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BUSINESS: Thirty-Two Years of Earth and Wood
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| By Gretchen Langton |
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Behind the melodious gurgle-gurgle of Earth and Woods’ two water features north of Victor is the steady dood-dood-dood of heavy machinery backing up. Highway 93 is going four lanes outside their front door. “It’s been almost ten years, dealing with the highway project. They have done everything we’ve asked them to do,” explains Gus Johnson, one of the four partners who has owned Earth and Wood for thirty-two years. Johnson and his partners are anxious for June 8th, which is the date they have been given for the highway to be paved.
Between the waning economy and the highway, Earth and Wood has seen a twenty percent decrease in their profits in the last two years. When I asked Marla Hennequin, Earth and Woods’ chief financial officer, if the economy of 2009 scared her, the Butte native wryly responded that the business owners who weren’t scared weren’t close enough to their businesses. She reflects, “When things start happening around you that you don’t control, for example, gas prices—which really affect us-it’s almost like a natural disaster. You almost have to ride it out, let it take its course.” Hennequin joined the partnership in 1982 and attributes her Butte heritage for her hunker-down spirit and daunting work ethic.
Earth and Wood’s long time employees contribute to the company’s longevity. Their current staff numbers 42 people but can go as high as 60 in the peak landscaping season. “We have very little turnover. We have employees who have worked for us for twenty years,” Johnson proudly proclaims, “We pay a fair wage and have 401K’s.” Hennequin goes so far as to credit the employees with helping the business survive the financial crunch and adds, “Our employees are awesome, our biggest asset.” Johnson said when the partners sat down to figure out how to address the financial strife of 2009, they were determined not to lay anyone off. They did have to reduce some hours and job share. Business has been picking up, but it is still not up to where it was in 2008, according to Hennequin.
Earth and Wood’s story began in the late seventies when founding partner Randy Hodgson’s Land Cruiser broke down between Butte and Missoula. He and a buddy were seeing the west after graduating from the University of Nebraska. He had received a degree in Biology with a focus on environmental science but found himself borrowing twenty bucks from a friend, buying some basic framing tools and going to work as a carpenter in the Missoula area. When Hodgson realized there were very few nurseries around, he called Gus Johnson who had been his roommate in college and he contacted Harold McGaughey, a boyhood friend from Nebraska. He asked them to come out and consider his proposal to start up a business together.
Johnson was working for Bachman’s “mega” Nursery in Minneapolis at the time, delivering trees and shrubs and working in the warehouse. Johnson’s degree was in marketing so he was able to combine this with his nursery experience to benefit the budding Earth and Wood collaboration. He is the general manager and takes care of the marketing; it is Johnson’s son, Marshall, who in 1991made his acting debut as Earth and Wood’s poster child. “By the time Marshall was eight or nine he was able to do the full thirty second ad,” Johnson tells me. Johnson laughs when he says that families would bring their kids in and say, “Where’s Marshall,” as if he might be there all the time and be ready to entertain.
The fourth spoke in Earth and Wood’s wheel is Harold McGaughey, a horticulturist trained at Oregon State. He says his parents were horticulturists too and that it was normal to have soil scientists mulling around his childhood home. McGaughey grew up on a potato farm in the Sand Hills of Nebraska and attributes his love of plants to his upbringing. “Like all good American farmers, we didn’t have a back yard; we had a ½ acre garden. I’m 56 and my fingernails are still dirty.” There is obvious joy in his voice when he says this. McGaughey works sixty-five hour weeks out of Earth and Wood’s Missoula location, which opened ten years ago. When he begins to talk about a recent project where he was creating an expanded patio living space, complete with foliage to compliment a summer kitchen and dining space, I can sense his enthusiasm, attention to detail, and creativity. “My vocabulary and palate are constantly changing. My landscapes tend to be a collage of both texture and color.”
