All this real estate industrial complex (REIC) fraud and corruption, it had to end badly. And for homeowners who were overjoyed that that HELOC gave them a pot of gold, based on a fraudulent appraisal, well, they're finding out quickly there is no such thing as free money.
What there is is bankruptcy and foreclosure. This abuse, this fraud and this pathetic immoral display of a REIC gone awry is likely why Denver leads the US in foreclosures today. People got suckered, communities got suckered, and now they're paying the price. Yes, the consumer is at fault in the end. But like drug dealers and pimps, evil REIC forces contributed to this human toll.
Thanks JH for the link. Great article, and again another one for "rolodex of realtors" Catherine Reagor of the Arizona Republic to learn from.
His factory-made home had not been installed on his land, yet when he signed his first home loan, Frank Finn Jr. thought his family was getting a great deal. He borrowed $102,500, the cost of the land, home and installation. The appraisal showed his home in West Valley Estates, a community of factory-made homes, would be worth $130,000 - $55,700 above the ZIP code's median house price.
"We were so happy," he said. "I was like, 'Right on; geez, I'm really making out on this. I've already got $28,000 in equity."
Six years later, Finn is a foreclosed homeowner with ruined credit and monthly rent bills. So are his old neighbors.
Finn and many of his former neighbors believe they were victims of appraisal fraud, a hidden crime that officials say is helping fuel Colorado's nation-leading foreclosure rate. Reports of all mortgage fraud nationwide have tripled since 2003 to nearly 22,000 last year, the FBI said. In the past five years, appraisal fraud has been involved in up to 40 percent of fraudulent mortgage reports, according to the Mortgage Asset Research Institute.
In Colorado, mortgage fraud is "a significant factor" in the rising number of foreclosures, and "bogus appraisals are a big, big part of it," said Colorado Attorney General John Suthers.
Suthers' office is pursuing six mortgage-fraud investigations, including cases involving inflated appraisals.
July 17, 2006
Saw it coming: Inflated, bogus appraisals burn homebuyers and sap lenders' profits
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13 comments:
I have friends caught up in the same situation, they bought in the booming 04/05 year, and when i went and seen the house they bought for $332,000 i almost shit myself..the guy who appraised that house for $332,000 was either a blind. or just plain stupid...needless to say IO-ARM 07 ajustment.
yet, yet, how often did the homeowners themselves actually seek
the inflated appraisals to get higher dollar value loans? They all thought everything would alsway go up..but it dident
homeowners are definitely to blame - they wanted the free money
now they get their just desserts
but the corrupt commission-paid REIC played the role of the drug pusher, giving 'em what they wanted just so they could make a buck
a reminder as to the definition of equity:the difference between what you owe and what you can sell it for....many people can't even sell their homes now the values aren't clear if based on comps, (neighbors recent sales) their value is diminishing, equity evaporating.....that equity based loan is still in effect but equity is...gone
I've been saying for years that an true appraiser will be out of work and a inflated appraiser would be worked to death. I know of several houses that are pieces of crap that have unreal appraisals. There is no way those house now could be sold anywhere close to what they owe. My father in law who took money out twice on his shack to add 2000sf addition and cash out of Northern San Deigo, was out working on his travel trailer instead of breaking ground on the project. He missed it by 2 years. Now he owes much, much more than that house will sell in the next 8 years.
I remember when a new development in Southern San Diego was going up and being sold..the seller was convincing the appraisor that the new homes would be worth sooo much so the appraiser felt compelled to high value appraise the new development!
The appraiser hired by the bank is certainly not hired to prevent the buyer from overpaying. It must be up to the buyer to determine that for him or herself.
If the appraisers are sent by the bank to ensure that the value of the house is worth the value of the loan then what would the bank stand to gain by inflated appraisals?
If the appraisers are sent by the bank to ensure that the value of the house is worth the value of the loan then what would the bank stand to gain by inflated appraisals?
Higher interest payments?
thinker - appraisers aren't being sent by banks - they're being sent by loan brokers, who then sell of the loans to securitized debt holders
When I lived near Appleton, WI (I now live in MD) I was sending letters out to people who were in danger of having their houses foreclosed on them. I was visiting them to work out a potential short sale with the bank/lender, buy the house, and sell to a willing buyer after doing fix-up on the properties after years of neglect.
In many cases, these uneducated buyers, starving for money in some cases, would get refinanced at a value much higher than the value of their homes. However, they were always told that's what the property was worth. In every case it was a drive-by appraisal. One house that I visited appeared to be worth $55,000 but the financing on the property was $72,000. That may not seem like a lot, but keep in mind that the people in these properties could only afford a $55,000 house.
Anon at 5:07 PM: I don't know why you think it is only loan brokers and that banks are not somehow involved. In the case above, it was a small bank but they were holding the mortgage.
So who are these people who buy mortgage debt? Are they institutional investors, hedge fund managers, foreign investors? When the music stops who exactly will be left without a seat?
Your observation actually substantiates that across the board no-one REALLY KNOWS what their home value is other than that it isworth whatever you can get a buyer to pay!
thinker - yes, yes and yes.
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