The Home Appraisal Numbers Game

Home Appraisers Tell CBS News They Were Told To Value Homes High — Putting Banks, Homeowners At Risk

(CBS)  Home appraisers Pam Crowley and Joyce Potts knew the roof was caving in on the housing industry four years ago, CBS News correspondent Sharyl Attkisson reports.

That's when they noticed their profession being turned on its head. Instead of letting them do their job and figure what a home was worth ... bankers and realtors started telling them what dollar number to hit.

"The appraiser is not to accept any orders where it's pre-determined what the value should be," said Crowley, a Florida certified real estate appraiser.

Most everyone wants a high appraisal: buyers pay less cash down; banks make more money on bigger sales. It's the appraiser who's supposed to be fiercely independent to keep things honest.

But more and more, appraisers have been told that, to get hired, they have to guarantee a high appraisal - sight unseen.

One lender emails appraisers, "I need at least $210,000." Another writes: "I want to know if we can hit a value of 280K."

Some lenders even send out blatant mass e-mails putting appraisers in a bidding war. To 77 appraisers for a home in Arizona: "whoever can provide the highest [appraisal] will receive the deal."

"We were blackmailed," Crowley said.

Those who don't play ball lose work.

Whoever can provide the highest will receive the deal. Those that are honest will get run out of business.

We didn't have to look far to see the fallout. Joyce Potts had just been called by a mortgage broker who wanted a high appraisal to refinance this tiny house in disrepair. The owners don't want to be identified.

Attkisson asked Potts: "What was the number they wanted you to appraise this house at?"

"Well, it started at $210, then he says, 'what about $175.' Then, 'how about $150. can you get $150?'" she said.

Potts turned down the job. But while we were there, another appraiser came by. He decided not to look at the house with CBS News cameras there.

Records are confidential, so CBS News doesn't know if he ended up appraising the property.

So many appraisers have felt pressured to give inflated home values, 10,000 of them signed a petition hoping to get federal regulators to act.

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Read more on Couric & Co.: Houses of Cards and Hot Potatoes

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Now under scrutiny, bankers and lenders are starting to adopt new rules to ensure independent, reliable appraisals.

"It's not in the lenders' best interest to have an inflated appraisal, to the extent to that was taking place, lenders want to see that corrected," said Steve O'Connor of the Mortgage Bankers Association.

The changes are too late for many, including Crowley who's lost her business, and the couple struggling to make inflated payments on a house that's not worth what they owe.

[frankbowers]

For those of you lwho are reading this story lor article do not have to worry about the new tax plan hurting you it is for those over $ 200,000. A year income and I bet the truth be known not one of us have to worry.
Unless you are like gw bush and lie to make it sound as if you do, and to them shame on YOU.
the best of good byes Frank Bowers

[psgute]

Appraisers used to be the independent check on value. That only lasted as long as the banks stayed honest. When banks started to pressure appraisers for high numbers versus reviewing for realistic numbers, the show was over. Another part of the problem is that for the past 5 years builders have been able to use wholly owned subsidiaries to act as the realtor, mortgage company, and appraiser. When the party with the most to gain controls the entire process, the consumer gets taken. Most of the new developments that are forclosure clusters were sold in this fashion. Several times over the past 4 years I could not close clients on purchase deals because the ONLY appraiser who could get the needed value was the subsidiary of the builder. When everyone else is saying that the house did not meet value, the builder was commiting FRAUD. When a builder is making several hundred thousand dollars selling a poorly build home on property that was an orange grove, then getting 3% of the sales price as real estate commission (broker''s share of the subsidiary) and 1%-4% of the sales price as mortgage commission (subsidiaries set up as lenders do not have to show YSP), you can bet the farm that the appraiser who is an EMPLOYEE of the builder will put whatever number is needed down. If the media ever did it''s job, this is a story that would get looked into...

[scout789]

running ralph: One can certainly hire their own appraiser when purchasing a home and I''m surprised more homebuyers don''t do this. Nothing wrong with a second opinion. Buyers faithfully think that the commissioned-based salespeople they call upon to help them with their transaction are looking out for the their best interests. I suppose most people don''t want to spend the extra few hundred dollars to get the opinion of their own appraiser but instead rely on the appraiser of a comissioned based mortgage SALES rep.

Just to be clear though, when applying for a mortgage loan, the lender always has to hire their own appraiser and typically will not rely on an appraisal from another source. So even if one hires their own appraiser, they cannot hand that appraisal report off to their lender to use.

