Ever since Larry Yun of the National Association of Realtors complained about new appraisal regulations, and their role in slowing down the housing market, there’s been talk about whether or not the NAR is merely against “honest” appraisals.
Barry Ritholtz, who is the master of issuing beat downs to adversaries that he regards as dishonest, has been all over the story, and Yesterday produced documents about the NAR’s and the National Association of Mortgage Broker’s battle against appraisal reform.
We linked to him, and said the NAR was engaged in an “appalling” fight against appraisal reform. Well, anyway, Barry’s got the NAR in his jaws, and today he has another post urging readers to read the organisations’ “dastardly” lobbying letters.
But let’s step back. Were we too quick to say that the NAR was appalling? Maybe. For one thing, this is what lobbying organisations do. They lobby. But more importantly, just because a new law or regulations claims it’ll reform an industry in a positive way, it doesn’t mean it actually will. What matters is not the intent or the title of the law. What matters is the content of the law, and just because regulators say they’re introducing “reform” it doesn’t mean we all have to roll over and support the law, just because we support reform. Reform isn’t any good unless it’s good reform.
And as it turns out, there are plenty of legitimate concerns about the new reforms, including the establishment of Appraisal Management Companies — unregulated third-party appraisal mills.
BusinessWeek wrote about them earlier this year, nothing that some of these AMCs are just former subprime lenders in new clothing:
Take NovaStar Financial (NFI) in Kansas City, Mo. A large subprime lender during the housing boom, NovaStar was disciplined by three states—Massachusetts, Nevada, and Washington—for such infractions as employing unlicensed brokers and charging unlawful fees. Without admitting wrongdoing, the company paid $5.1 million in 2007 to settle similar allegations in a class action brought on behalf of borrowers. After its mortgage business collapsed, NovaStar morphed into an AMC last year by acquiring another company and renaming it StreetLinks National Appraisal Services.
Now, unless you think that they’ve got totally new DNA, or have seen the light about an honest, straightforward housing market, your neck hairs should instantly stand up.
There are other issues, too, such as the ones in the Jonathan Miller post we linked to this morning. Third-party appraisers, who mainly compete on price, and who don’t necessarily know the area, won’t be helpful to the housing market.
Remember, we’re not looking for expensive housing or cheap housing, or a housing market with high velocity. The goal should be a well-run market, with as few distortions as possible. And as long as mortgages require a third-party appraisal, then you want this area to be run well.
Just because the old system was bad, and the new regulations are couched as “reform” doesn’t mean you’ve arrived at a much better place.
And organisations who lobby aren’t necessarily appalling for doing their job, even if it is really easy to kidney-punch the NAR.