Interesting Letter to the Editor in the Wall Street Journal

Though the first paragraph may seem a bit misleading since HVCC didn’t give rise to AMCs, they’ve been around for years, there is an interesting point by the author regarding the creation of national policy.

‘First Do No Harm’ Should Apply to Attorneys General

Two articles from June 9 hammer home the same lesson: Nothing good comes from the governance of American commerce through the New York attorney general’s office.

In the article “Appraisals Roil Real-Estate Deals in the U.S.” (U.S. News), we learn that a deal that Fannie Mae and Freddie Mac agreed to last year under pressure from Attorney General Andrew Cuomo has already given rise to an industry of “appraisal-management companies.” The firms take a sizable cut of up to 40% of appraisal fees to dole out appraisals, leaving the appraisers with smaller fees to do more work. All of this will, of course, lead to higher appraisal costs without any evidence that the quality of appraisals will improve.

In the article “Stock-Research Reform to Die?” (Money & Investing), we get an update on the deal that former New York Attorney General Eliot Spitzer cut with big Wall Street firms in 2003 to spend $460 million to provide free, independent research to retail clients. The former SEC official who implemented the program was quoted as saying that “a lot of money was spent and not very many people were using” the research. A grand total of 16 people retrieved reports from Credit Suisse in one year, for example.

The genius of the Founders was in creating a system that, however imperfect, reaches results through the checks and balances of the three branches of government, combined with a system of federalism in which the respective states and the federal government operate within their spheres. The present and former New York attorneys general think that they have designed a better mousetrap: governance by their office alone, for the whole nation, through the threat of indictment or other legal action that the target businesses cannot afford. I’ll go with the Founders. Can anyone stop this before the New York attorney general thinks up the next great idea?

Darryl May
Wynnewood, Pa.

Printed in The Wall Street Journal, page A14

  1. Fred Marsh

    The Federal mandates and control of the appraisal business is no different that what the Rxecutive, Judiciary and Legislative branches of our government are doing on a daily basis.
    Does the executive branch have the right to confiscate the census data, federalize private banking institutions, demand resignations of CEOs in private companies, spend trillions without any accountability, make promises to the auto union workers than destroy the companies that support them, or continually demonize the corporations that have made this country great.
    Does the Judiciary Branch have the authority or right to make laws such as the recent private property rights that can be taken by a county, city or state entity for the purpose of having the property developed strictly because the new development will generate more tax revenue.
    I think not in all cases. But, it is happening and I as a 20 year veteran of a private appraisal company am not at all surprised by the HVCC mandate by an Attorney General in NY under the guise of protecting the poor appraiser from undue pressure.
    Speaking of the NY AG, if one were to look closely, you will find that he has direct ties to several of the larger Appraisal Management Companies that he is mandating take control of the appraisal ordering business. And if that shocks you, try researching information pertaining to his involvement with HUD.
    The reality of the HVCC, is that I have been operating a successful appraisal business for almost 20 years, I have 4 designations from professional appraisal organizations, I had hundreds of clients that trusted I would continually provide reasonable and reliable valuations.
    Yes, there were times when I was pressured by certain lenders, or mortgage originators to reach unrealistic figures. I simply told them NO. And if they did not like it, they had the option of never using me again. But, then I still had 99 other clients that were using me due to my experience, knowledge of the business and the ethical reputation that I have acquired.
    Now, the ordering process has been put into the hands of a dozen or so corporate Appraisal Management companies that want to make a huge profit by extracting a portion of my fees while expecting me to perform appraisals in an unrealistic period of time. All the while, we are to bend to their pressures to get either lower or higher numbers or worse yet, fraudulently represent a property in an appraisal.
    The only difference now, is that I now, only have a dozen companies that now have absolute control over the appraisal process and they use it to their advantage. We are constantly threatened with the “exclusionary” list or more commonly referred to as the “Black Ball” list if we do not comply with their “unregulated” underwriters or in-house appraisers of unknown knowledge and experience.
    Keep in mind that these Appraisal Management companies are not yet regulated, they do not have to adhere to the Uniform Standards of Appraisal Practice, and the majority of them are either completely owned by the major banks or the banks have a large stake in these companies.
    The Constitution is out the window. We are in a government free-for-all.
    Remember quotes such as: A Financial crisis is something not to waste (RE), I did not have sex with that girl (BC), I had no idea the Bank CEOs were going to give themselves bonuses with the money (G), I did not threaten BofA to purchase that investment company…on and on and on.

  2. Todd Nace

    Hey lets send all our request to lowest bidder. Doesn’t that sound like a great idea. I doesn’t matter if your from the area or not simply add that county to your coverage area and your in. FNMA is now getting the cheapest appraisals money can buy. Is that what they really wanted? Oh but wait they are going to have a box checker review the report so everything should be ok. What a joke.
    The answer is that if HVCC must exist the AMC’s should be required to have an office in your state with staff that is familiar with both appraisers and value in the area. Box check reviews are only good for making sure Fannie and freddie will buy the deal. Value is the issue so get out of the way and let us do our job.

  3. GWS

    GREAT report.
    I have been appraising for almost thirty years now.
    This article says it all.
    But will someone listen? I’m sure Cuomo’s AMC buddies shiver when they read stories
    like this…

  4. I have been in the Real Estate industry for about 23 years in the cities Denver, Orlando and now Houston. Fifteen years as a mortgage lender for major banks, most recently as a Real Estate Broker/Owner of an independantly owned office of a nationally recognized franchise. The latter I recently merged with another office and then left that flawed (franchise) model. I am a top producer. I find, mentor and create other top producing agents.
    In sum: street smart…in the trenches everyday dealing with the appraisal and lending debacle. Todays’ climate has been exacerbated due to an overreaction to a problem created by those who allowed and promoted liberal lending standards in the first place. Our lawmakers are out of touch with the mechanics of this industry yet allowed to “modify” it. It’s no different than calling your local mayor’s office to define your cancer treatment protocal. These reactionary policies create more problems than they attempt to solve. Similar to Sarbanes Oxley…
    This, along with banks reluctance to invest a few dollars to bring foreclosed homes up to par (condition) will continue to deteriorate home values…thereby deepening this problem.
    We are attempting to change this deterimental practice in Houston. With our group everyone wins: banks, taxpayers, buyers, sellers, homeowners; entire communities.
    If you want to hear more on how we do this you may email me at
    Have a great day.
    Greg Bennett
    Broker Associate
    The Great State of Texas