McGaughey and Hodgson, who do the bulk of the bids, designs, and consultations love to see construction zones transformed into finished products. They are not strangers to necessities of changing environmental circumstances and are concerned with reducing the use of pesticides and herbicides as well as recycling products with composting methods. Reducing water usage is a goal for them, “We have been installing drip systems for thirty years,” Hodgson reiterates. Earth and Wood also utilizes native plant material and drought tolerant grasses as well as deer resistant but bird friendly plants, trees, and shrubs.
Johnson recalls that their company started out with “a 1950’s Chevy one ton flatbed and a Sears credit card to buy rakes and shovels and wheelbarrows.” Their first big job was the sewage treatment plant in Stevensville and the first year they barely cleared $27,000. Now they do two to three million dollars worth of business in a year and have had such prestigious jobs as Grizzly stadium and it’s grass, before the stadium went to artificial turf. In 2000, Earth and Wood was Montana’s Small Business of the Year.
As I visited with each of these four people I was struck by the fact that it is so rare to find four unrelated individuals who can work so closely, for over three decades, and still be friends and harmonious partners. How do they do this? Like their jobs, they all had slightly differing answers that demonstrate the symbiotic nature of both their business and their partnership. They all have their specialties. “We were all pretty good friends to start with,” Hodgson says, “and there is not a lot of overlap as far as stepping on each other’s toes. We spend two to three hours every other week to sit down and talk.” Hennequin states simply, “We all love what we do.” McGaughey adds, “You have to be forgiving and open-minded. We each have a niche and we become codependent on each other.” Johnson concludes that it is essential to have a “strong work ethic and a concept in order to survive and succeed.”
And succeed they have. It feels like spring in their plant yard with the sun shining and a slight breeze blowing off St. Mary’s mountain. The bees are making a spring ruckus among the blooms of a Princess Kay flowering plum and the Aspens are whispering sweet nothings. It finally feels like spring.
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TRAVEL:Islands in the Prairie
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A Bitterrooter’s search for beauty beyond the Rockies
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| By Rod Daniel |
High fuel prices and a still-sluggish economy have prompted plenty of families to forego their summer trip to Disneyland and, instead, take to their own back yard for a family vacation.
Fortunately, for those of us in western Montana, our “back yard” features endless options for hiking, biking, camping, fishing and sightseeing. Like a kid in a Toys R Us store, an outdoor lover in these parts has more choices than could ever be satisfied.
Motivated by our desire for our 5-year-old daughter to experience the many treasures of Montana -- with us as her tour guide! -- my wife and I decided last year to begin a quest to explore some of the off-the-beaten-path wonders of our state. One trip per month – that is our quota – and the goal is to pack as much into each trip as possible
One weekend last year, we left home at 1 p.m. on a Saturday, camped at Miner Lake in the Big Hole, soaked at Jackson Hot Springs the next morning, visited Bannack ghost town, explored Crystal Park and soaked again at Elk Horn Hot Springs before returning home on Sunday night. We did all this on one tank of gas!
This year, a late-May, work-related meeting in Havre prompted us to visit a couple of Montana’s lesser known mountain ranges: the Bears Paw Mountains south of Havre and the Sweet Grass Hills north of Great Falls.
Bears Paw Mountains
The Bears Paw is an island mountain range comprised mostly of private land, including a large chunk of the Rocky Boy’s Indian Reservation. Located just south of Havre, the 17-mile-long, 10,000-acre Beaver Creek County Park features more than 130 camp sites amid vast areas of grasslands, pine groves, cottonwoods, box elders and willows that line Beaver Creek. The 3.5 mile Bear Paw Nature Trail parallels Beaver Creek on the west side of Montana Highway 234 with interpretive displays highlighting the flora, fauna and geology of this unique “Island in the Prairie.”
As luck would have it, our visit to the Bears Paw coincided with peak stream levels brought on by 80 degree temperatures and abundant snow pack. The park was closed to camping and many of the camp sites were temporarily under water. My daughter and I still had a great time, climbing to some stunning vistas and steering clear of high water.
