NEW PUBLICATIONS: PUBLIC TRUST BETRAYED. An Interview with author and real estate appraiser, James E. Manning

By Seán Martinfield
Sentinel Editor and Publisher
Photo by Lynn Imanaka

The independent real estate appraiser is being driven out of the business by the same forces that borrowed billions from the taxpayer in the form of a bailout, speculated in an over-leveraged derivatives market, and swallowed each other up after years of mismanagement. Why should anybody care? Because the housing recovery is dependent on transparency that we have not seen in more than a decade.

Public Trust Betrayed: The Truth Behind the Real Estate Appraisal Industry emphasizes that there must be transparency and objectivity in the mortgage and evaluation process if we are to solve the current credit crisis and what we must change in the financial industry to prevent another economic meltdown. As a result of fraud, conflicts of interest, over-valuations, and lax underwriting standards, the entire lending industry must be examined and changed if any meaningful housing recovery is to be accomplished.

On Saturday, May 14th, between 1:00 and 4:00, Mr. Manning will be signing his book at Barnes & Noble in the Hillsdale Shopping Center, San Mateo. Since it is rather unusual for authors of business books to be featured in the same spotlight as media celebrities and high profile politicos, I decided to be first in line via a private interview. James Manning has a very personable style in this newly-released exposé on the real estate appraisal industry. Home buyers take note! Public Trust Betrayed is an engaging must-read and a sure-fire first line of defense.


Sean: Give me the job description of Real Estate Appraiser.

Jim: The function of the appraiser is to appraise the underlying collateral for a loan whether it’s a refinance or a home purchase, a re-sale or a brand new home in a subdivision. The appraisal is what the whole process is based on. You have to have enough collateral to cover the loan. So, it’s critical that you get un-biased professional appraisals performed for these lenders. What has happened over the last nearly ten years is that all this pressure has been placed on the appraiser. Most people are aware of the chaos in the financing industry. There was a terrible abuse and a lowering of underwriting standards. It got to the point where anybody could borrow money to buy a home. A good normal down payment used to be twenty percent. Then over the last fifteen to twenty years we started seeing ten percent down payments. It just got smaller and smaller to where there was 100% financing and people who had no business buying homes were buying homes. Lending institutions such as World Savings came out with these option arms – an adjustable rate mortgage. They lowered the standards to the degree that people were lying about their incomes, lying about their assets and how much money they had in the bank. There was little or no documentation on these loans whatsoever. There were people working at McDonald’s who were buying $800,000 houses.

Sean:: It’s difficult for me to comprehend that an individual who obviously cannot afford such a high monthly payment is as bonafide a customer as someone who can.

Jim: The lenders were not requiring any documentation. So, these people could put down anything they wanted to on these loan applications. The brokers and the lenders didn’t care because they found another sucker to sell the loan to. They were selling them to the big Wall Street firms and then they began packaging them and securitizing them and selling them off to other investors throughout the world. It was like nobody cared. In my opinion, it is Real Estate Fraud to lie on a home loan application, especially if it’s going to be sold-off to the secondary market – that is, Fannie Mae or Freddy Mac or FHA. Lying on a loan application is Mortgage Fraud.

Sean: Should a book such as Public Trust Betrayed be available at the front door of real estate offices? “Here’s what YOU should know before speaking to one of our representatives!”

Jim: (laughs) That would be wonderful but I don’t think that will happen. I run into people at the grocery store and tell them about the book. Most everyone is eager to learn more. There is a genuine interest in this subject, because so many people were effected by the guy knocking at the door and measuring-up the house and valuing the property for the guy at the bank. And not just home purchases but re-financing. Over the last ten years people were re-financing like crazy. Most of them were using their home like an ATM machine. I have been to many-many houses – six, eight, ten times – because people were re-financing so much and taking money out of their homes. I’m assuming that a lot of them were using the money to fund retirements, college tuitions, cars, big screen plasma televisions – simply living beyond their means. We saw this cycle. We see a cycle in real estate about every ten years. We were due for a correction. We always get it. I quote Alan Greenspan as saying, “We didn’t think property values would go down to that. They’ve never done so.” Well, that’s not true. I don’t know where Mr. Greenspan was in the late ’70s and ’80s. In May of 1989 the market had stopped peaking. I was down in San Jose at the time and would look at the Multiple Listing Service. On any given day, there would be twelve homes that would come on the market. It jumped to twenty and then to fifty and then hundreds of homes all at the same time. It was almost as if every other house was on the market. In the early ’90s you couldn’t give a piece of real estate away. Statewide, most people lost between 20 and 25% of their equity. Towards the millennium it started picking up again. The speculators came in. There was an awful lot of money made, especially here in northern California, with respect to all those Internet start-ups. Then we had the dot-com bust. I thought that was going to be the start of the typical downward spiral of the cycle. But Greenspan began loosening up money policy – making money abundant and easy to borrow – and people started getting back into the real estate market and speculating once again. When you make money so easy to borrow and you don’t require anybody to put their own money into the deal – who wouldn’t go out and buy a piece of property? And at the rate of escalation, it suckered-in so many speculators. I run into people who bought as many as five homes. They’ve since lost them all. I don’t know exactly how much of the market was speculation, but I would say at least one-third.

