It should come as no surprise that 10 years after the crash, Bloomberg reports that most U.S. homes are worth less now than before the crash, with many homes worth less than when they were purchased or refinanced long before the crash. Appraisal fraud was thus institutionalized to the dismay of the licensed appraisers and subsequent “drive-by” appraisals done by real estate agents. The question is whether this fraud is NOW actionable. I think it is.
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Based on over one hundred years of analysis and research, most economists agree with the Case-Schiller conclusion that in the end, the fundamental factor in housing prices is median income of people who own or would like to own their home. The next conclusion is obvious: with wages stagnant for nearly 40 years the VALUE of homes should also have been stagnant. And that is not merely a conclusion; it is a fact. The value of residential property has indeed been largely stagnant while wages have remained largely stagnant (taking into account inflation).
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Indeed a reasonable person could argue that wages have not merely been stagnant — they have declined sharply cutting into savings and the illusion of savings. It’s not just that CPI prices have increased, it is that the actual cost of living has increased with new “necessary” payments for things like cable, internet and cell phone usage and other things that didn’t exist 40 years ago. Disposable income during this period has gone negative.
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So if the value of residential property was declining, why were PRICES increasing at astronomical rates? The reason appears to be that the largest players in the financial system embarked on a campaign to convince consumers that the availability of money was more important than actually having it. At this juncture most people are convinced and reminded constantly that their FICO score is more important than their income or the amount of money they have in savings. And they were sold on the idea that buying a home was a form of compulsory savings that would mount up in the form of equity and even result in large profit when the home was sold. In short wages received were replaced with payments out— a negative outcome for most consumers and a negative outcome for the nation and its economy.
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In 2005 more than 8,000 real estate appraisers signed a petition to congress to address forced appraisal fraud. They warned that they were under pressure to justify pricing of residential real estate. It turned out that this also impacted the commercial real estate market. If appraisers wanted to work they were required to fake the appraisal to justify the price that was being “paid” through what appeared to be mortgage loans. In most cases they were given the contract to help “guide” them. The appraisals were thus based upon a formula — the price of the home plus $20,000-$50,000. Comparative “values” included properties that were not comparable and/or spikes caused by the market being flooded with money. Loans that were clearly not affordable were sold using “teaser” rates in which the initial payment or payments were within the range of affordability but reverted in complex ways to standard amortization of principal and interest.
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It should come as no surprise then that 10 years after the crash, Bloomberg reports that most U.S. homes are worth less now than before the crash, with many homes worth less than when they were purchased or refinanced long before the crash. Appraisal fraud was thus institutionalized to the dismay of the licensed appraisers and subsequent “drive-by” appraisals done by real estate agents.
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Most of this information remains unknown to most homeowners and prospective homeowners. In fact, despite all evidence to the contrary, the notion sold by the banks was that real estate never goes down in prices and always leads to a profit. The information was withheld by banks for obvious reasons. Their goal was to move as much investor money as possible into the illusion of a securitization scheme. Yet the consumers that were hammered by the consequences were the only parties who paid for this fraud. As I have previously stated, there is plenty of blame to go around the table. But the primary losers, even today, were the ones with the least access to the information that was vital to the largest transactions of their lives.
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Some appraisers dropped out of the market because they didn’t like committing fraud. But most succumbed to the industry practices that were aimed at deceiving homeowners. Deception was and remains at the heart of the entire illusion of securitization. It didn’t happen. The appraisals were faked as were the “originations”, “aggregations”, and even the sale of securities that did not qualify for exemption as “mortgage backed” securities and hence should have been regulated and prosecuted under existing laws, rules and regulations to prevent this kind of consumer fraud and the larger securities fraud perpetrated by the banks against investors whose funds were largely derived from the same consumers whose retirement funds were being managed by professionals who were duped into believing the fake ratings of fake bonds in the mortgage market. By having their retirement money managed by “professionals” consumers were unknowingly contributing to their own demise in real estate transactions.
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The question is whether the withholding of such vital information and the cover-up tolled the statute of limitations on claims based in fraud, violations of TILA, RESPA, FDCPA and state lending laws. I think it does.
Filed under: foreclosure |
When I refinanced to a fixed in 2006, after Katrina when I obviously could not sell and downsize, my appraisal was $739,000. I listed it for $649,000, but zero action on the coast, eventually took off market. In 2016 BAC, through it’s ‘Massachusetts Counter Offer’ dept. gave an in house appraisal of $163,000….Really? Over half a million difference? I should add that I only owe, per the BAC report, $174,000. I sent a certified letter demanding a licensed Fl. appraiser provide an appraisal. No response….
Reblogged this on California freelance paralegal.
When our home was refinanced by Country wide Home Loans and its division Spectrum Lending, it was appraised fraudulently. The appraiser came to the living room and said it was worth more than $330,000 when the tax appraisal value was only below $200,000. When I brought this to the attention of the appraiser, he told me that I didn’t know the market value of houses then (2007) and that was why there were appraisers.
Now, I know that it was appraised way too high for many things from commission, approval and to boost up mortgage backed security values.
Has to go to funding — and discovery of that funding. These loans were predatory. Based on inflated appraisals, and not income. Can only be predatory if the same “lender” funded. That lender is still unknown. All that was funded was any cash-out. And, that funder for “cash-out” still unknown. So called “refinances” were simply restructuring of already classified default debt So the funding for cash out – was predatory and based on inflated appraisals. So should still be good as to inflated appraisal, but need to know WHO actually funded the so-called refinance, which was not really a mortgage/deed of trust, but restructuring of a debt – an inflated debt with cash-our based on inflated appraisal. Until that party is known, inflated appraisal is in question.
Not an attorney, and not meant to be legal advise. .
CRD’s view on App. Fraud: Yes it should be good if within the statute of limitations. Even if not a separate claim, it forms the basis for a straight fraud claim, misrepresentation, rescission et al., based on mistake/fraud in the formation of the contract [Note]. Call us for more at 818.453.3585 today.