We definitely will return to the Bears Paw, next time in the summer months, to camp near the refreshing streams and lakes while exploring the wonders of this unique Montana mountain range.
From Havre, we traveled west on Highway 2 to the town of Chester, where free camping in the city park and $5 showers at a local laundry welcome budget-minded travelers on the Hi-line. Beckoning from the north, near the Canadian border is the East Butte of the Sweet Grass Hills, a mountain range so isolated and remote that it almost seems forgotten.
Sweet Grass Hills
Towering over the surrounding farm and ranch land about a hundred miles east of Glacier Park, three buttes – East, Gold and West – rise nearly 3,000 feet from the adjacent prairie. Clusters of smaller hills trail off to the north of each butte, providing some of the most striking and unique scenery in Montana.
Each peak is over 6,500 feet in elevation and is separated from its nearest neighboring mountain by about 10 miles, making the range about 25 miles long from east to west. The south side of West Butte boasts towering granite walls from which people are said to hang glide.
Most of the land is still native range with pine forests blanketing the lower slopes and granite scree stretching to the top of each butte. Each of the buttes is owned by the federal government (BLM), and some adjacent State land increases the acreage that’s open to the public. But each hill is surrounded by private ranch land, so accessing them can be tricky. Delorme and Benchmark maps show which land is public, and signs on fences often give permission to cross private land on foot.
West Butte, the tallest of the three at 6,983 feet, can be accessed easily by public land via Coal Mine Road. Our initial goal was to climb up and down West Butte the first day, then camp at Cameron Lake and climb Gold Butte the next morning.
The hike up West Butte looked pretty easy, but a few minutes of walking reminded us that these were mountains and not hills! The grassy slopes were too steep for a 5-year-old to hike comfortably, so our progress was slow.
But the walk in the sun was breathtakingly beautiful: The gullies and ravines still held plenty of snow and a wide array of wild flowers were emerging where the snow had recently melted. The 100-mile, checkerboard view to the west was punctuated by the spectacular eastern front of the Rockies, beckoning like a shiny white ribbon.
By the time we finally emerged from the grassy slopes to the granite scree, it was clear that my daughter was not going to make it to the top. We needed to turn back soon so we could make it to our camp site. I struck a deal with my wife that I would continue hiking by myself for 30 minutes and then turn around and hurry to meet them for the walk down.
I hiked as fast as I could up the loose granite talus, sticking to switchback trails made by horses. Along the way, I encountered giant gnarled limber pine trees that must have been at least 300 years old. I also found the only the only thing resembling litter – an Orange Crush bottle circa 1955. As I neared the top, the trail became more steep. My 30 minutes were up and I had to turn back.
The walk down was challenging but quick, and within about an hour we were all back in the car headed to Cameron Lake near Gold Butte. Located on private land, but managed by Montana Fish, Wildlife and Parks, the small, stocked, man-made lake is a nice camping spot, offering views of both West and Gold buttes. The lake’s landowner has granted access to the towering butte to the east, but the 2-mile hike to its base (and the desire to see the third butte) persuaded us to drive around to East Butte.
The winding ranch road to the town of Whitlash was awesome! The green, rolling hills resembled scenes from Ireland and prompted my wife to say, “I think this is the most beautiful place I’ve ever seen!”
Just south of Whitlash is a beautiful campground, maintained by Liberty County 4-H and nestled along the tree-lined banks of Keller Creek. Donation boxes help with the upkeep and many of the sites have electricity. After playing on the venerable but sturdy playground equipment at the campground, we drove a few miles down the road to the 3U Cattle Ranch from which we were told we could access East Butte.
The owner of the ranch said we were welcome to walk through her land, and in a gesture of hospitality, her two dogs accompanied us on our walk. We didn’t come close to scaling East Butte, but the walk up the grassy slopes of the ranch was serenely beautiful and devoid of any hint of civilization.