Sean: Are we now in a cycle that is different? Is it one that you can recognize as having happened before?

Jim: Not to this degree. The comment I make is, “It was a heck of a party, we’re going to have a heck of a hang-over.” That’s what we’re suffering now. It’s not over by any means. It takes eight to ten years to work yourself out of these predicaments. Realtors are salesmen. They’re going to tell you there’s never been a better time to buy. But they’ve been saying that as the cycle gets deeper and deeper. With all the foreclosures out there, I say we have a ways to go. There are a lot of foreclosed properties that the banks are holding onto and not exposing to the market. They’re trying to wait until things get better and get rid of the inventory they have left. Statistics show that 30% of purchases in California were all cash. That’s indicative of a lot of speculators. They come in and buy a lot of REOs (Real Estate Owned Properties) that lenders have foreclosed on. Equity Funds and Hedge Funds are buying them in bulk.

Sean: Are you still active in the appraisal business?

Jim: No, I haven’t done any in two years. Mortgage brokers took over about 70% of the market with respect to originations. The originator is the person who takes the loan application whether it’s the bank or the mortgage broker. Mortgage brokers took over the origination industry of loans. In other words, they were originating loans, not the lenders themselves. They would take the loan, package it, order the appraisal, order the credit report, do all the paperwork and then submit it to a wholesale lender that would actually do the funding of the loan. Mortgage brokers don’t do the funding, they’re just the middleman. So, the industry had become one of middlemen. They are able to shop for the best rate for the customer or borrower. But they’ve got no skin in the game – money, something at risk – so, they don’t care. That’s where the appraisal comes in. The appraiser determines the true value of the house. Is it really worth the $500,000 you just paid? The brokers were getting appraisers to come in and appraise the homes at whatever price they needed in order to make the deal work. If the appraiser couldn’t come up with that amount, the response was, “You won’t be hearing from us anymore.”

Public Trust Betrayed: The Truth Behind the Real Estate Appraisal Industry

Sean: What would motivate someone today to become an appraiser?

Jim: Honestly? Ignorance.

Sean: After they read your book, do you think they might pursue the job anyway?

Jim: No. And rightfully so. They’d find a different career. As a result of the savings and loan debacle of the 1990s, we started licensing real estate appraisers. Prior to that, you didn’t have to have a license. You just had to demonstrate that you could appraise. So, they set it up where every state had its own licensing board. Here in California it’s called the OREA – Office of Real Estate Appraisers – located in Sacramento. Their responsibility is to come up with the educational and experience requirements and oversee pretty much everything with respect to the testing and the enforcement of the laws. It’s up to them to deal with appraisers who are accused of any criminal acts and bring the hammer down on them. In the height of this crazy credit thing, there were 22,000 appraisers. Now there’s no need for them. So many mortgage brokers and lenders have gone out of business. The last time I checked, there were 17,000 appraisers here in California.

Sean: Your book has the feel of a documentary.

Jim: It started out as a documentary. I had interviewed several appraisers, but it sounded like so much whining. I tried to set up interviews with mortgage brokers and couldn’t find anybody to co-operate. Nobody wanted to do it.

Sean: What do you think the resistance was about?

Jim: My honest feeling is that there was so much dishonesty in the industry and nobody wanted to talk about it. Here’s a good example. My wife and I were down in Long Beach during the time when it looked like Countrywide was destined to crash. At the hotel where we were staying, it just so happened there was the annual convention of the California Association of Mortgage Brokers. I already had my camera and microphones. It seemed a great opportunity to get some interviews for my documentary. I went into this great big ballroom and tried to be as discreet as possible. I just wanted to observe for a while. People started coming over and asking me to join them. I replied that I was just observing. Finally, a guy came over and said, “Who are you?” I introduced myself and said that I was working on a documentary about the appraisal business, just happened to be in the hotel, and would like to interview some of your members. And he replied, “Oh, really? That would be great!” and then introduced me to their media guy. After meeting with the Board of Directors, rather quickly, he came back to me and said, “We really wish you would not interview anybody. In fact, we want you to leave.” And that was that. So, I’ve had a difficult time in getting willing participants to continue the story. I decided – since I’ve been doing this over 35 years – I could tell this story as well as anybody. I decided to write a book instead.

