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APPRAISAL FRAUD IS THE ACT OF GIVING A RATING OR VALUE TO A HOME THAT IS WRONG — AND THE APPRAISER KNOWS IT IS WRONG. This can’t be performed in a vacuum because there are so many players who are involved. They ALL must be complicit in the deceit leading to the homeowner signing on the the bottom line and advancing his home as collateral on a loan which at the very beginning is theft of most of the value of the home. It’s like those credit cards they send to people who are financially challenged. $300 credit, no questions asked. And then you get a bill for $297 including fees and insurance. So you end up not with a credit line of $300, but a liability of $300 just for signing your name. It’s a game to the “lenders” because they are not using their own money.

And remember, the legal responsibility for the appraisal is directly with the appraiser, the appraisal company (which usually has errors and omissions insurance) and the named lender in your closing documents. The named “lender” is, according to Federal Law, required to verify the value of the property.

How many of them , if they were using their own money, would blithely accept a $300,000 appraisal on a home that was worth $200,000 last month and will be worth $200,000 next month? You are entitled to rely on the appraisal and the “verification” by the “lender” (see Truth in Lending Act and Reg Z). The whole reason the law is structured that way is because THEY know and YOU don’t. THEY have access to the information and YOU don’t. This is a complex transaction that THEY understand and YOU don’t.

A false appraisal steals money from you because you rely on it to make the deal for refinancing or for the purchase. You think the home is worth $300,000 and so you agree to buy a loan product that puts you in debt for $290,000. But the house is worth $200,000. You just lost $90,000 plus closing costs and a variety of other expenses, especially if you are moving into anew home that requires all kinds of additions like window treatments etc. But the “lender” who is really just a front for the Wall Street and the investor pool that funded the loan, made out like bandits. Yield spread premiums, extra fees, profits, rebates, kickbacks to the developer, the appraiser, the mortgage broker, the title agency, the closing agent, the real estate broker, trustee(s) the investment banking entities that were used in the securitization of your loan, amount in some cases to MORE THAN YOUR LOAN. No wonder they are so anxious to get your signature.

“Comparable” means reference to time, nearby geography, and physical attributes of the home and lot. Here are SOME of the more obvious indicators of appraisal fraud:

1. Your home is worth 40% of the appraisal amount.
2. The appraisal used add-ons from the developer that were marked up for the home buyer but which nobody in the secondary market will pay. That kitchen you paid an extra $10,000 for “extras” is included in your appraisal but has no value to anyone else. That’s not an appraisal and it isn’t collateral or fair market value.
3. The homes in the immediate vicinity of your home were selling for less than your home appraisal when they had the same attributes.
4. The homes in the immediate vicinity of your home were selling for less than your home appraisal just a few weeks or months before.
5. The value of your home was significantly less just a  few weeks or months after the closing.
   
6. You are underwater: this means you owe more on your obligation than your house is worth. Current estimates are that it might take 20 years or more for home prices to reach the level of mortgages, and that is WITH inflation.
   
7. Negative amortization loans usually allow the principal to rise even above the falsely inflated appraisal amount. If that happened, then they knew at the time of the loan that even if the appraisal was not inflated, it still would not be worth the amount of the principal due on the obligation. For example, if your loan is $290,000 and the interest is $25,000 per year, but you were only required to pay $1,000 per month for the first three years, then your Principal was going up by $13,000 per year compounded. So that $300,000 appraisal doesn’t cover the $39,000+ that would be added to your principal balance. The balance at the end of 3 years will be over $330,000 on property APPRAISED at $300,000. No honest appraiser, mortgage broker, or lender, would be complicit in such an arrangement unless they were paid handsomely to do it and they had no risk because they were not using their own money for the loan.
   

Filed under: foreclosure | Tagged: access to the information, Appraisal, appraisal company, appraisal fraud, builder, closing agent, credit cards, deceitful lending practices, developer, errors and omissions insurance, fair market value, false appraisal, fees, fraud, HERS, insurance, kickbacks, lenders, MORTGAGE BROKER, profit, rating, reabtes, Reg Z, TILA, title agency, trustee, Truth in Lending Act, value, verification, yield spread premium, YSP | 26 Comments »