07/17/2026
By: Jeremy Bagott ~ In late 2024, Ohio podcaster, real property appraiser and influencer Phil Crawford contended he had localized a “cancerous” home sale in a Cincinnati housing tract. He believed this inflated sale, based on a so-called “black box” valuation authorized by mortgage giant Fannie Mae and Freddie Mac, had subverted other sales in the tract and was a microcosm of what was causing housing inflation coast to coast.
Based on Crawford’s analysis, the data cancer began with a so-called appraisal waiver authorized by Fannie and Freddie – “appraisal waiver” is code for the twins’ nearly complete use of artificial intelligence and Big Data to assign synthetic values to properties across the country. They have created a self-reinforcing distortion cycle, says Crawford, in which data, once initially distorted, is fed back into a looped system that further subverts lending policy by the mortgage giants. The twin government-sponsored enterprises together guarantee around 70% of U.S. mortgages. They fully control the market while ostensibly relying on its independent functioning.
Even when a human appraiser goes back and values a property influenced by data cancer, the cancer has already worked its way into the comparable sales. Crawford describes the problem as insidious. The State of Maryland has taken an interest in these activities. Other states may follow. Moreover, in valuing a property in order to “waive” a traditional appraisal, Freddie and Fannie openly violate a key federal consumer protection statute, but more on that in a moment.
The use of quick and inexpensive artificial intelligence to synthesize value has also introduced the likelihood of something computer scientists call “virtual input phenomena” or “spontaneous generation.” This phenomenon, akin to human hallucinations, happens within artificial neural networks.
The Frankenstein sale, described in the most recent episode of Crawford’s podcast, “Voice of Appraisal with Phil Crawford,” has allowed the buyer, seller, and the commissioned salespeople in the transaction to negotiate, in essence, using a credit card with an open credit limit. In this case, one provided by Uncle Sam.
The twin mortgage giants have increasingly allowed actual valuations to be substituted for these numerical apparitions. A common valuation method among real estate analysts known as the “sales comparison approach” means that if Fannie or Freddie have introduced just one or two distorted sales into a tract neighborhood, it will cause the sn*******ng derivative effect throughout.
Crawford uses the metaphor “data cancer” because of the stealthy way the distortion spreads and the way it corrupts markets. Of course, what he describes in his latest podcast could also be called a “self-reinforcing feedback loop.” He believes much damage has been done to affordability in tens of thousands of similar housing tracts nationwide. This is in addition to the risk the twins’ experiment has inserted into markets.
The tract in Cincinnati consists of homes built in the late-1990s and early aughts. Homes are between 1,400 to 2,500 square feet. There are many model matches. It’s a living laboratory for tracking and studying how one aberration can, in relatively short order, affect the value of nearby homes, since Freddie and Fannie have so large a grip on the market.
“I discovered this data-cancer sale because it’s in my backyard,” said Crawford at the time.
Unfortunately, others in the market have not identified the sale as influenced by a synthetic value, believing the property’s sale price was based on a valuation by a state-licensed appraiser and a negotiation unaffected by so-called “moral hazard.” To isolate the cancer, every participant in the local market would have needed to place a protective barrier around the sale. This never happened.
“You couldn’t design a more efficient system for corrupting a market. It bases lending on the sale price of the collateral, not on its actual value,” said Crawford. “There’s an ethics hazard when agents don’t act as fiduciaries – which is likely happening with many of these so-called waived appraisals – and there’s moral hazard on the part of the buyer, who is handed what amounts to an open checkbook by government-sponsored Fannie and Freddie. In essence, the buyer acts as the minder of the U.S. government purse strings.
“All homeowners want their home to be worth more, except the frustrated young couples who are trying to purchase a home for the first time. Of course, the homeowners themselves soon sour on the windfall when property tax bills arrive, especially those homeowners who are on a fixed income.”
Freddie and Fannie are almost certainly violating federal consumer-protection law. The Equal Credit Opportunity Act mandates that creditors provide consumers with a copy of any appraisal or written valuation report used in connection with a credit application for a loan secured by a first lien on a dwelling, meaning if Fannie and Freddie are creating automated “appraisals,” they must provide mortgage applicants a copy of their reports.
Barry Colen, appointed by Maryland’s then-Gov. Larry Hogan to a panel called the Taskforce on Property Appraisal and Valuation Equity, also believes Fannie and Freddie has been approving mortgages based on unreliable automated models. He believes the models are inflating appraised values in his state. The beneficiary? The commissioned salespeople and bonused executives in the housing industry, a longtime Fannie and Freddie ally. He worries the automated appraisals have been gradually inserting risk into Maryland’s economy and making homes there unaffordable.
His panel was largely stonewalled by the mortgage giants. He found Fannie Mae particularly impenetrable, its employees presumably working from home with no interest in the most basic level of accountability to the people of his state.
Maryland was hard-hit by the twins’ backing of so-called Alt-A, negatively amortizing, stated-income loans and other toxic mortgage products. The twins concealed the number of these toxic products they had on their books until the very end. Freddie and Fannie required a combined federal bailout of nearly $200 billion in 2008.
In 2011, the Securities and Exchange Commission filed civil fraud charges against former Fannie Mae CEO Daniel Mudd, former Freddie Mac CEO Richard Syron and four other former executives. In 2015, the case against Freddie Mac execs settled with Syron paying $250,000, former chief business officer Patricia Cook paying $50,000, and former vice president of credit policy Donald Bisenius paying just $10,000. The settlement was unusual as it allowed the three executives to continue to deny wrongdoing. Mudd settled his case a year later for $100,000, a sum paid for by Fannie Mae. It was sofa change compared with the $24 million he earned from Fannie Mae from 2006 to 2008.
Expect more subterfuge to surface over the twins’ activities in the 2020s.
