Appraisal Fraud

It's really sad that it's come to this:

"It's called 'hitting the number' - or inflating a home's value - and real estate appraisers who don't do it often enough can find it hard to make a living."

Yet another problem contributing to the housing boom/bust. So we combine appraisal fraud with relaxed lending standards and low interest rates and we get.........wait for it............

A Housing Bubble!

Gee! Who'd have thunk it:

In prepared testimony Tuesday before a Senate subcommittee on mortgage industry abuses, Alan Hummel, spokesman for the Appraisal Institute said 'Appraisers face pressure from various parties involved in mortgage transactions. They are told to doctor their appraisals or else never see work from those parties again.'"

It's absolutely unbelievable how irresponsible the mortgage industry has acted over the last five years. "Doctor your appraisals"? Unbelievable.

So this is what we have: we have previous appraisals that inflate the price. Then, people refinance their current mortgage because they have all that extra equity to play with. Except that their homes aren't really worth as much money as they thought. They spend their re-fi money on home improvements or vacations or big screen televisions or a new car, and then they decide to sell their house. An appraiser comes out again, no more than two years later and appraises the house at thousands of dollars lower than the previous one. And then you see people who own property with a market value at $350,000, yet they owe $700,000. These kinds of practices are causing the shift in wealth from the middle class to the upper class. It's truly unbelievable how irresponsible the markets act when there isn't any regulations or oversight!

Oh, but the oversight was just late arriving:

The National Association of Mortgage Brokers (NAMB) addressed the issue last year, changing its bylaws to prohibit pressure on any other players in the transaction, including appraisers.

Maybe I'm an old-school thinker, but doesn't it sound a bit criminal to influence appraisers in the first place? I thought that was called 'fraud'.