Posted by Jonathan J. Miller -Tuesday, June 21, 2011, 3:38 PM
actual AMC (car) factory
AMC Factory For a year and a half, our firm tangled with the bureaucracy of Landsafe, the poster child for the appraisal management company (AMC) industry. While not all AMC’s are bad, their relationship to the mortgage process is fundamentally flawed. The estimation of market value of mortgage collateral to enable lenders to make informed decisions has been commoditized to the point where most mortgage appraisals are generally not worth the paper they are written on. This series is from an appraiser’s perspective, about a profession left to die by the side of the road.
A little background on Countrywide, creator of Landsafe: About a year and a half ago, we were approached a final time to provide appraisal services for Landsafe, one of the largest AMC’s in the US. Landsafe was founded in 1996 by Countrywide, one of the US largest mortgage lenders accounting for 20% of all lending at their peak. By forming an AMC, Landsafe was better able to control the appraisal process to handle more volume including selling mortgage paper to Wall Street for packaging into a number of exotic financial mortgage instruments.
Countrywide ran into financial trouble in 2007 along with other lenders like American Home Mortgage as the housing market began to collapse.
Think ‘Friends of Angelo’ VIP program, Subprime Lending, Bailouts, Hurricane Katrina, AG Lawsuits.” Among appraisers, Landsafe developed the same reputation over time that Countrywide developed and it wasn’t favorable – they were seen as a factory – only interested in cranking out reports at high volume. Like other financial institutions, the quality function had far less political clout than the sales function which is the basis for Landsafe’s poor reputation in the appraisal industry. I had at least a have dozen meetings with Landsafe senior executives and appraisers in my office to ask us to join them because the appraisal quality they oversaw was so poor. Nothing ever happened.
By 2008 when Countrywide was purchased by Bank of America, it’s name was so toxic it was changed to Bank of America Home Loans. I remember giving a speech at an awards luncheon and the event sponsor was a Bank of America Home Loans rep. When he announced they were no longer known as Countrywide, the audience of real estate agents broke out in spontaneous applause. It was an amazing moment. It remains a mystery why the Landsafe name wasn’t changed at the same time.
One other point and then I’ll get to my story:
In September 2007, after months of negative publicity and the announcement of a reduction of 20% of its workforce, Countrywide launched a public relations campaign aimed at demoralized employees. Employees were expected to sign a pledge to “demonstrate their commitment to our efforts” and “to tell the Countrywide story to all”. Those who signed the pledge received a green rubber Protect Our House wristband.
Landsafe has continued the tradition, requiring their appraisers to sign various draconian documents to pledge their allegiance. Of course the appraiser has the option not to do business with them, but they represent a huge percentage of mortgage appraisal volume. A new generation of appraiser has quickly replaced the more experienced appraiser. Thus the industry is now dominated by an army of form fillers.
Ok, finally – here is this week’s post:
Part of the Landsafe application package includes:
AUTHORIZATION FOR BACKGROUND INVESTIGATION
[view application form - pdf]
I further authorize LandSafe to obtain information and records that includes, but is not limited to, credit history, criminal record, civil matters, driving record, previous employment, education verification, and professional license verification. A consumer report containing injury and illness records and medical information may be obtained after I have been approved as an independent contractor to LandSafe. Here is the form.
I took exception to Landsafe’s requirement that they be able to review my employee’s injury and illness records and medical information. Good grief.
- Who at Landsafe is qualified to review anyone’s medical information?
- How is that relevant to their professional qualifications to perform appraisals?
If you are frequently sick then you won’t get work because you will be slow to turn the work around. To have access to personal information like that is scary. How could I require my employees to sign such a document? I simply would never ask that of anyone. To Landsafe’s credit, they made an exception because I refused to budge on this point and they needed us to be on the list. But they got even with us later (a future post).
But I was alone on this “health” point. According to the people I dealt with at Landsafe (assuming they told the truth), I was the only person in their history – tens of thousands of appraisers over the past 15 years – to get a waiver on revealing my staff’s personal medical history because they wanted us so badly.
Wow – am I that difficult? Or has our industry turned into a spineless blob devoid of principal? I thinking the latter.
NEXT on the AMC Factory: The Good Appraiser AMC Bait And Switch Technique