When we returned to the car, we chatted with the lady for a while. She had been raised near Lewistown, but her husband had grown up on the ranch and spent his entire life in the Sweet Grass Hills. These were real Montanans -- independent, isolated and tempered by ranch work.
Driving away, it was not hard to imagine that this was what much of Montana might have been like 70 or 80 years ago: Rugged mountains, big skies, and hard-working folks – unaffected by the software moguls, movie stars and talk-show hosts that have recently bought up so many beautiful ranches in the state over the last two decades..
So was I disappointed that I didn’t make it to the top of the butte? Not a bit.
I feel so fortunate to have tasted the Sweet Grass Hills, to have experienced a glimpse of the real Montana. Our two days in “them thar hills” was the trip of a lifetime. And I’m sure we will return again and again. After all, it only cost us two tanks of gas!
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NON-PROFIT: Bitterroot Rallies for Ronald McDonald House
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| By Lori Grannis |
They come decked in all colors of swimsuits and swim caps, goggles and helmets. They don running and cycling shoes, and arrive on the latest road bikes, trikes and scooters, and scrawl three-digit numbers down the length of each arm.
Serious athletes come to win. Others - families with kids - simply come to play. But all ages come to the Bitterroot Classic Triathlon to help raise money in support of Missoula’s Ronald McDonald House, opened in 2006.
“You’ll see whole families competing in this event,” says Ronald McDonald House executive director Barbara Wickel. “It’s a really fun and family-friendly day.”
For those not seriously swimming, cycling, and running for time, there is laughing and joking as they unleash robust bellies not fit for Olympics, and quickly slip into baggie beach jams.
For the sinewy, well-muscled set, swimming, cycling and running for time, it’s a steely-eyed glance across the length of the pool, and a quick dose of adrenaline. For the rest, it’s a day of community, and a quick slip into the pool to help children swim its length.
Chip and Anne Pigman have entered this event as a family three out of five years now. Sponsors of the event, they are also the fittest of families. Anne Pigman says doing the event gives them a great opportunity to spend time exercising and connecting with one another.
“It’s been real positive for us and it’s something kind of different for us to do together since our kids do other sports,” she says.
Prior to the event, the family swims laps at the Canyons Club in Hamilton, she says, and the kids - ages 15, 17, and 28 - race alongside parents.
Anne Pigman says a motorcycle accident in her husband’s family years earlier is what inspired them to support the Ronald McDonald House as a family.
“They didn’t have anything like the Missoula house at that time, so Chip’s mom had to go back and forth from Hamilton to Missoula,” she says. Walking through that as a family, she says, helped them understand how much a facility of that sort could benefit other families.
Monte and Leslie Drake are poised on the starting line each year too. They were among those who helped start the event five years ago while serving on the home’s board of directors.
“It’s a perfect distance for beginners because it’s a sprint - a 750 yard swim, 20K bike, and 5K run,” says Leslie Drake, who notes kids as young as 10 have completed the regular triathlon.
But according to Drake, the knee-high set - some as young as 4 and decked in beach jams and baby sunglasses - have their own event. They swim a single lap, round orange cones on small bikes and scooters, and wave to parents as they run to the finish line for a silver medal that dangles from neck to rounded belly.
“This event was created to raise awareness of the house throughout the Bitterroot Valley - since we are the people it directly serves,” Drake says.
Drake says this year’s event will take place on August 28, 2010, at the Bitterroot Aquatic Center.
Missoula’s Ronald McDonald House looks like it could be a dwelling on any street in Montana. But the house that borders Fort Missoula on one side, and Community Medical Center just across the parking lot, has an ongoing waiting list for occupancy, according to director Barbara Wickel.
That’s because the eight family suites, living room, and large double kitchen at the house, provide home-like comfort to the families of sick children who may not be able to afford motel stays while children undergo pediatric medical treatments.
Last year RMH-Missoula housed 220 families who stayed, on average, 23 days. Many, she says, for much longer.
