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  • Writer's pictureJesse Ledbetter

Baseball and appraising are changing.

Ask any baseball fan and you'll hear an opinion on the pitch timer. The simple rule change has decreased game times by about 15%. Further the replay system has changed the feeling. Fans can be found on both sides of these issues.

Appraising is changing. Quicker turn times, more automated reviews, and increasing replacement by AI are the way the industry is moving. Appraiser's have extreme reservations about all of these moves - but lenders, agents and Fannie Mae stand to make more money (in the short run) as a result of them. One of these sides of the equation has massive lobbies in Washington... and then there are appraisers.

Following on the Baseball - Mortgage theme, I wanted to use this as a framework for describing the mortgage process.

Pitcher - the seller places a property on the market at a price. The market then reacts to the offering. Sometimes the offering is "high and outside" or overpriced and a little odd for the market. Sometimes the property is straight down the middle making the batter salivate. The seller wants as much as they can get from the market, but has to be realistic.

Batter - the buyer sees a good offering and makes contact (usually through an agent). It may take the form of a clean acceptance of the seller's terms, or it may trigger negotiations.

Coaches - the realtors and loan officers offer advice and information to the buyer and seller to ensure that the buyer can "make it around the bases." This takes the form of exploring financing options, keeping the inspections on time, making sure that all parties have all the information that they need.

Umpires - the appraiser and underwriters ensure that everyone is playing by the rules. The rules are handed down by the lenders, the federal government and government sponsored enterprises (Fannie, Freddie, HUD, VA, etc). Want to pay more than the house is worth - OK, but you're going to need to provide money out of pocket. Want to buy a "fixer-upper," - No problem, but there may be some hoops to jump through.

MLB and the Owners - GSE's and lenders are the one's making the real money, and the rules - after all, "He who has the gold, makes the rules." Thick manuals of rules are available from all of the GSE's and individual lender's have additional risk tolerances that are acceptable.

The Fans - the wider population of taxpayers. We're watching the housing market's ups and downs. We're "invested" in the market, and want to see it be healthy for the long term.

Obviously, the analogy is broken, as no pitcher roots for the batter to score a home run. Hopefully, the analogy is intact enough to provide a framework for how the system should work. Problems enter the market when any party in the process starts to "cheat." If appraisers let bias enter their analysis - everyone loses. Any instance of this should be turned in to the state board of appraisers. Coaches who want to "fudge" the line and get in the "umpire's" face for doing an honest job, should be ejected from the game. Owners who begin to make decisions that jeopardize the long-term health of the "game" by throwing out the rule book or the umpires, should be fined and imprisoned.

At the end of the day, if we don't police this game, it will be us, the taxpayer, on the hook. 2008 taught us that the government is fine with forcing taxpayers to pay for lenders and Fannie Mae mistakes and outright fraud.

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