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Contact: Jeremy Bagott, MAI, AI-GRS
Tel: 805-794-0555
email: jbagott@gmail.com
*** FOR IMMEDIATE RELEASE ***
FEDERAL OFFICIALS TEAM WITH FREDDIE, FANNIE TO DECEIVE INVESTORS
VENTURA, Calif. (April 5, 2024) – Thirty-seven hours after President Biden took the oath of office, White House officials met with executives at social media companies. The officials threatened restraint-of-trade lawsuits and regulatory action if the companies failed to censor what the White House deemed “misinformation.”
In a parallel development, we can now connect the dots that similar talks occurred among White House officials, employees of government-sponsored mortgage giants Fannie Mae and Freddie Mac and private vendors to throttle the protected speech of individuals and firms in the mortgage industry engaged specifically for their independence. The latter serve as bulwarks in federally backed mortgage transactions.
In the social media censorship case, a federal judge last year enjoined cabinet agencies and federal officials from working with YouTube, Facebook, Instagram and Twitter to shape what subscribers could see and not see. The suit claimed federal officials had exceeded their authority in attempting to persuade social media companies to throttle posts. U.S. District Court Judge Terry Doughty cited evidence of a far-reaching censorship campaign that “depicts an almost dystopian scenario.” He likened it to an Orwellian “Ministry of Truth.”
Arguments were heard last month by the Supreme Court in Murthy v. Missouri.
In the realm of mortgage finance, we now know that executive branch officials, employees of Freddie Mac and Fannie Mae and their vendors, working to promote an illusory concept known as “housing equity,” began throttling what could be spoken and written about the condition of collateral and the credit history of borrowers. The censorship has done real damage to borrowers and the purchasers of bonds issued by the government-sponsored mortgage giants.
An online trail of press releases and policy documents demonstrate members of the administration and employees of the mortgage giants bullied a private company, Fair Isaac Company, to rename and redefine its credit-scoring formula. The same group has imposed censorship on tens of thousands of state-licensed appraisers whose independent value opinions serve as a key guardrail in the $14 trillion residential mortgage market.
White House officials are engaging in the censorship campaign as part of a federal valuation task force known as PAVE. The latter includes employees of 13 federal agencies and offices, including the politically appointed head of the Federal Housing Finance Agency, Freddie and Fannie’s regulator and conservator.
The censorship of appraisers is occurring under the pretext of a make-believe concept the partisan task force calls “appraisal bias.” It’s similar to the way public health was invoked as the pretext for the White House censorship of social media platforms, which then quickly led to political censorship.
The FHFA announced the fruits of its censorship of the Fair Isaac Corporation in February. The FHFA censored the company’s FICO score algorithm, bullying it into creating a “more inclusive” score known as the “FICO 10T” score. Government officials then compelled the company to dilute the value of its long-accepted original credit score – known simply as the FICO score – through compelled speech, coercing Fair Isaac to rename it the “Classic FICO.”
But by far the most disturbing is the censorship of the nation’s 80,000 state-licensed appraisers by primarily Freddie Mac under the urging of the FHFA and PAVE task force.
Since the beginning of November of last year, government-sponsored mortgage hegemon Freddie Mac, currently in conservatorship with the FHFA, has begun screening appraisal reports for a lengthy list of forbidden words and phrases used by independent real property appraisers engaged by lenders whose loans the mortgage giant buys or guarantees.
A Freddie Mac employee named Scott Reuter is the mortgage giant’s point man for the coercive program.
Like the administration’s arm-twisting of the social media companies, Mr. Reuter assures appraisers that by expurgating many of the most common words in the English language from their appraisal reports, words like “good,” “bad,” “high,” “low,” “strong,” “weak,” “slow,” “rapid,” appraisers will be freed to be more descriptive. At the same time, says Mr. Reuter, the appraisers can be safe from career-destroying accusations of bias. Since Freddie Mac, and its twin, Fannie Mae, can blacklist appraisers and punish the lenders who hire them, the censorship has real teeth.
Banned are many other words and terms. They include “crime,” “school district” “student,” “preferred,” “well-kept” and “desirable,” and many puzzlingly innocuous phrases like “convenient to.”
“Some of this language is subjective in nature, while some is potentially biased,” writes Mr. Reuter without explaining the methods by which Freddie has determined words and terms like “place of worship” or “well-kept” or “student” to be potentially biased when used by appraisers.
Freddie’s new sanitized language means an appraiser can no longer make basic observations like, “The appraised property has a high-gabled roof with two dormers” or “The property is located in the Houston Independent School District” or “The property is adjacent to a church parking lot.”
Freddie’s new censorship program is an example of nongovernment actors – Freddie Mac employees are not civil servants – working with individuals in government, like Sandra L. Thompson of Freddie’s federal regulator, to chill the protected speech of a class of citizens uniquely engaged for their independence.
The new policy is contained in Freddie’s Soviet-like directive “5603.4 Unacceptable Appraisal Practices.” It went into effect November 1, 2023. The true crackdown began at the end of January 2024.
In the social media case, Judge Doughty cited “substantial evidence” of a far-reaching censorship campaign by the executive branch. No less can be said about these bowdlerizers and what they are doing to deceive individual borrowers and investors in Freddie and Fannie’s mortgage-backed securities.
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Jeremy Bagott is a real estate appraiser and former newspaperman. His most recent book, “The Ichthyologist’s Guide to the Subprime Meltdown,” is a concise almanac that distills the cataclysmic financial crisis of 2007-2008 to its essence. This pithy guide to the upheaval includes essays, chronologies, roundups and key lists, weaving together the stories of the politics-infused Freddie and Fannie; the doomed Wall Street investment banks Lehman and Bear Stearns; the dereliction of duty by the Big Three credit-rating services; the mayhem caused by the shadowy nonbank lenders; and the massive government bailouts. It provides a rapid-fire succession of “ah-hah” moments as it lays out the meltdown, convulsion by convulsion.
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