Wickel says 75 percent of families who stay at Missoula’s RMH have newborn babies in Community Medical Center’s Neonatal Intensive Care Unit.
Emy and Lou Royce took up residence at the Ronald McDonald House in early July of 2008 when Emy began having difficulties with her pregnancy, and was then diagnosed with placenta previa - an uncommon condition that can cause excessive bleeding before or during delivery.
Because they live 60 miles away in Darby, the couple was forced to stay near Community Medical.
“We had to stay close enough because if she went into any kind of labor at all, we’d be in serious trouble,” says Lou Royce.
According to Wickel, a residence at a certain distance away is one of the pre-requisites for occupancy in the home. It’s 40 minutes or 40 miles, she says. Other rules are that a family must have a permanent home of their own, and must have a pediatric medical patient that brings them there.
In the Royce’s case, it was an unborn child that qualified their stay. In most other cases, it’s a child between infancy and 21.
The Royce’s lost their unborn child during their stay at the house. But eleven weeks ago, Lou Royce says the couple delivered a healthy baby girl.
“It was such a hard time for us,” says Royce. “But staff at the house were really great, and being able to stay there helped keep costs down enormously.”
On any given morning in this house, you’ll see adults and children of all ages milling around in pajamas, munching on toast, or checking email.
They come and go as they please, but many are here for the long haul.
According to Wickel, some families are in residence as long as seven months, and the cost of that tops $90 per day, per family. Last year, that meant the budget hovered just around $242,000 for operating costs.
But Wickel says that between grants, personal and corporate donations, voluntary family donations, and events - such as the triathlon – all help keep doors wide open for families in need.
“It’s why events like the triathlon are so meaningful,” she says. “Not only is it a community effort by folks who may directly benefit from our house, but it’s also an effort of great love and spirit.”
Each year, the Bitterroot Classic Triathlon, with sponsors such as First Interstate Bank, Marcus Daly Memorial Hospital, The Runner’s Edge, Pigman Builders and Willow Creek Physical Therapy - to name a few - raises $15,000 for Missoula’s Ronald McDonald House.
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HISTORY: Lewis & Clark and the Lost Art of Astral Projection
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By Wm. W. Whitfield
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More than a decade has passed since I set aside a year of my life to write a book about the Lewis and Clark Expedition. My main objective was to retrace the mountainous route followed by Lewis and Clark, and then publish my own impression of their overland adventure. With maps and cameras firmly in hand, I retraced their route from one historic site to the next, compiling my travels into a self-published field guide that fulfilled my original intent and provided me with five full years of in-depth research into a subject that has always fascinated me. That’s right, I said five years, because even though I had only set aside a year to accomplish the project, each trip led me further along the trail, and each new leg of the journey opened up another interesting aspect of the famous duo’s exploits. Eventually, I managed to publish my booklet just in time for the Bi-Centennial Celebration, and I felt satisfied that I had taken part in some Grand American Event that only comes along every hundred years or so.
All in all, it was a wonderful experience and an awesome adventure that will stay with me for the rest of my life. There was a point though, where I may have let my Lewis & Clark mania get the better of me. We often raced frantically from one distant location to another trying to gather useful information and snap pictures of the general lay of the land. One of my goals was to examine the sites at the same time of the year that the Corps of Discovery had visited two centuries earlier. In many instances we were at their campsites on the very day that the explorers had been on the scene, and reading their journal entries on the actual site and on the very same day that they had recorded them was really an experience in itself. But, as I indicated earlier, we also tried to take in as many sites as possible in a day, which meant that hundreds of miles were racked up in one outing. Unfortunately this technique sometimes left me in a bit of a whirl!
