Tweet
New Headache For Homeowners: Inflated Appraisals
July 22, 2006 (WSJ Online)
Rosy Valuations, Common In Boom, Now Haunt Sellers; 'It's Pay-the-Piper Time'
As the housing market cools, Americans are confronting a problem that was easy to ignore during the boom: inflated appraisals of home values.
Critics inside and outside the appraisal business have long warned that many appraisals are unrealistically high. That's partly because generous appraisals help loan officers and mortgage brokers, who often choose the appraiser, complete more deals. If a home is appraised at less than the buyer offered, the deal is likely to fall through.
Inflated appraisals didn't matter much when home prices were rising at double-digit rates, since market values would quickly catch up. Now, however, prices are leveling off in many places and falling in some. Some homeowners are finding that the market value is below what past appraisals led them to believe.
AntiSpin: We've pointed to appraiserspetition.com since 2002 to identify the main fraud element of the housing bubble, as all bubbles have fraud in the formula. The site has been around since 1999, begging the Federal Financial Institutions Examination Council to enforce existing laws related to appraiser independence. Their complaint? "Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value." Petition signer #17 Kenneth M. Rossman of Melville, NY noted "This will never stop until & unless control of appraiser selection is taken out of the hands of mortgage brokers and commissioned loan officers." Seven years later, there are now over 9,000 signers of the petition, representing about 30% of all appraisers in the US. And the problem still hasn't been addressed. But according to this WSJ article, lack of action is coming home to roost as the bubble ends, displaying once again the predictable behavior of government officials during asset bubbles: turn the other cheek while the money is flowing -- where was the SEC during the dot com bubble? -- and turn up only after the event to round up the usual suspects after the money's stopped flowing. They naturally prefer the political benefits of capital gains taxes on inflated asset prices over any moral points they might win by enforcing of the law.
But isn't that how the US now runs in general? Money before everything? Money before justice? Money before moral principle? Money before the law?
Money is the law in the US today.
July 22, 2006 (WSJ Online)
Rosy Valuations, Common In Boom, Now Haunt Sellers; 'It's Pay-the-Piper Time'
As the housing market cools, Americans are confronting a problem that was easy to ignore during the boom: inflated appraisals of home values.
Critics inside and outside the appraisal business have long warned that many appraisals are unrealistically high. That's partly because generous appraisals help loan officers and mortgage brokers, who often choose the appraiser, complete more deals. If a home is appraised at less than the buyer offered, the deal is likely to fall through.
Inflated appraisals didn't matter much when home prices were rising at double-digit rates, since market values would quickly catch up. Now, however, prices are leveling off in many places and falling in some. Some homeowners are finding that the market value is below what past appraisals led them to believe.
AntiSpin: We've pointed to appraiserspetition.com since 2002 to identify the main fraud element of the housing bubble, as all bubbles have fraud in the formula. The site has been around since 1999, begging the Federal Financial Institutions Examination Council to enforce existing laws related to appraiser independence. Their complaint? "Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value." Petition signer #17 Kenneth M. Rossman of Melville, NY noted "This will never stop until & unless control of appraiser selection is taken out of the hands of mortgage brokers and commissioned loan officers." Seven years later, there are now over 9,000 signers of the petition, representing about 30% of all appraisers in the US. And the problem still hasn't been addressed. But according to this WSJ article, lack of action is coming home to roost as the bubble ends, displaying once again the predictable behavior of government officials during asset bubbles: turn the other cheek while the money is flowing -- where was the SEC during the dot com bubble? -- and turn up only after the event to round up the usual suspects after the money's stopped flowing. They naturally prefer the political benefits of capital gains taxes on inflated asset prices over any moral points they might win by enforcing of the law.
But isn't that how the US now runs in general? Money before everything? Money before justice? Money before moral principle? Money before the law?
Money is the law in the US today.