I Told Ya So

{This is going to be my first submission in a weekly series on the financial crisis here in America. I want this to be an honest account of why we are where we are based on my tiny perspective of the mortgage/housing debacle.}

I've worked as a full-time real estate appraiser since 1992. Over the years, it has provided a good income for me and my family. The work is diverse...in the office and out in the field...meet new people every day. Basically I have enjoyed this profession, but.

"Hold on a minute there, Marky...there's a 'but' at the end of that sentence, and nothing else follows."

Yeppers, but...

I like to think that the appraisers are down in the trenches, so to speak, in the mortgage business. We battle every day to "shake out" the truth of what the market is doing in our respective areas. We are supposed to be objective and give reliable opinions of home values for our clients. Unfortunately, I have witnessed fraud in this business...from appraisers to mortgage brokers, from buyers to sellers...from real estate agents to closing attorneys. But the thing that gives me the royal red rumpus are the "little white lies" that have run rampant. And the reason I'm upset is because nobody has really cared...until now.

The dirty little secret in the appraisal profession for the past 15 years has simply been this: If you lie, you will get work. If you're a really good liar, then you will get even more work.

"Mark, these are good people you're talking about...Christians...upstanding, nice folks."

Yep, pillars of the community. Salt of the earth. Good ole boys...and girls.

I wish I had a dollar for every time one of these community pillars asked me to stretch the value of an appraisal. (I could probably retire by now.) I wish I had a dollar for every morally upright real estate agent that asked me to cover for his/her mistake.

"What? The house isn't as big as I said it was? I just copied the old MLS data."

"Yes, you compounded the mistake because it was wrong then and it is wrong now."

"Hmmmph. Is there any way we can cover it by using different comps? I mean, uh...is there any way you can appraise it for the sales price any way?"

You get the picture, right? This doesn't happen every once in a while. This has happened on a weekly basis since I entered the business. Now, please don't get the idea that I'm some angelic appraiser that has never made a mistake or never stretched a number to make the deal go through. Because I have. I'd be willing to bet that the great majority of appraisers have at one time or another stretched the truth. But we each draw a line in the sand and say, "I won't cross this." Then an opportunity arises and you're asked to do something that you wouldn't normally do. The conversation in your head goes like this, "I have to provide for my family...give them shelter...clothe the kids." And before you know it, you've crossed the line. So what do you do now? You re-draw the line in the sand. How convenient! Your integrity is for sale. It's amazing...once you cross the line how imaginary the line becomes. Unfortunately, some appraisers cross the line way too often. Perhaps they never drew the line from the get-go. The all-mighty dollar appears to be their lure...not integrity. What would you rather have when you stand before the Great White Throne...a pile of money or integrity?

What you have to look at, in my opinion, is the overall body of work. One of my friends said it this way: "We all are dirty. It's just a matter of how much dirt we have on us." Here's another way to look at it: Each appraiser has a bucket of water. Everytime the appraiser lies on an appraisal, it creates a hole in his bucket. Now if the appraiser is honest and does what is right, his bucket will hold water from now until Kingdom comes. But once he lies...even a little...a hole is created. The more he lies, the more holes he has. The bigger the lie, the bigger the hole. If he gets too many leaks, people will be able to see right through his bucket and it won't hold water. I can see right through a lot of local appraisers right now.



Now, you should ask, "Why should I care if an appraiser stretches the truth now and then?"

Because it's just one of the reasons that we are all about to be taxed for the bail-out. All the little things begin to add up to something huge. And if you work and breathe here in America, you are going to be affected. Do you know if you started a trip with a specific course in mind, you would need to stick to the course to reach your destination, right? What if you veer off the course by 90%? You'd be off course quickly, but you'd probably notice it quickly too. But what if you veered off course just a little bit...1%...2%...5%? You might not notice for a while. But when you did, you'd probably be waaaayyy off course. We've been asleep at the wheel here in the good ole U.S. The little white lies have finally caught up with us and we've got a long way to go to get back on the right track.

A couple of months ago, I ran into a friend who's a banker. He asked me how business was and I made the mistake of telling him my honest opinion. I mentioned that we were about to see some rough times because a lot of bad appraisals had backed a lot of bad paper, aka mortgages. (These mortgages are pooled together, 1000 at a time, and sold to investors to back your and my retirement accounts.) I told him that some big mortgage firms were going to have their feet sticking up in the air and we were all going to have to pay for it. He acted like I was screaming "the sky is falling." He sardonically replied, "Well, I guess I'd be better off just running out into the oncoming traffic." I wonder if he recalls our conversation now?

Back in 2005, at a seminar I attended, I learned that the Government Sponsored Entities (GSE's), i.e., Fannie Mae & Freddie Mac, knew they had a large percentage of unreliable appraisals backing unrealistic mortgages. It was just a matter of time before the ship hit the sand. I was lead to believe that we appraisers were about to get busy re-appraising assets to verify their soundness. Never happened. I guess no one wanted to rattle the cage...alarm the public. Is it too late? Maybe. As Ben Stein eloquently explains in the video below, "now they're trying to stop the bullet as it rushes through the chamber". Scary!



So here we are. Reach down deep into your pocketbook. We've been off course for a while now and we need some gas money to drive us back to the right spot. Don't worry about driving yourself...just let ole Uncle Sam take the wheel. Did I forget to mention that he's blind in one eye and can't see out of the other. Oh well.



Here are some good videos to watch.