Appraisers as Four Horseman of Financial Apocalypse

*sigh* Well, I had hoped that during this real-estate crisis, people would realize that the folks making $300 a transaction are not really the principle parties behind the financial debacle. But sadly, that is not the case.

In an article for the Wall Street Journal, Thomas Frank attempts to affix the blame for the current financial crisis on Wall Street. And in doing so, he quotes a Professor of Economics who states:

Most of the mistakes for which we are paying now, Mr. Black told me, were actually made “by four entities that under conservative economic theory should have exercised effective market discipline — the appraisers, the originators of the mortgages, the rating agencies, and the investment banking firms that packaged the subprime mortgage-backed securities.” Instead of “disciplining” the markets, these private actors “served as the four horsemen of the financial apocalypse, aiding the accounting fraud and inflating the housing bubble.” It is they, Mr. Black says, who “turned a crisis into a catastrophe.”

I am not exactly sure how appraisers are supposed to “discipline” the market. When bankers and brokers run around using AMC’s and AVM’s to faciliate their loans, they essentially remove any power appraisers have in “disciplining” the market.

While I do not believe that appraisers are completely innocent, they certainly are not as culpable as the mortgage brokers and investment banks who made millions off of the financial crisis, and controlled all the levers involved in the home lending process.

In 20 years, after America learns nothing and we go through another real-estate related financial crisis, I suggest appraisers figure out a way to get rich of these schemes. If they are going to get blamed for ruining America, then they might as well make a penny or two in the process.

-Justin Morton
Manager of Appraisal Specialties

  1. Jerome Nagy

    The four horsemen? That’s a little over the top. This real estate crisis is a catastrophic failure at virtually every level. A better analogy would be a herd of cattle walking over the cliff. But just to be safe I’m stopping by the local church on my way home.

  2. Justin Morton

    I totally agree. There is certainly a problem with our financial sector, but it’s not the end of the world, like so many are predicting.
    The folks on TV need to take a deep breath and realize that, this too will pass.

  3. Roy C. Tremain

    The 4 horsemen? The Government and major banks seem to be bent on destroying our profession even further with even more regulation after almost completely deregulating themselves. They seem to be almost entirely above the law. Remember the S&L scandal? Remember Mr.Bush’s brother’s relationship to it? Or the last time we had to bail out the Government’s buddies? Get rid of “K Street,”The Blue Dogs;” kick the lobbyists out of the Congressional halls, and we might finally be able to elect our own President, a job now being done for the first time in U.S. history by a Supreme Court, or by a Justice Department which doesn’t currently prosecute Federal Election Fraud, and which doesn’t seem to think that every vote should count, unless of course it’s theirs. Are we a nation of laws or are we going to continue to allow our Government to drift towards corporate socialism? It’s a sad day because the banks and Government continue to misinform the public by telling them the housing crisis was somehow caused in great part by real estate appraisers, when they know very well, that this isn’t true. Appraisers don’t control capital, bankers do. That said, the bankers have a choice as to whether to lend money to anyone or no one, and definitely have enough money to find out whether or not they are making risky investments. Since when does the appraiser have the final word on whether to lend or not? Yet once again, we are going to get more regulation in the most regulated service industry in the U.S., and they’ve even figured out how to cut our fees using AMC’s, AVM’s, and BPO’s. I guess extraordinarily wealthy people like the bankers which own the federal reserve need to make sure we’re earning less so we’ll have less money to defend ourselves against the vicissitudes of the housing market which they in large part helped create. “Creative financing,”0% down payment loans,”prepayment penalty fees;” where will it all end.


    I think the order is not correct. The broker should be first as they pipe those perfect files to the lender and then the lender,then the rest of the pack and then the appraiser. We are their eyes and ears but I remember a statement my dad used to say on the farm “you can lead them to water but you can not make them drink.” I tell all and the loan is made anyway.Avm’s have been used wrongly and that is not the fault of the appraiser.