What Price for Independence?

I hope you all got out and enjoyed some fireworks this past weekend. My family went down into our little historic town, not all that far north of where George Washington and his men wintered the year we almost lost it all, and sat with friends and neighbors on the side of the hill to watch the show. I thought about mentioning to my kids that these fireworks were real to the soldiers and civilians who fought during the Revolutionary War, and in every war since then; that they represent more than a good time with friends and family, but I didn’t. I didn’t want to spoil their fun with reality. Remembering what had to happen to ensure our freedom as a people is more work than many want to do, even during the 4th of July Holiday weekend. What if the stories are mostly made up? What if Betsy Ross couldn’t sew her way out of a sewing box? What if George Washington never actually showed up at Valley Forge when the men who had bought into the dream and signed up for the militia were freezing and starving to death? Can’t we just enjoy the fireworks and a day off of work? No, we can’t. Independence isn’t just part of the name of another federal holiday. It’s a concept that had never been tested enterprise-wide (i.e. on an entire society) at any other time in history (that we know of) before the late 1700s. There were democracies of sorts (Greece was pretty close) and republics (Rome had its senate) that pre-dated the U.S., but there had never been a society that started everything with the concept that men had an inalienable right to be free. Independent. Masters of their own destiny. What we take for granted today was truly cutting edge thought leadership back then. Sure, they were all rich white guys who owned land, but they were courageous enough to step out from under the skirts of their monarch and they started something that grew into a system where even the craziest, wacked-out freak can speak his mind freely without fear of being arrested, tortured or killed. That is something to be proud of. But there was a price paid for that. The fireworks were real. There are people today all over the world who dream of independence, but not all that many are willing to pay the price. Take appraisers, for instance. A few years ago, October Research put out a study that indicated that the vast majority of professional fee appraisers felt that they had been put under pressure by a loan officer or real estate agent to hit a certain price. They just weren’t able to operate independently. When one of the nation’s largest settlement services companies was caving to pressure from one of the nation’s largest lenders, the Attorney General of New York stepped in and grabbed the biggest set of shirt collars he could, yanking the GSE into a detailed agreement to guarantee appraiser independence in the future. I have yet to find a single appraiser who likes the Home Valuation Code of Conduct. It turns out that in order to be independent, the HVCC builds a wall between the people who traditionally ordered appraisal reports and the people who generated the reports. Problem solved. Except that the companies that sat on top of the wall, transferring orders to appraisers and finished reports back to mortgage lenders, charged a fee for their service. Can you imagine? Turns out that some Appraisal Management Companies (AMCs) take some of the money lenders pay for appraisal reports and keep it. There’s some disagreement about how much each one takes, but professional appraisers are pretty much unified in hatred for any firm that would consider doing such a thing. Sometimes independence is too expensive, I guess. I’m told that the new law will supersede HVCC, though I’m not yet sure what the ultimate result will look like. Fortunately for the industry, it won’t be any one group of professionals that decides what price the industry will pay for independent property valuation. I suspect, like the country we’re all lucky to be living in, that the price will be well worth paying. At the very least, the fireworks will be real. Rick Grant is veteran journalist covering mortgage technology and the financial industry. Follow him on Twitter: @NYRickGrant