Appraisers Pressured to Inflate Home Values

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ALBANY, N.Y. (AP) -- New York Attorney General Andrew Cuomo said Thursday a major real estate appraisal company colluded with the nation's largest savings and loan companies to inflate the values of homes, contributing to the subprime mortgage crisis.

Cuomo announced a lawsuit against eAppraiseIT that accuses the First American Corp. subsidiary of caving in to pressure from Washington Mutual Inc. to use a list of "proven appraisers" who he claims inflated home appraisals.

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Actually, there is considerable pressures to bring the value in LOWER by banks. I have lost many loans due to lower appraisals and it is always to a broker. Banks have compliance departments and frequently separate the Loan Officer from the appraiser. Banks want values to come in lower so they can charge higher rates. This is part of risk management. I know it sounds silly given the fact we originate no doc loans and neg ams, but that's the deal. Appraisals for retail generated loans are subject to much more scrutiny than brokered loans. Although purposefully depressing values is just as egregious.

I do not work for WAMU and I don't know the appraisal company so can't say it's inaccurate, but I am skeptical.
 
First American fires back.

“The complaint filed today by the New York Attorney General against First American and our eAppraiseIT subsidiary has no foundation in fact or law. We are dismayed by any impact these specious allegations may have on our company, on our many employees and on our valued customer, Washington Mutual. The Attorney General’s allegations, largely based on a handful of e-mails that have been taken out of context, or mischaracterized, and an incomplete review of the facts, belie our record of compliance with applicable law. The program called into question today by the Attorney General has been vetted and approved by the federal regulator responsible for oversight of such programs. We welcome the opportunity to now present all the facts before an impartial third party. In that presentation, we will demonstrate the appropriateness of our appraisal practices in the state of New York and we will vigorously defend the reputation of Washington Mutual and the reputation we have labored more than 100 years to build.”
 
I've run into some small scale dishonest appraisers, but mostly they were trying to be honest while making a buck. There are some flips on million dollar condos with beach views that I've heard of recently which probably were appraised by con artists.

But when the comps go higher and higher, and fraud is not obvious, what is an appraiser to do? Ignore recent comps if favor of older ones? Goddess knows that South Florida is Home Of the Fraud, but this I really didn't see.
 
no_vaseline,

You're right. Who does the AG of the State of New York think he is anyway, to suspect malfeasance? I'm sure real estate prices in NY reflect the true values of the homes just like they do here.
 
Well, no_vas, who should we blame?

It wasn't just the lenders.

If Bill Clinton were still prez, would this have been noticed in time? Before everyone jumps on me, I HATED BC, turned off the tv, every time his ugly mug came on, but now, I wish we had him around to hate, instead of Bush.

He surely wasn't stupid, and he was lucky, and he balanced the budget.
 
I'd like to blame the lenders. It's not like they can claim:

"Hey, did you hear that writing $600K loans to somebody who can't qualify for a Discover card is bad business? Who knew?"

The banks are SUPPOSED to say no from time to time! The borrower isn't going to turn the money down. Remember, they showed up looking for the money in the first place. These guys have ignored the underwriting.

Until about a year ago, I didn't understand that there were standing orders on trading desks everywhere for all the CDO tranches the lenders could deliver. That green lighted everybody and thier dog to loan money to, well, everybody and thier dog.

I think the ultimate villans are the people who live behind that curtain that is CDO and SIV that didn't know what the hell they were buying and apparently didn't care. They'll care now.
 
The people behind the SIVs et al, probably include pension funds and money mkt funds (including the one I have with Merrill) as well as stupid greedy rich people.

So how do I, personally, get away from the toxic debt? It's like trying to avoid shoes from China, they're everywhere.
 
Get away from being invested in toxic debt products? As are probably part of my Merrill money mkt fund. I'm assuming they are so invested, I asked them to send me info, but they did not.
 
I understand what you are asking. And if I knew, I'd do something I've never, never, NEVER done before.

I'd borrow every dime I could, pile all of that money into what I have, and short the living daylights out of it with all the leverage I could get. And so would everybody else if they knew.

What you asked is the $64,000 question. Nobody understands. Nobody knows. Look at Merrill this week.

It's like a crazy game of "Musical Chairs", with a twist. The one left at the end of the game with the chair gets stuck with the bill. Nuts.
 
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