[sebastian27-2009]

I retired in 1995 with 35 years as a real estate broker. Things began to change when two things happened. Banks and S&Ls started selling their mortgages instead of keeping them in-house and Wall Street started packaging them and selling them to investors. While this gave the lenders a lot of leverage, it encouraged loose underwriting compounded by poor appraisals.
The appraiser always knew the sales price and amount of loan that had been applied for, and he was usually encouraged by the lender and the real estate broker, if there was one involved, to appraise the property for enough to make the sale go through. All three had the motive to make money.
It was my experience that when FHA and VA had there own appraisers ie. did not depend on so-called independent appraisers that there it was much more difficult for the appraisers to be influenced by the lender or RE broker.
I believe that the appraisal process must be reevaluated and that the appraiser should not be told of a target value, but should only be given a range. I realize that this information would be hard to keep from the appraisers, but effors should be made to do so.

[urfactcheck]

Freddie Mac Joins Fannie Mae in Raising Mortgage Fees

By Jody Shenn

Nov. 15 2007 (Bloomberg) -- Freddie Mac, the second-largest source of money for U.S. home loans, joined Fannie Mae in introducing or raising fees on mortgages the company buys from lenders because of the increased risks in slumping housing and mortgage markets.

Freddie Mac is primarily setting new fees for mortgages made to borrowers with credit scores below 680, whose loans exceed 70 percent of their property''s value. The new charges range from 0.75 percent to 2 percent depending on credit scores, according to a bulletin by the company. The changes take effect March 1.

The higher fees by Freddie Mac and Fannie Mae follow an 81 percent drop over the past year in the market for new mortgage securities without guarantees from the government-sponsored enterprises. The tightening of lending standards that''s resulted has worsened defaults by borrowers unable to refinance rising adjustable-rate loans and has limited home sales and prices.

SEE MORE AT http://davidcheecpa. blogspot. com/2007/12/freddie-mac-joins-fannie-mae-with-new. html

AMAZING HOW NOBODY IN THIS GOV''T EVER RAISED THIS CAUSE OF THE ECONOMIC MALAISE SOME IN THE PUBLIC NOW SUFFERS THIS YEAR!!! The gov''t should make loans to those affected to prevent this crisis!

Predatory Capitalism ! Ronnie Raygun unleashed it. We''ve been looking at it''s hideous face ever since. In the mortgage industry.
The credit card industry.
Buy a company, take it apart and sell the pieces and trash all the jobs industry..

Will we ever put this monster back in a cage....??

[gbalpha33]

So, with housing appraisals inflated, tax assessors just love it. Now your home will be assessed based on the inflated values of houses around you. I have already seen it in my own home. A $3000.00 value increase and I haven''t changed a thing.

[runningralph]

What is needed is appraisers that work for buyers. The prospective buyer should go to the appraiser and pay them to lowball the property value and specify why the property is not worth much. Bring this low appraisal to the real estate agent and the lender. In the long range big picture, the country will be better off if people are discouraged from living in single family dwellings.

[michaelblomq]

We must impeach. We have plenty of time.

www.wexlerwantshearings.com

One of the President''s most important Constitutional responsibility is to care for the faithful execution of law. If he is NOT executing the laws of the land our congress (checks and balances) is supposed to impeach him.

Quit whining and do something about it. Voting is not enough.

Sign on with www.Wexlerwantshearings.com go to www.meetup.com and find local groups who are demanding impeachment.

Once Spitzer was caught there where dozens of representatives calling for his impeachment. What is worse a Governor who cheats on his wife or the most corrupt President in our nation''s history who has no qualms with murder.

[fuzzybear9]

Hello Home Owners

I think its Ok to sit and discuss the why`s and what`s
of the failed system.
But if we want to make real change in the system
those who are in chsrge of running the System need to go. Lock , Stock and Barrel.

America seems to be stuck in a rut with these same corrupt Senators taking paybacks and granting favors to corrupt Banking Officials.

America will never solve its housing or any other problem for that matter.

Until , UNTIL
you get rid of the corrupt parties and politicians
that run the goverment.
as Long as you have these two frindge political parties, controlling the votes of the citizens.
you will continue to have Failure.

So what are we suppose to do Fuzzy ?
you have the right to vote at least.
Lets not keep voting for Senators that are still in the Status Quoe.

Thats your answer.

Sincerely Fuzzy

[hdmngr1]

To most people it appears that Pam is a real hero but I would imagine even when times were good that she never filed an income of over 20.000 a year Its all about the big biz that she lost if that is big biz

[peturner-2009]

This scandal is larger than we imagine. Cudos to CBS. Now do the FULL and COMPLETE story....A teaser story does not do this justice to the American homeowner nor the American taxpayer who will shoulder this burden just like the RTC and the S & L meltdown. Bailing out banks versus S & Ls will like be bailing our bathtubs versus the Atlantic Ocean.

[peturner-2009]

This story was a glorious beginning. However, the iceberg tip has not even been seen yet. Lenders utilized Automated Valuation Models for higher priced houses, charged borrowers full appraisal fees for a $20.00 piece of junk and now want to blame the appraiser when absolutely NO APPRAISAL was done. Fannie and Freddie have agreed to negotiate with AG Cuomo of New York because he has overwhelming evidence of their hands in the cookie jar. This has been a scandal from top to bottom, and it is in NO WAY over yet. It is NOT just sub-prime...it is prime mortgages as well. The collateral behind the mortgage paper is bogus, and is probably gonna get exposed. We can only hope CBS pursues this story to the fullest extent. The American homeowner AND the American taxpayer deserve no less than full exposure and explanation.

