For the 12th consecutive quarter, Fannie Mae has posted a loss. Not only
that, but the mortgage financing giant has seen about $148 billion go down
the drain over that time. That's almost the entire GDP of Chile. FreddieMac
has $68.6 billion in cumulative net losses for eight of the previous
FannieMae and FreddieMac HAVE NEVER SEEN THE APPRAISALS for the home loans
they purchased. Ever. They will actually start getting appraisals for the
loans they are purchasing in June of 2011.
This shocking fact was discussed in the semi-monthly appraiser meeting at
the Realtors Association, who has contracted a technology company to help
export the MLS data to the new format required by FannieMae and FreddieMac.
"They're going to replace us with all this technology", whinned an
"I've heard that comment the last ten years I've been writing appraisal
software", said the tech guy. "And its just not true. When was the last time
any of you were asked to do a drive by appraisal?"
"That practice is pretty much gone. And the automated models are based on
property tax information which varies so much from state to state. Its just
used early in the process to produce a range to see if it makes sense to
order an appraisal."
The appraisers complaint reminded me of the critical thinking talk I heard
last weekend by member Ray Seth. Ray was one of the first to use data base
technology in the 70s. An auto insurance company hired him to determine
which of the 65 data points they collected on the application were most
important in assessing risk. His research determined there were only 6 of
these factors that had predictive power, including age of the car - older
cars had less claims. The auto insurance company was rejecting 5% of their
applicants and most of the rejects were low risk. They could increase their
income substantially by implementing Ray's technology. Ray did the same
study for a bank for their mortgage applications -- the first credit score
Ray was so excited to present his data to the auto insurance mortgage
underwriters. Ray thought he was really hot stuff! But, like the appraiser
in the meeting this week, the underwriters only saw Ray's technology as a
threat to their jobs and they all said they would quit if it was
implemented. So the technology was shelved.
Ray's reading on how the brain functions shows the impact that Dopamine has
on this fear of change that this new technology invokes. Dopamine affects
brain processes that control movement, emotional response, and ability to
experience pleasure and pain. Dopamine can distort our ability to think
critically and recognize this new technology as a tool instead of a threat.
There must be a lot of Dopamine at FannieMae and FreddieMac.