guess if there's anything to such suspicions we'll find out soon enough. Did anyone already post this little note from 2006?
Washington Mutual to shut down appraisal review
Sounds like you live in Minnesota. I grew up there (family is still there)and had season tickets to Gopher hockey too. I remember waiting after a game and getting sticks from Pat Michelliti and the goalie at the time, I believe it was Jon Blue (sp). I even got to play play a few times in the old rink (was that Mariucci?). Ahh, those were the days. Is Doug Woog still the coach? Is the team still all Minnesotans? It's been a whilw since I've followed the old team.
Team is all Minnesotan right now but they do actively recruit non-Minnesotans now, that is a bit of a change. Woog is a commentator for TV & the current coach is Don Lucia originally from Grand Rapids but played at Notre Dame and then coached Colorado College. Gophers have won two Nat'l Championships under him - won't this year though, rebuilding due to a number of key players making early exits to the NHL.
I remember both Blue & Micheletti - Blue was a Californian - very unusual back then.
They don't play in the Old Mariucci - you probably new that - they moved into a new state of the art arena built across the street. Very nice but not the same. I could go into some stories about the old barn... some would qualify as 'evidence' so I'll refrain.
Other than that its still the best ticket in town.
From the article linked by transient:
"And the backup fund will not distinguish between the assets it buys from each SIV; instead, it will assign the same risk level to all their troubled securities."
Um, yeah.
but post a sec/row/seat number and I might recognize the 'faces'
They're probably in about the tenth row. Erik's the guy who's always in the hat with the gopher ears, and Paula wears a beret.
Is Doug Woog still the coach? Is the team still all Minnesotans?
Woog is now in the broadcast booth, thank god. He suffered a severe case of burnout as the coach, as well as a couple of shenanigans, including leaving $500 under a hat for a player.
The team is currently all Minnesotans, but the commitment to that is something Don Lucia did away with as a condition of coming here. Again, thank goodness. Maybe it's just because I came up here from out-of-state to go to school, but I always hated the policy.
The Economist has a nice overview write-up on the problems Citi faces and ouster of Prince.
Economist.com
finance...ory_id=10111659
--Andrew | 11.10.07 - 11:54 pm | #
Well this post set off my computer AVG security big time.
AVG claims some sort of trojan horse...I think it was trying to load anti-spyware software on my computer.
While I doubt it was intentionally malicious just passing the information along.
Tried again and it just opened the article.
Nevermind?
So on the revived MLEC, crap is sold to MLEC, because MLEC will eat anything. And this restores confidence to the market because MLEC bought crap that everyone knew was crap?
Why will the 60 institutions mentioned pony up the $75B for MLEC, based upon an agreement by BOA, Citi and JPM?
(quote)
Now, Henry M. Paulson Jr., the Treasury secretary, is describing the proposals benefits as helping at the margin. In an interview on Thursday, before the latest agreement was made, he acknowledged that the proposed backup fund would not rescue troubled SIVs, only lead to a longer and more orderly demise.
This is something that is not a savior, Mr. Paulson said, noting that he expected the fund to begin operating by the end of the year. Anything at the margin that will speed up liquidity is worth trying.
(end quote)
Yes, they will line up to donate, won't they? A manditory buy sure will act to create a a market where there is no confidence.
The great shame in Minnesota hockey was the elimination of one-tier high school tournament. Do you guys remember how cool that was? The Iron Range kids versus preppies like Edina and Bloomington Jefferson. Good times, good times.
"Wamu by forcing an appraiser into such sleezzzy business practices is inexcusable."
You can't force someone into sleazy business practices, either you have integrity or you don't. End of story.
Anonymous | 11.10.07 - 7:01 pm | #
What I meant was Appraisers that practiced honest integrity were not welcomed at WaMu -the nations largest savings and loan.
Figuring a region the size of southern California, there where probably 300 or more appraisers fee-feeding daily at Wamus welcoming pleasure. The fix is in, full steam ahead!!!
here it comes xD
Banks said to agree on $75B credit fund - Nov. 10, 2007
Its Credit and its Crunchy
YouTube
- Broadcast Yourself.
Later this year I will let you know who I really am and you will understand why I write like this.
Tennis_8 | 07.15.07 - 12:08 pm |
This is unintentionally funny on a couple different levels. I hope he comes back to reveal he's Alan Greenspan or Chuck Prince.
it must feel good to get these;you deserve them ; thank you again tanta.
Waponi Woo!!!
i hate banks already, thanks for giving me more of a reason to
OT, are we getting a new thread on NYT's quest to expose Countrywide?
Countrywide's Chief Salesman And Defender - NY Times
Now, it's the board's turn to start explaining.
Great post.....These things never stop amazing me.
SC is ready!
B of A, Citi, J.P. Morgan set credit fund: N.Y. Times
B of A, Citi, J.P. Morgan Chase set credit fund: N.Y. Times - MarketWatch
The fund, of at least $75 billion, will be structured more simply than earlier proposals had envisioned and could be up and running by the end of December, the Times reported.
ooops sorry .. duplicate post.
From the nasty tone of the letter that OTS sent back, ...
DCRogers | 11.10.07 - 8:00 pm |
I think you're referring to the nasty letter that OFHEO sent to Cuomo. OTS hasn't commented, as far as I've heard.
JerryH | 11.10.07 - 9:26 pm
Whoops, of course you're right... sorry about the confusion!
Figuring a region the size of southern California, there where probably 300 or more appraisers fee-feeding daily at Wamus welcoming
Everyone of them needs to be in jail, unless the appraisers have some skin in the game and a few years in jail is skin in the game as far as I'm concerned this kind of crap will continue. I don't think paying a fine will do it either, mandatory jail time. That needs to go for loan officers, R/E agents, home inspectors and anyone else involved in real estate that gets paid a fee for their supposed service.
The demise of the RE appraiser is almost tragic. The relevance of the appraisal has been so weakened in it's scope that rarely is a good appraisal enough to justify a property's value. In today's world there are several extra steps to used to augment the accuracy of the appraisal
Appraisal is now scrutinized by an UW (not just a DU validator but an experienced UW preferrably with a DE)
The neighborhood or market risk is reviewed with some sort of flip risk software (for instance HistoryPro) this is on top of whatever market warnings DU might offer
The appraisal's valuation is checked with a AVM (there are dozens of individual AVMs so you can actually order a cascade of multiple AVMs) or a BPO
Ginned-up appraisals? Lending Institutions colluding? I believe Captain Renault has something insightful to say about this:
"I'm shocked, shocked to find that gambling is going on in here!"
Making a third party appraisal vendor lower it's value??? You bet! Marking the Neighborhood Section of the 1004 Stable/Steady/In Balance when the property is in Detroit, MI? Do they think we're all Stupid? and don't read?!
Hsbc actually kicked off appraisers that did a super good job just because they didnt make " the value " that Hsbc wanted,,,,,I would do away with a so called Bank list