Now, I have to say right off the bat that I’m a notorious skeptic when it comes to all things supernatural. I don’t like things that can’t hold up to scientific investigation, and I honestly believe that most things are quite easily explained when we apply a logical and clear vision of how the natural world works. Having said that, I’ll admit that there are still times when it appears that logic does not fully apply to the world we live in, and that’s where astral projection comes into the picture. I think I first became aware of the Art of Astral Projection sometime in the mid-seventies, when I read all of the Carlos Castaneda books on Native American sorcery and shamanistic rites. Of course, I took it all with a huge grain of salt, and never really imagined that twenty-five years later I would actually have my own out-of-body experience that seemed to fall squarely into the exact same category as the strange Tales of Power that Castaneda had written about.
By definition astral projection is the ability to see a subject from above, usually with the aid of some mind-altering drug or an extended period of extreme self-deprivation. In some unexplainable way the mind’s-eye is able to follow the movements of itself or others as if it were a bird soaring high overhead. Indigenous people have historically used this unusual method of cognitive enhancement to follow herds of animals, or to spy upon their enemies. People who have survived a near death experience, or who have clinically died on the operating table, occasionally encounter a similar phenomenon, and we often hear stories of how the victim hovered over his own body while the doctors and nurses worked desperately to revive him. How is it done? I don’t really know, but I know for a fact that it is possible because I have done it myself without even trying! Whether these strange sensations are actually some weird form of extra sensory perception or merely a glorified daydream is debatable, but I know that when it happened to me the images felt as real as any other waking moment.
Some scientists have reasonably explained the curious phenomenon known as astral projection as a form of hypnagogic sleep, or what you might describe as that gray area that exists between sleep and wakefulness. Most of us experience hypnagogic sleep at some time or another as we enter into our nightly sleep stage, and the subjects of these waking dreams usually fall into three distinct categories. The first one involves geometric shapes and forms in glowing colors that flash and flare across a dark backdrop. The second type consists of recognizable faces and objects, and the third incorporates whole scenarios, which often include action sequences. For some reason, I seem to have skipped over the first two types of hypnagogic sleep completely, and somehow went straight into the third and final stage. These seemingly prophetic visions manifest themselves as certain mental activities just before the onset of sleep, and apparently, according to the people who study such curiosities, have nothing to do with mysticism or other weird psychic abilities.
The strange momentary apparitions are usually accompanied by auditory signals as well, such as voices and other common sounds related to our everyday lives. Unlike the deep sleep phase that puts us into a full-fledged dream state, the dream sequences experienced in hypnagogic sleep are usually quite serene and commonplace, aside from the fact that a hypnagogic dream often leaves one with the impression that he has left his body behind, and is viewing the scene remotely from an out-of-body position. According to some scientists who study sleep behavior, the REM phase of our normal dream state is completely different from these quick little waking daydreams we experience just before we nod off. But I digress. Let’s get back to my own personal experience with Hypnagogic Sleep, and the Lost Art of Astral Projection!
The scene is a typically hot and dry August day. As I said earlier, one of my objectives in doing the Lewis and Clark project was to try and be exactly where the Corps of Discovery was on the same calendar day of the year, and so, sometime in mid August we found ourselves in the heart of the Lemhi Valley of Idaho, following the various trails of both Lewis and Clark as they made their separate tours of the region. Our vehicle was a tried and true forest-green Jeep Commando. The day had been a long and exhaustive one as we scurried over the trail trying to capture as many different images as possible while taking in all the various roadside attractions, distractions, and interpretive signs along the way. The sun was still hanging fairly high up in the sky as we threaded our way through the beautiful canyon carved out in prehistoric times by the main fork of the Salmon River. It was the middle of the week and we were traveling on a zigzag course towards North Fork, and seemed to have the road pretty much to ourselves. I can’t really remember if we had stopped for anything to eat at Salmon or not, but my guess is that we didn’t, and that might explain what happened next.
