Fear of Fear Itself

By David Brauner, Editor

I heard this statement recently in connection with the phycology that sometimes drives the stock market: there is nothing to fear but the fear of fear itself.

For stock traders, it means rushing to sell- regardless of the actual economic data- out of fear that others might be selling out of fear regardless of the actual economic data. Yep, these are the kinds of vagaries on which our retirement accounts rise and fall. In the appraisal profession, fear is another sign of the further erosion of appraiser independence.

Why do so few appraisers choose to put their names on comments for publication these days? Fear of retribution and losing what little work they have left. There has always been the occasional well-placed source wanting a story out but not willing to tie their name to it because of their insider position. But in my 20 plus years of covering this profession I have never seen folks so universally afraid to go on the record. Why?  Fear of losing business. The relentless consolidation of lenders and AMCs means that losing one big box client can put an appraiser in serious trouble, given the state of things.

Appraisers are jumping through more and more underwriting hoops to make AMCs happy, who in turn are trying to please their lender clients. Most appraisers know when request after request for “additional data” really means “we need a higher value.” Pressure is nothing new but here’s the twist: appraisers will tell you that it was much easier to fire a mortgage broker who exerted undo pressure before the Home Valuation Code of Conduct (HVCC) than it is firing an AMC today. This much consolidated power is dangerous for appraisers, consumers and taxpayers.

And it isn’t only appraisers who won’t speak on the record. AMC management also are reluctant to say anything for attribution, even when they are defending their positions. More chilling, recently a spokesperson at a federal regulatory agency wished not to have the agency name attached to information they provided on how appraisers can better understand their rights under various appraisal independence legislation, with respect to filing complaints against AMCs. Someone has some serious juice when they can intimidate a federal regulator.

We have not even emerged from the financial crisis and it seems the lessons are already lost or maybe they were never learned: no entity can be allowed to be too big or too powerful to fail or to be examined and criticized when warranted. As we have seen, when this happens we all lose.