12/01/2023
FREDDIE MAC 'PROTECTS' APPRAISERS BY CHILLING THEIR SPEECH
VENTURA, Calif. (Dec. 1, 2023) – It’s rare that censorship makes for comedy gold, especially by a state-backed organ with the ability to strip a class of citizens of their livelihoods. But this scheme is rich.
Since the beginning of November, government-sponsored mortgage hegemon Freddie Mac, currently in conservatorship with the Federal Housing Finance Agency, 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. For now, the appraisers (but more often the lenders and middlemen who hire them) seem to be getting off with a warning and scarlet letter but wait until February.
Scott Reuter is Freddie’s man when it comes to the promulgation of all positive twaddle on the coercive program. He couches the censorship in a series of friendly reminders, suggestions. If an authoritarian government someday comes to America, it won’t come in the form of a goose-stepping fop in a black shirt and tasseled fez. It will come through someone like Mr. Reuter, in a Brooks Brothers shirt and Allen Edmonds loafers, bearing a friendly smile.
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 is a dog’s breakfast of other words and terms, many bearing not-so-subtle DEI and reality-masking telltales. They include “crime,” “school district” “student,” “preferred,” “up-and-coming,” “well-kept,” “desirable” “high,” “low,” 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," but only when used by appraisers.
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.
With his imaginative take on the censorship, Mr. Reuter now tugs at the shirttails of some of history’s great gasbags of official misdirection, like Stalin propagandist Dmitrii Shepilov and “Baghdad Bob.”
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 the parking lot of a place of worship.”
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 is slated to start at the end of January 2024. The arbitrary nature of the banned words looks like something dreamt up by college sophomores in a late-night dorm-room bull session.
Bowdlerizers like Mr. Reuter should remember that even if appraisers were silenced and unable to describe the soundness of America’s $12 trillion pool of federally related mortgages, buyers of every race, creed and cultural background – even academics and Freddie Mac employees – still would aspire to live in neighborhoods with efficient local governments, low response times for police and fire, low crime rates, high-performing school districts and low levels of deferred maintenance and property abandonment.
Market participants of all races and creeds jockey for the best combination of many of these core elements they can afford. It’s Adam Smith’s Invisible Hand. It’s about supply and demand, and the appraisal is simply an attempt to quantify these forces and create a value snapshot. Appraisers don’t determine the value, buyers and sellers do. Price discovery can’t be replicated by technocrats like Mr. Reuter. It’s a function of the markets. Appraisers only interpret those markets.
As George Orwell made his readers aware in his essay “Politics and the English Language,” there is a link between political orthodoxies and the degradation of language. Political language, he held, is intended to hide the truth rather than express it. No more so than with Mr. Reuter and his banned words for appraisers.
Like all utopian visions, Freddie Mac’s mission of providing liquidity, stability and affordability will never be realized. At this writing, housing in America has never been less affordable. Of course, paradise is just one more repression and one five-year plan away.
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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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