[wiseoneelder]

You really must get this story out again and for a longer more in depth time. One hour and you still would not find the ice burg.

Condo-tels across the country having been appraised as single family living units, not as investment property. In the $500K to $1M range.

HUD Code housing, using assemble comparables with in the resort and selling for triple the value and being finance. When similar models outside of the resort as = to 2/3 less value with a few miles.

Good appraisers are leaving the profession every day for the simple fact they will not lie or push value on an appraisal report.

It is starting to happen with the FHA loans now. The same nonsense that caused the sub prime mess. The Lenders and Mortgage Brokers have shifted to FHA and applying the same pressure to appraisers now. Do we need to wait aging four years and then wring our hands as to how it happens and why no one stopped it?

You really need to let the American people see the whole story. Know that when the closed a loan for higher bucks, the lenders make thousands of dollars off their loan. You need to air the rest of the story.

The AMC%u2019s are forcing the appraiser to work faster and cheaper, many times below that of the minimum wage in the state. Yet they rape the home owner with higher and higher fees. While paying lower and lower fees to the appraiser.

[wiseoneelder]

You really must get this story out again and for a longer more in depth time. One hour and you still would not find the ice burg.

Condo-tels across the country having been appraised as single family living units, not as investment property. In the $500K to $1M range.

HUD Code housing, using assemble comparables with in the resort and selling for triple the value and being finance. When similar models outside of the resort as = to 2/3 less value with a few miles.

Good appraisers are leaving the profession every day for the simple fact they will not lie or push value on an appraisal report.

It is starting to happen with the FHA loans now. The same nonsense that caused the sub prime mess. The Lenders and Mortgage Brokers have shifted to FHA and applying the same pressure to appraisers now. Do we need to wait aging four years and then wring our hands as to how it happens and why no one stopped it?

You really need to let the American people see the whole story. Know that when the closed a loan for higher bucks, the lenders make thousands of dollars off their loan. You need to air the rest of the story.

The AMC%u2019s are forcing the appraiser to work faster and cheaper, many times below that of the minimum wage in the state. Yet they rape the home owner with higher and higher fees. While paying lower and lower fees to the appraiser.

[tippr01]

I the Fannie Mae Mortgage Fraud Update dated 01/2008, 14% of the fraud reviews completed through 12/2007 were attributed to property issues (Value-4% & Property-10%). My market area in SW Florida has the highest rate of foreclosures at a rate of one in every 84 households per a recent report provided by RealtyTrac.
Dialing for dollars via fax, email or phone has been an ongoining practice by some mortgage loan originators. Overvalued properties has resulted in higher real estate tax rates and higher insurance rates locally. Additionally, housing costs increased beyond the local income levels of teachers, public safety employees and other local wage earners.
It was not uncommon to see suspicious sales transactions while researching sales for appraisal assignments over the last several years. The issue was who would investigate suspected sales. We as appraisers do not have the appraisal reports available to submit to our regulatory board unless we were completing a review of a suspected misleading appraisal. Ms. Crowley established a web site for reporting of suspect transactions, requests for appraisal services demanding minimum values, etc.
The issue of value pushing originators is only one of the negatives appraisers face on a daily basis.
Thank you CBS News for this broadcast.

[payasyougo]

On the other side of the coin is home inspectors.
Most realtors don''t want the buyer to hire an inspector that is thourogh. And state real estate commissisons tend to be in control of legislation that affects home inpsection guidelines. And relators make the commission on the sale - which could be hindered by a fair inspection.

Banks make the money on loans and appear to have influence on appraisals these last 4 years.

Realtors influence the home inspection industry in both legislation of inspection guidelines and recommendation of inspectors to buyers. Why are both these scenarios not decoupled?

What is WRONG with this picture??


Posted by lisacallenwo


Elsewhere on thes site you will find a story concerning a lady of the eventing. It has over a thousand comments.
This store has less than 50
What is wrong with this picture indeed...

[aroell2]

obsolescence, I am in Oklahoma. We are very fortunate to have a board that is fair, impartial, objective and ethical. If your state''s board is anything BUT that, the appraisers in your state need to get together and get the members replaced.

[obsolescence]

ARoell2, I don''t know which state you''re in but the last time I tried to turn in an appraisal that was blatant fraud, the ACLB actually tried to scare me with their warnings of: "you better have the value & the facts completely right or we will be investing you". NICE! This land appraisal on a SFR lot used comps with river frontage, a commercially zoned lot and subdividable property. NO!! no fraud there! HA! It took a lot of my time, therefore money, to put everything together they wanted. The appraiser was slapped on the wrist and set free to commit more crime. Worthless!