Sounding Bored is my semi-regular column on the state of the residential appraisal profession. Today I discuss the massive layoff of the appraisal department by WAMU effective September 12th.

Effective September 12, 2006

Washington Mutual Bank, affectionately called the bank of last resort by its own employees (making fun of its Power of Yes ad campaign), told its employees today that they are discontinuing the in-house appraisal department. Going forward, all residential appraisal functions will be managed by First American and Lender’s Service, two appraisal management companies. (Disclaimer: My appraisal firm has worked for WAMU since the early days and choose not to work for the AMC’s.)

This action finally puts the issue to rest.

The appraisal department had been one of the few remaining of the national lenders that actually looks at the reports that come in, to assess the collateral for their loans. Its been an automated slow bleed after the last two series of major layoffs.

Things were never the same after upper management botched the installation of their in-house appraisal management system called OPTIS VALUE, that never really worked. OV was the in-house back end version of AppraisalPort (which worked fine). Most upper management associated with the decision and implementation effort were purged.

The last 5 years has been a clerical nightmare for all. WAMU could never figure out how to make it work effectively. It looks like they admitted it was a failure.

The appraisal staff that currently works at WAMU are good people given limited resources to review the heavy flow of reports that come through their pipeline.

Its absolutely amazing that a federally insured financial institution could be allowed to let an appraisal management company handle the appraisal function. AMC’s are a low margin business who rely on appraisers who generally work for less than half the market rate and therefore can not afford data sources nor the time to verify information. They are essentially there to fill out a form for the file and are rated for turn times, not quality. I have opined about this on many occasions.

The timing for WAMU couldn’t be worse. The real estate market is softening and the pressure on appraisers to make the number is stronger than ever. I think I’d sell their stock if I had any.

I was hopeful that upper management would “get it” when they took over, but it looks like they don’t. I wonder what all those secondary market investors are going to think about the quality of WAMU mortgage portfolios going forward.

I’d call that the Power of No!

UPDATE: All vendors are being turned off on July 31st. The work will move to the AMC’s (40,000 appraisals per month). Can you imagine the deterioration in quality for investors thats going to happen right away? Rumor has it that WAMU is being prepped for a sale to another lender and another 6,000 layoffs are planned. Citigroup has been in the rumormill as a takeover candidate for the past several years. Since Citi uses these AMC’s, it makes sense.

UPDATE 2: Here’s a t-shirt link for those affected sent by a number of ex and future ex WAMU employees [Warning – may offend].

UPDATE 3: WAMU Thanks All Their Residential Appraisers For Doing Such A Great Job And Now Will Let Them Spend More Time With Their Families [Soapbox].

UPDATE 4: According to American Banker, WAMU had 30,336 employees as of March 31, 2006, up 10% from the prior year.

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9 Responses to “[Sounding Bored] The Power of Yes! WAMU Pulls The Plug On All Residential Appraisal Department Employees”

  1. MJR says:

    I’m sure Greggy, Kelly, Michelley and the rest of the Hitler youth DIDNT lose their position.

  2. Ray Miller says:

    See my post at the WintotalAlamode users group.

    May its time the appraiser took a stance against the AMC’s. You know full good and well that the fees that have been paid will be cut in half or better.

    The AMC are acting more like an employer every day. Maybe they should be made to toe the line like an employer and the appraiser gets additional benifits.

    Looks like the ranch is looking better and better every day now.

  3. Michael Mila says:

    GREAT article!

  4. Anon says:

    Optis was there homegrown loan Origination System that they completely blew up. I believe they dumped over $1B into this system that never worked. There appraisal management system is Optis Value, not Optis. This system functions fine and actually enabled WAMU to benefit from enormous increases in processing efficiencies and staff reductions on their operations side. This fact was reiterated by WAMU executive as recently as yesterday. There is nothing wrong with there Appraisal Management System, this was purely a senior management decision to move from an in house Appraisal Department to a VMC model.

  5. PayingPal says:

    I am saddened by the shift to AMC’s. It is nothing short of catastrophic that these “efficiency’ mills win because of greed and impatience. We will all pay for it in the long run.

