Appraisers' Free Forum

Last year’s denial rate was twice as high for African-Americans and Hispanics as it was for whites.

What do you want to bet that our government will decide to fix that... along with the basic, overall numbers? What do you want to bet it leads to new market problems?

It's kind of like locking the barn doors after all the horses are gone!!!!!!!!!

What a great time to make it harder for people to purchase homes after all the years of giving 110% mortgage and no income verification loans now the lending industry realizes what they were doing wrong all these years.

I do believe that the government will try and get lenders to open up a little.

For the economy to recover the real estate market will have to show some signs that things are getting better.

The government is walking a thin line because on one hand they know there must be more regulation and on the other they know that with more regulation it will be harder for the economy to start grow again.

Watching the news these day's is interesting because now the way they report stories is to say well the numbers were as bad as they thought they were going to be. I guess that is means we should feel better that instead of the home sales being off 34% it was only 32%

The thinking has really gotten crazy with everything going on.

Jim Hill

I strongly disagree that there has to be more regulation. I believe it was too much misguided regulation that got us into this mess. Instead of more regulation, how about just one, simple rule... if you mess up, you have to bear the consequences. If Fannie and Freddie were broken up and sold in pieces to the highest bidder, and that simple rule was put into place, the market would eventually solve this problem.

Steve Owen:

You wrote the following, I strongly disagree that there has to be more regulation.

That kind of talk scares me!!!!!!!! A generial lack of regulations and the idea that the market will take care of things like this are part of the reason we are in this mess. Many thought these people were professionals and would act like professionals well we were all wrong.

Almost without exception every time they have every talked about degulating anything and how good it would be for the consumer it just did not work.

I understand what you are saying about misguided regulation and there is some true in that statement.

After seeing what we are going through now I would never want to see less regulation in place again.

There are many rules that could have prevented many of the problems we have today and one of them is lenders having to hold every mortgage they make for the first ten years and if there was a mortgage broker involed they would be on the hook for the first five years of the mortgage and maybe then they would want to make better loans instead of just a fast commission check.

Just my opinion. Jim Hill

Steve Owen wrote:Instead of more regulation, how about just one, simple rule... if you mess up, you have to bear the consequences.

Well, to some extent that is what was happening pre-Tarp. Problem was the consequence was that the entire economy was going to be trashed.

Steve Owen wrote:If Fannie and Freddie were broken up and sold in pieces to the highest bidder, and that simple rule was put into place, the market would eventually solve this problem.

Actually Fannie/Freddie, though definitely problems, had nothing to do with the rating agencies who, like lying appraisers, misled every investor with money who would buy long term mortgages.

Let's take this a step beyond just getting rid of regulations Steve, let's answer where the money for mortgages is going to come from post de-regulation, in a time when everybody knows there are no cops.

Steve Owen wrote:I strongly disagree that there has to be more regulation. I believe it was too much misguided regulation that got us into this mess.

That is a pretty good capsule of belief in the ideology, but is there any evidence other than Hong Kong banking and investment (I've been told Hong Kong is the poster child for libertarian economics) that it works?

Jim Hill wrote:A generial lack of regulations and the idea that the market will take care of things like this are part of the reason we are in this mess.

Au contraire, my friend. I don't see how anyone could read this

http://www.fhfa.gov/webfiles/15105/DeMarcoTestimonySBC100809.pdf

and come away thinking that regulation of these industries is a good thing.

It's not exactly rocket science (and it's not ideology, either)... it's just freshman level economics combined with common sense. Markets, unimpeded, always find an equilibrium. Government action always distorts markets. I'm not typically one to use "always" except in the statement: 'anytime you say always you're always wrong.' But, this time I feel fairly secure.

The government has been regulating banking since President Polk's very effective solution was discarded after the Civil War. The robber barons did not do what they did because of lack of regulation... they specifically used the regulation to their advantage. The modern crooks did the same thing.

What happened to the mortgage market was largely caused by the regulation. Mom and Pop went in to get a mortgage and thought the government was watching their backs. So, they didn't do as good a job of watching out for themselves as they should have. That is at the root of the problem... that, plus the government deliberately heating up the housing market with artificially low rates and putting people into houses they could not afford. The people incorrectly valuing default swaps and other esoteric instruments would not have needed to do that, or indeed, even been able to, if it was not for the underlying government regulations and guarantees. Adam Smith said it best that if every person looks out for their own best interests, then an invisible hand guides the economy. When government regulators add levels of bureaucracy and implicit guarantees, it distorts the market. That is exactly what happened to the housing market.

How would you know that freedom to make your own financial decisions will not work? It's never been tried.

Yup, even got a buzz word for it: moral hazard.

However, in a complex marketplace, equilibrium can only be reached with readily available and credible data. The lack of credible data, or rather the prevelance of data thought to be credible which was found to be not credible, plus moral hazard, is what killed the goose.

Yeah there should be better regulation and enforcement, on the providers of financial data. That means us guys, accountants, rating agencies, et al.

Otherwise, let the market particpants live and die as they may.

Steve Owen wrote:How would you know that freedom to make your own financial decisions will not work? It's never been tried.

That begs the question, how do you know financial freedom (I assume that is the same thing as a free market economy) will work since its never been tried? Anyway Skibs has the right Idea in my way of thinking; whatever is going on it is the appraisers job to report the impact on market values competently, accurately, truthfully and free from spin, idealogy or bias.

There has to be a happy medium.

I use to get pounded by LO's & Agents when my appraisals came in under sales price, or the value needed to refinance. In fact it got bad enough that it compelled me to quit mortgage lending appraising all together more than 5 years ago!!!

However, my wife & I had a slam dunk sale ruined by an appraiser whose best comp adjusted $1,010 under the contract price. The buyer thought it was "a sign from God," and bailed! Earnest Money is probably headed to Superior Court & I'm still contemplating how to (or IF I even should) file a complaint regarding the appraisal.

How do you regulate common sense?

Mako wrote:How do you regulate common sense?

That's really most of the problem. Markets are self-regulating far beyond the ability of any government to regulate them, and far more efficient, as well. If one bank has a lousy deal, customers go to another bank. However, as Skibs said, there needs to be an adequate amount of credible information. There needs to be something else, however, for this to work... that is a lack of restricting regulation. What has happened is that the bank lobby (coordinately helped along by the real estate lobby) has designed things so that it works like an oligarchy even though there are many players. The legal regulations and restrictions in play assure consumers that you can not go somewhere else and really get a much better deal... another economic maxim: regulation leads to conformity of offerings. As Adam Smith said (paraphrased, damn I'm lazy... this would be easy to look up) "members of an industry rarely meet together but that the public interest is harmed."