The congressional hearings will have to address this big-time. Appraisers everyone knows are the puppies of the realtors (who spiff them) and the mortgage bankers (who get them their business)
The system was cooked to force these guys to "hit the number". Well, who got screwed? Not the realtor, not the banker, and not the appraiser.
The homeowner. Big time. Even if he doesn't know it (yet). He's still out buying Hummers with his new refi wealth (oops!)
A go-go real estate market is partly responsible for the inflated appraisal epidemic that gives consumers a false sense of their home’s worth. One disastrous result: mortgages and refinanced loans that exceed the value of a home and create crushing debts that can take years to pay off or lead to foreclosures.
Annie Lewis knows what that feels like.
“It’s a very sick feeling,” said the Lee’s Summit woman, who fears losing the recently built condo she bought in 2003 for $94,000.
In 2004, she responded to an Ameriquest TV ad to consolidate her debts by refinancing her home. She was delighted when an appraiser sent by the company valued her condo for $129,000 — a 37 percent leap in value in little more than a year. She paid off bills and settled for a 7.7 percent adjustable rate mortgage.
But it was too good to be true. This past year, six lenders rejected her efforts to get a new, fixed-rate loan to keep her interest rate from rising. All said her condo was overvalued and is only worth $108,000.
Appraisers said the problem began to grow with the housing boom and low-interest rates that spurred aggressive loan brokers to encourage consumers to refinance their loans. The carrot dangled in front of consumers — in thousands of direct-mail campaigns, TV commercials and Internet ads — is freed-up cash to consolidate debts.
But to make such high-dollar loans pass muster with underwriters, unscrupulous loan brokers chasing big commissions pressure appraisers to meet predetermined values. In other words, artificially inflate the value of the homes to justify the costlier loans.
February 28, 2006
Posted by blogger at 2/28/2006