Fraudulent Appraisals: The Centerpiece of Securitization PONZI Scheme

Editor’s comment: There are two “good” reasons why Wall Street wanted the appraisals inflated. The first was that the higher the appraisals (the real values be damned) the more money they could show that was moving, and the more sure they  could be that even good loans would be defaulted strategically by people unwilling to pay. The second was to create the frenetic bubble where consumers were led to believe that the rising prices represented rising values and that they better get on the train before it leaves the station.

Without investors and borrowers feeling like they were on a speeding train under the masterful control of Wall Street banks with 100+ year histories, there would have been no mortgage mess. Investors would not have been looking at the mortgage bonds as something not only safe, but with growth potential. Borrowers would have stayed away from homes or financing packages they could not afford.

Now, as the facts seep out of leaking seals, the investor side and the borrower side are realizing that real estate prices DO go down, especially when the prices are so far over any reasonable valuation. With investors, there is no deal. Without borrowers, there is no deal. It is that simple.

So now we have a new term: FRAFing — Field Review Appraisal Fraud in which Quality Mortgage Service and others are being hired to show that the appraisals were faked. This shouldn’t be hard.

Collect up a hundred random appraisers who were working during that period, and they will tell you that they were shown the contract, and directed to use the broadest possible range of comparables to come up with the highest possible appraisal, even though by industry standards, the appraisal should have been much lower.

The facts bear out these allegations. As soon as the money stopped, the home prices collapsed. Why is that? If they were really worth the price paid or financed, then homes should have been a safe place to keep your money while their were wild currency gyrations and the banks were teetering on collapse and actually still are on the edge of ending their long reign of terror over the US economy and political landscape.

The short answer is unavoidable: the homes were not worth what the sham lenders were certifying in their loan packages. remember that the appraisal is from the lender not the borrower, so don’t go blaming borrowers for setting up this mess. In 2005, 8,000 appraisers signed a petition to Congress to warn of these practices. They were ignored. Now it will take decades to clear out the mess that could have been avoided by a quick nip in the bud.

The effect on borrowers is that they were victims of the fraud and if properly presented the liability goes all the way up the fake securitization chain leading, like the bridge to nowhere, to no loan pool that actually owns the obligation, note or mortgage. Investors (pension funds etc) bought faked mortgage-backed bonds that were neither bonds nor mortgage-backed and the borrowers bought homes or loan packages (refinance was 50% of the market) based upon a contract whose premise was that the market was rising and the value of their homes was rising with spectacular results and would never come down.

BOTH investors and borrowers deserve better treatment than they are getting. It is like the veterans coming back from combat tours. Whether or not you agree with the policies that sent these brave men and women to war they should be treated like heroes, and not victimized by a society that no longer has any use for them. When do we reach the point of outrage where the people march on government and the banks and take back their power?

The reason that homeowners didn’t get the benefit of the bargain they made when they bought these sham loan products, is because the deal was never there. That is the essence of fraud. The banks. media and regulators will tell you that the market went down. No. It actually didn’t “go down” it crashed back to the real value of the property as soon as the scam was over. by Justin T Hilley

Audits by Quality Mortgage Service indicate that many demands by financial institutions that lenders buy back mortgages are based on fraudulent appraisal schemes in an attempt to increase the success of repurchase claims.

The Brentwood, Tenn.-based quality control and assurance company believes some appraisers are systematically being pressured to use a subset of market data that skews the calculated market value of the property backing the disputed mortgage.

QMS says the scheme, which it calls FRAFing, or field review appraisal fraud, is often found in appraisals when mortgage repurchase demands are pushed backed to lenders for a claim based on a field review appraisal value.

“The appraiser or someone is manipulating data and/or information in sections of the appraisal to obtain a targeted value result,” QMS President Tommy A. Duncan says. “They are ignoring the higher value of comparable so that a lower value is supported in the appraisal.”

The data used to compare to the property is nearly always restricted to the bottom 20% to 30% of sale prices in the market area, Duncan says.

“What we are finding, when supporting repurchase defenses, is a concerted effort to base an opinion of market value on the lower one-third of market data that produces erroneous estimates for approximately 65% of the properties appraised — assuming equal market distribution,” he adds.

Financial institutions are FRAFing because of intense pressure to successfully push back loans for repurchase, Duncan claims. “It is a conclusion I am making because it does not make sense for an appraiser to overlook the obvious,” Duncan says. “Therefore, the act must be based on pressure and not sloppy work.”

The QMS repurchase defense audit compares the information contained in mortgage loans and supported material in the claim usually at the lender’s second attempt to defend. QMS employs human analytics and asymmetrical methodology in its review to ensure that the document has been prepared correctly and that the information reported is accurate.

Duncan recommends mortgage lenders perform the highest level of due diligence when field review appraisals are used to support a repurchase claim in order to combat FRAFing.


12 Responses

  1. I agree enraged..the grocery store is a wealth killer…it is the costs of necessities that they are now using to destroy the people…! This was achieved by fake money lending called….CREDIT LENDING and FRAUDULENT INVESTING…. under the guise of American Institutions…theses crooks have turned all of our NATURAL RESOURCES INTO A FRAUDULENTLY INDUCED TAX….SAME WITH OUR PROPERTIES…THERE ARE TOO MANY GREEDY HANDS IN OUR PIE. THESE POLITICIANS ARE DIRTY DOUBLE CROSSERS.


