I’ve discussed the curse of stadium naming [1]. The new Citi Field [2] stadium name is in danger of going Enron [3] on us. After all, the naming rights [4] are only a paltry $400M and the Sunday’s Citi bailout was $326B.
For the past few years (for security reasons?) appraisers have been required to provide private financial information to Citi in order to consider whether the appraiser was solvent enough to work for them. Appraisers I know fought tooth and nail against this. In our case, we had been working for them for more than 20 years and now they want to know how much money we make? In other words, they wouldn’t want an appraiser to go under during the middle of a $400 appraisal assignment. It would be (apply sarcastic tone here) devastating to the entire financial system I would think.
The irony here is amazing given Citi’s need for a bailout. [5]
Don’t get me wrong, we work for other areas of Citi which are sophisticated and professional. I am simply fed up with the “efficiency” theory of banking as it applies to backroom operations of large retail banks. They have lost their way. Incidentally, nothing has changed in this regard since the credit crunch began in the summer of 2007.
A few months ago, Citigroup’s retail banking appraisal group based in Missouri put my appraisal firm out to pasture (demoted to backup) in favor of appraisal management companies (those big national companies known for high speed, low costs and virtually zero quality (aka “army of form fillers”) aka AMCs and high volume appraisal shops/factories.
Of course, Citigroup gets a bailout [6].
Here’s a sampling of our former clients who are national banks that went with appraisal management company [7] factories and ended up getting into financial trouble.
- Citigroup – went with AMCs
- Washington Mutual – Residential mortgage lending gone – went with AMCs – NY AG tried to sue them for collusion with eAppraisIT to pressure appraisers [8](an AMC)
- Countrywide – absorbed by Bank of America – lots of litigation in the future
- US Trust Company – went with AMCs – such a disaster they actually came back to their appraisers only to be purchased by Bank of America and then we were dumped again
- Bank of America – went with AMCs – rumors that it was such a bad experience, returning to appraisers
- Wachovia – created their own AMC, Bought by PNC.
Coincidence?
Not really. Like the stadium naming deal, the shift to an AMC symbolizes the point when a mortgage lender goes too far and loses touch with it’s understanding of risk. The corporate culture loses the ability to understand the importance of assessing the value of the collateral to which they are lending. Common sense evaporates.
For the most part, the individual review appraisers that worked at these lenders were professional and competent and could see the issue at hand, but they just didn’t have the political weight, so to speak.
Hopefully those institutional politics will be crushed by the time we reach seventh inning stretch (at US Treasury Field).
This just in: Tiger Woods now needs to rustle up lunch money [9].