Without any prior warning, I suddenly felt my inner-self leaving my body as it sat zombie-like behind the steering wheel of the Jeep. In one sweeping motion I felt myself smoothly exiting through the back window of the rig as if through some kind of vacuum, and then I flew up far behind the vehicle as it worked its way through the rugged canyon. My concentration was totally fixed upon the scene that unfolded below me, and while I was suspended there in space, I was able to see the entire road for miles ahead and behind the car, and there wasn’t a single other vehicle on the road as far as I could see. Then, as if I were some type of powerful zooming telescopic lens, I just as smoothly and effortlessly returned to the vehicle in one continuous motion, until I found myself once again sitting in the driver’s seat gripping the steering wheel and gazing out through the windshield! All of this happened within a split second and actually takes longer to explain than it really took to do. I remember snapping myself out of the mysterious hypnotic trance that had overtaken my body and then I mumbled something about having an out-of-body experience.
The vision seemed so real that I was instantly awake and fully alert afterwards, and I remembered all of the intricate little details of the illusion as if they had really happened to me! Some scientists believe that most hypnagogic events aren’t usually remembered because they lead to the deeper sleep that occurs when we allow ourselves to completely succumb to the golden slumbers of our nightly repose. I think they’re probably right, but it’s a shame really, because we ultimately miss out on a dream-state that closely mirrors the actual world we live in. These unadorned and seemingly mundane images allow us to view ourselves from a different perspective of reality, a reality devoid of all the unusual and bizarre little nuances that fill out our regular dreams. The altered state of consciousness that some mystics call astral projection actually provides an insightful glimpse into our daily existence that would probably never occur in the harsh reality of the waking world, but just the same, I can’t say that I’d really recommend attempting it while sitting behind the wheel of a car!
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| REAL ESTATE: Pending Financial Regulation Reform Legislation |
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| By Darwin Ernst |
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I recently returned from Washington DC with some confidence that our legislators are actually concerned about financial reform that can benefit those of us on Main Street. However, I also recognize that most politicians are so deeply involved with looking at who gambled with toxic mortgage loans and which games of chance they chose to play, they have overlooked how the ineffective financial lending regulations permitted the creation of the fake money used to bank-roll the Wall Street gambling spree. Moreover, many of the same legislators have such a tight connection with the financial lending industry that they are unable or unwilling to listen to the loud cry for relief by “Main Street”.
Mr. Wilmers, Chair & CEO of M&T Bank Corp., an independent commercial bank holding company, was summarized in the Wall Street Journal on May 4th, 2010, page A19, regarding a speech he recently made to the company’s annual shareholders meeting in April, 2010. He claims the federal government has pumped $126 Billion into the Government Sponsored Entities (GSE’s) under the governmental attempt to increase home ownership in America since the early 1970’s. Despite this huge cost to taxpayers, the percentage of home ownership has only increased by 4% (to 67%) within our Nation. It seems quite evident that the governmental attempts to increase home ownership have not been effective and our Nation’s legislators must pursue effective financial reform legislation.
While on the Hill, as a representative of the Montana Chapter of the Appraisal Institute, I acted as a lobbyist and asked Members of Congress for support in filling the gaps within the current financial lending industry regulations. The gaps in the regulation have resulted in taxpayers involuntarily bank-rolling the gambling debts created by high rollers on Wall Street. Brokers sold investors bad deals and then made twice as much money by winning the bet with insurance companies that those investments would later be proven to be bad investments. These Wall Street gamblers played with the fake money created by an inaccurate understanding of the housing market, which was allowed to exist, mainly due to the ineffectively regulated financial lending industry. The resulting debt was involuntarily repaid in the form of a governmental “bail-out” by taxpayers.
I am glad to report that Montana Senator Jon Tester’s office has been my most responsive contact on the Hill. As of this date, I am very confident that Senator Tester, who serves as a member of the Senate’s Banking, Housing, & Urban Affairs Committee, will remain a formidable proponent for financial reform legislation that could provide “Main Street” with effective regulation of the financial lending industry to prevent any future bail-outs for those financial companies previously considered “too big to fail”.