Sean: Your book is challenging, but easy to follow. There is an on-going atmosphere of excitement and the anecdotal references are all very high end. It’s bound to irritate a few folks.

Jim: I take some shots at real estate brokers, a lot of shots at mortgage brokers and banks. Because these are the things I have seen. This is a disorganized and chaotic subject and it’s not over yet. This whole debacle has taken down Fannie Mae and Freddie Mac, both of which are in Federal receivership. Look at all the banks and savings and loans that aren’t around anymore because they’ve been taken over. You’ve got Countrywide, Washington Mutual, World Savings – so many institutions that got swallowed up by the bigger banks.

Sean: Public Trust Betrayed might well be regarded as a Primer.

Jim: My main thrust is to get the appraisal industry out of the hands of the lenders. These appraisal management companies are entities where title companies, particularly First American Title, has partnered with various banks to set up these management companies that actually order the appraisal. They control the process now. Why is this important? There is so much room for abuse here. If you don’t come in with a high-enough value you’re not going to get any more appraisals. If you don’t do it cheap enough you’re not going to get any more appraisals. And if you don’t do it fast enough – when you should be spending whatever time it takes to come up with a competent report – you’re not going to get any more orders. In essence, what we have here are appraisal management companies who are ready to pull the trigger if the appraiser doesn’t come in cheap-enough, fast-enough, or with a higher value. You can’t do that. There is no difference in what has happened here than what has happened with the credit rating agencies issuing these Triple A investment ratings on what turned out to be junk mortgages – just so pensions and institutional investors and municipalities can buy these things. They would not be able to buy them without the Triple A rating. They were just rubber-stamping these things. These are the same guys that are getting paid by these institutions to rate them in the first place.

Sean: What happens next? Will there be a sequel? Will you turn it into a documentary? Are you pursuing it further?

Jim: What I’m going to do is make it my life’s mission here to get the appraisal process out of the hands of the foxes in the chicken coops.

Sean: The average homeowner needs and deserves to know if the property they are considering is perhaps not everything it’s purported to be.

Jim: I’m glad you brought this up. When you have a good objective and unbiased appraisal, that not only benefits the lender who actually puts the money out but benefits the buyer as well. Because he can now take that report and say, “I’m paying fair market value for this property.” He paid for the appraisal. When he got the loan he’s entitled to the report. He should be able to say to himself, “I’m not being talked into anything by the seller or the real estate agent or the builder or whoever else is involved.” There are terrible conflicts of interest out there. You’ve got real estate brokers that have their own mortgage companies, national home builders that have their own mortgage companies. What quality of loan are you going to get when everybody is on the payroll? In other words, they basically own the appraiser, they own the inspector, they own everybody that’s a party to it. Of course they’re not going to have any problems in putting these deals together and getting them closed because everybody is party to it. They’ve ruined it for appraisers. Most of us seasoned appraisers are getting out of the business. None of us wanted to get rich or screw anybody. Most of us only wanted to do a good and honest job. Most of us have left the business because we value our integrity. Integrity is something that Corporate America just doesn’t give a pooh about. My mission is to get the appraisal industry out of the hands of the lenders. We’ve already seen what the lenders are capable of doing. They are not the bankers we remember from the old movies. These guys are gamblers and we’ve seen their losing bets over and over again. And we’re all paying for it. If we have to have the government control some sort of regulatory body that is compromised of appraisers so that you can get an honest appraisal – that there’s no influence over that value – then that’s what we need to do. Trillions of dollars of mortgages are based on a simple appraisal. That is the underlying collateral. It just takes a backseat to everything else. There’s a button that needs to be pushed and I think I’ve found it.

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Seán Martinfield
Sentinel Editor and Publisher
Seán Martinfield, who also serves as Fine Arts Critic, is a native San Franciscan. He is a Theatre Arts Graduate from San Francisco State University, a professional singer, and well-known private vocal coach to Bay Area actors and singers of all ages and persuasions. His clients have appeared in Broadway National Tours including Wicked, Aïda, Miss Saigon, Rent, Bye Bye Birdie, in theatres and cabarets throughout the Bay Area, and are regularly featured in major City events including Diva Fest, Gay Pride, and Halloween In The Castro. As an Internet consultant in vocal development and audition preparation he has published thousands of responses to those seeking his advice concerning singing techniques, professional and academic auditions, and careers in the Performing Arts. Mr. Martinfield’s Broadway clients have all profited from his vocal methodology, “The Belter’s Method”. If you want answers about your vocal technique, post him a question on If you would like to build up your vocal performance chops and participate in the Bay Area’s rich theatrical scene, e-mail him at:

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