  6. Matt says:

    AMC’S are the only entities that contract out for unbiased appraisals – in other words they are the only entities that order USPAP compliant appraisals. Our office has a swinging door for standard mortgage companies that order appraisals because they only order until the first one does not hit value, then they go somewhere else. In my review work, only about half reflects good work, the rest are just trying to keep their clients. I hate AMC’s, but it is the price I pay for being honest.

  7. Jonathan J. Miller says:

    Matt – You make an interesting point and I think your heart is in the right place but I disagree with the intentions of AMC’s. AMC’s don’t order appraisals based on making the deal like the mortgage brokers are often accused of. However, the fees are so low, that for the most part, and no offense, but their appraisal panels are the bottom of the barrel. Does the lender get a better understanding of the collateral? No. AMC appraisers quite often rely on all their comps from the broker involved in the sale who has a vested interest in the outcome. In other words, the order AMC process may be not as biased toward the outcome, but the mechanics of the appraisal certainly are and the outcome is the same.

  8. Marti says:

    My take on AMCs is not so jaded, but maybe that’s because I’m selective about the ones I choose to work with.

    My experience with AMCs has been overall pretty good, and I get paid market fees from one, and just slightly below market fees from another one, but I get PAID, and paid on time. Also, I get zero pressure to hit a value, and most of the time an estimated value is not even provided, which is as it should be. I’ve actually had way more trouble from local lenders and mortgage brokers as far as hitting values, and I try to take COD work wherever possible, because if the deal falls thru, I don’t always get paid, and I don’t like working for free.

    In my past appraisal life, I’ve been a staff appraiser for WF and BofA, and I make much more money doing fee work for AMCs, and have a lot more freedom. Some AMCs I won’t work for, as their splits are ridiculously low and their turn-time requirements are impossible, but I have a great gig going now and I’m not complaining.

    I’m sorry for the WAMU appraisers that are soon to be unemployed, but this could actually be a good thing for them in the long run – the industry is always changing, and we need to change with it or get out of the way. Enough said…

  9. Naive in Nevada says:

    Well, rather than trust the jaded wisdom of my elder peers, I went down the oakie-dokie trail from WaMu to LSI thinking I’d take a wait-and-see attitude regarding LSI. I figured that it only took a bit of my time to fill out the paper work and it didn’t take long to get hap-hap-happy email of encouragement from LSI. Soon enough, I was egged into purchasing Lighthouse conversion software–“you’ll be pre-ferrrred if you git it.” Then there was $75 bucks for digitizing my signature. Sheesh! Now it’s been two weeks and nothing from LSI. WaMu must have stopped lending in southern Nevada…..

    It seems that unless you’re willing to chop your fees to some secret level, which is probably always “a little bit lower….” you’re SOL. So who works for these substandard fees? You would have to be a communist to believe it’s the best and the brightest (or even the average).

    In Nevada, the state regulatory apparatus is miserably under-funded (probably by design–regulation impedes commerce, baby!) and the crooks, cheats, creeps and incompetants run riot. There are shops full of administrative flunkies doing work that is signed by a so-called appraiser. There are appraisers that send unlicensed people out to do inspections and then varify they had personally inspected the subject (happened when my old boss sold his place) and there are hacks in the outlying areas that every lender avoids. They prefer–after learning the hard way– to pay a reasonable “trip charge” to send someone out there to do a good job. Does LSI pay trip charges or do they hire the local hacks? Hmmm I wonder……

    It’s obvious who benefits from the WaMu / LSI transition and it’s not the WaMu stockholders (not in the long run) and it’s not the best and the brightest in our rapidly becoming “so-called” profession.

    I suppose Walmart’s “slopping the hogs” style of retail–really cheap goods at slightly lower prices–is the American way, but cheap/inferior canned goods are not the same as cheap appraisals. As the lending industry continues it’s march to the lowest acceptable standard in valuation practices, seemingly un-checked by regulation, a day will come (again)…. the tax payer and the economy will suffer and the politicians will (again) blame the appraisers. Cruel beans, indeed.

    I wonder if I can get a refund from Lighthouse?