Senator Tester’s staff has personally assured me that they will continue to support verbiage that incorporates portions of House Resolution (HR) 4173 that was not included in the Senate’s version of the current financial reform Regulation Bill (S-3217). Representative Barney Frank, current Chair of the House Financial Services Committee, will also serve as the Chair of the “conference committee”, which is charged with joining the separate chamber versions of the bill. The major differences between the chamber versions include rules for derivatives and restrictions on types of trading, both of which effect brokers and investors on Wall Street. The minor differences include additional regulation of real estate appraisers and the registration of the currently unregulated appraisal management companies (AMC’s), which has a direct effect on the borrowers on Main Street. The conference committee is expected to provide President Obama with a Financial Regulation Reform Bill by July 4th, 2010.
It seems remarkable that the Senate version of the bill (S-3217) did not address real estate appraisals, which is the foundation of the finance lending industry. Without resolving the existing regulatory deficiencies surrounding sound lending practices, the financial lending industry will undoubtedly continue to follow the path of least resistance and the taxpayers will continue to pay.
Here are a few issues that have been labeled as minor differences between the chamber versions, which could be included in the final version of the legislation, but will require action by the conference committee:
Funding and additional authority for the Appraisal Sub-Committee (ASC). This would provide oversight of the Nation’s State real estate appraiser boards. The mandate from Congress to regulate real estate appraisers was created within the legislation passed by Congress to correct deficiencies within the regulation of the financing lending industry linked to the Savings and Loan Crisis of the 1980’s. The Financial Institutions Reform Recovery & Enforcement Act of 1989 (FIRREA) failed to provide any funding for the mandate and the ASC was not given sufficient authority to discipline those State real estate boards which were not properly regulating their State-licensed real estate appraisers. Montana’s Real Estate Appraiser Board complies with the ASC’s oversight.
Requirement for Appraisal Management Companies to be licensed and regulated by State Real Estate Appraiser Boards. Currently, AMC’s are unregulated in many States and have been used by financial lenders as a solution to prevent mortgage loan originators and real estate appraisers from committing fraudulent collusion activities. Several recent independent appraiser surveys have demonstrated that quality appraisers are systematically being replaced with lower quality appraisers by many AMC’s in their attempt to make money. Working Real Estate magazine reports 98% of appraisers report that their experience has been that AMC’s rely on lowest fees in their selection process and only 62% of AMC’s consider service, quality and other factors as part of the appraiser selection.
Requirement for AMC’s to compensate real estate appraisers with fees customary for a market area. Many AMC’s are asking appraisers to cut their customary fees, so their “brokerage” business can pocket the difference and thereby increase profits. This provision would eliminate selection of real estate appraisers based on fees and promote selection based on quality, which better protects the public’s interests.
All real estate appraisals (valuations) and appraisal reviews are to be performed by State-licensed appraisers. Currently, there is a strong move among lenders who provide mortgage loans, to use real estate agents’ broker price opinions (BPO’s) in lieu of appraisals produced by a State-licensed real estate appraiser because they cost less. This takes advantage of a current loop-hole in some State statutes, which does not specifically indicate that mortgage lenders must rely on real estate appraisers trained in determining market value, and who can be regulated by that State’s real estate appraiser board. Thirty-one States already have “mandatory” licensing, which means that State-licensed real estate appraisers must complete real estate valuations within that State. Real estate agents are not specifically trained in developing and reporting opinions of market value, and therefore do not qualify for licensure as a Montana real estate appraiser, nor can they currently be regulated by the Montana Board of Real Estate Appraisers.
“Main Street” has rightly demanded that legislators in Washington must curb the excessive risk-taking activities of financial institutions due to ineffective regulation. The Congressional conference committee must fully explore these issues that effect the foundation of the financial lending industry and respond by enacting a strong, comprehensive and effective financial regulatory reform package that protects the American public.
Darwin Ernst, SRA e-mail: darwin@tekboys.com. Montana Licensed Real Estate Agent, Realtor, Montana Residential Certified Appraiser, Designated Residential Member of the Appraisal Institute, Montana Real Estate Appraiser Board Member, and President of Independent Valuation Solutions, LLC
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