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[Sounding Bored] The Power of Yes! WAMU Pulls The Plug On All Residential Appraisal Department Employees

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 [1], 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 [2] and Lender’s Service [3], 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 [4].

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] [5].

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] [6].

UPDATE 4: According to American Banker [7], WAMU had 30,336 employees as of March 31, 2006, up 10% from the prior year.