  3. SECURITIZATION never occurred…Therefore, SECURITIZATION is clearly a code word for FOREIGN ESPIONAGE….. Otherwise, these fraudclosures, would NOT be still going on. This is simply the foreign takeover of America by traitors from within…..the politicians, the attorneys and the judges.

  4. @DCB
    I think it was Hemingway or wild that said a rich man is just a poor man with money
    I disagree with that statement it depends on the means used to become rich and if a person stole to get money well his karmic debt must be paid… And that’s all I have to say about that forest

  5. Neil, my man, my man, my man, did you actually read the material you cited here? It’s troublesome that it looks like not.
    This group is part of a group to fight repurchase based on the initial bogus appraisals and apparently new appraisals done by the investors. In an ironic flip-flop, they are saying when investors demand that repurchase, the investors’ appraisals are being manipulated (sort of like the banksters did but on the ‘high’ side to justify their loan amts) and they are going to challenge the investors’ appraisals they are calling low-balled.

  6. DCB,

    “money is the root of all evil anyway”. No, No. Not money. THE LOVE of money. You know, as in “allowing money to become more important than anything and anyone in your life. Which is, in fact, what they turn us into by taking it away from us: when you really don’t have any and never know ahead of time if you’ll have enough to go to the grocery store, it does end up becoming more important than anything else. Especially if you have kids to feed.

    The bastards!

  7. How could the FED deceptively steal the property of the American people?…..

    Way too complex IVENT——the fed affects the US citizen by creating additional [new] credits/dollars —and either buying crappy assets from vulture offshore hedge funds with no discouts —or lending [new] money to the banks based on crappy collateral. ECB is also doing this now on both counts–despite German citizenry 3: 1 opposed.

    So at the end of the day as they inflate the number of dollars outstanding and give those new dollars to qualified persons, the dollars in your retirement account will not buy as much food or fuel as they did before the devaluation. Thus gold is rising in value—actually reflecting dollar falling in value.

    So if they say print 10% new money—your dollar saved is now 90 cents–this is the easiest way to cope with the promises made over the years to you re social security for example. They took dollars from you in say 1976 that would at the time each buy one ounce of silver—–in exchange for a promise to pay you future dollars adjusted for printing. But now the demographics are such that the retirees want dollars back to buy bread.

    But there are not enough dollars around to pay debts and build casinos and pay buy yachts forr every banker—so they need to cut outlays. But cant politically actually send you a check for less next month than last–[except greece, spain, ireland etc] —so instead they freeze your benefits in dollar terms —while allowing the prices to rise by reflecting the new money handed out to the financial guys to keep their jag going. So they promise to give you $100/month based on the dear money they took from you years ago—-but lo and behold the price of bread in the meantime has risen from 25 cents a loaf to $5 a loaf. Now they need to step up the pace of printing and give key workers nice pay raises of 10-20% /year [eg all the CEOs]-tax the increase at say 14% —thus they can give you back the dollars they promised you —but not the value of those dollars. The CEOs are the only ones that are keeping up with the not so hidden inflation —because they understand the game. But actually we all know the inflation is roaring–look at prices of food and fuel and cars —rent—–The only thing I cant understand is how the economists can look at the price data and tell me with a straight face that there is no inflation at the present time.

  8. How could the FED deceptively steal the property of the American people?…..FRAUDULENTLY INFLATED HOME VALUES…..! Like lend the people 20% of their equity at the bubble price. THEY DID THAT


  9. I recently had an atty tell me that a house must have been worth the amount of the loan at one point–by implication—therefore they give you a real sweet deal if they will accept anything less than the amount of the note–oh yes and geez—its no longer practice to get the note back no matter how you paid it—-amendment of UCC by local practice—so thats the answer–you dont need the notes back because the banks decided you dont need them—-most of the time anyway–and for those few instances where the missing notes turn up later for collection—geez it doesnt happen very often and in the totality it doesnt matter

    and you mitigate your risk in most red states by regularly attending church services and praying profusely that no 2nd claimant comes along—i call it the UCC Biblical Amendment—and if they do–well after all that church going you realize that money is the root of all evil anyway–so its really in your best interests if a collection agency takes as much away from you as possible–to get you closer to God

    and this is what I think Llloyd Blankfein meant when he said he worked tirelessly doing God’s work——sorry if i offended anybody —i dont touch religion generally—but since LLoyd did I thought id put it in context

  10. I just had a guy come up to my door with a flyer all excited that he had a house to sell to me—his words:

    “Prices are really great right now! Now is a great time to buy! You’re going to miss out! Do you know anyone who is looking to buy?”

    he seemed so pathetic to me…

  11. @Javagold,

    Combine that with the fact that, for 30 years, we have heard that Social Security was insolvent and on the brinks of collapse and we would not have a retirement, hence the need for us to absolutely buy real estate as a nest egg, lest we be on the street at 65, without a pot to piss in, and you have the biggest con ever pulled on us.

    I am so f…ing pissed!!!

  12. The second was to create the frenetic bubble where consumers were led to believe that the rising prices represented rising values and that they better get on the train before it leaves the station….


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