They were peeing in their own pool… of mortgage backed securities!!!

By TA Webster

Why would any prudent lender underwrite a loan for someone
who couldn’t afford it? What prudent lender loans money without knowing exactly
what the collateral is worth? Why are so many people upside down on their
home mortgages and are either nearing foreclosure or have already experienced foreclosure? Why
do consumers pay $300 for a worthless real estate appraisal that isn’t worth the paper it’s written on? After all,
the real estate appraiser IS the ultimate underwriter of the deal and
our last line of defense for Fannie Mae and Freddie Mac (TAXPAYER)
exposure.

The argument that someone purchased a home who "shouldn’t have"
means that
there was a lender out there (or two) who was knowingly underwriting
bad home loans. Here’s one of many examples of what was taking place – http://www.msnbc.msn.com/id/22425001/vp/25453131#25453131

On the subject of home valuation, consumers are totally unaware of the
incestuous relationship
between lender and appraiser, it’s borderline fraudulent. Years of
hiring only
"compliant" appraisers and blackballing honest
appraisers (refusing work) has come home to roost in the form of a real estate bubble.
I’d like to find out how many appraisers in the industry lost work for
being realistic about property values.  I understand they left the
business in droves.

Many honest appraisers knew in good judgement that property values
were over-inflated but the consumer was never allowed to hear that
voice of reason. Consumers have no choice in who the lender hires. We need to
protect consumers from toxic loan products and inflated appraisals.
It’s as important as making sure our food supply doesn’t get
contaminated or that poison doesn’t make its way into our childrens
toys. It goes without saying that having some sort of minimum standards
is a good thing for protecting the health and well being of the general
public.       

So, bottom line –  what does a "good" appraiser do? What does a
"good" appraisal look like? How do we fix the problem at hand? At a
minimum there needs to be disclosure at time of loan application that
explains to the
consumer their rights and recourse for the product they are purchasing.
There also needs to be some kind of agency disclosure explaining the
relationship of the lender and the vendors they use for valuation
services. If the consumer is not going to be the customer the lender
should clearly explain this in advance prior to accepting payment from
the borrower for the appraisal.

Consumers should also be well aware of industry terms like Automated
Valuation Models or AVM’s, Appraisal Management Companies or AMC’s,
unlocking secure appraisals, appraisal data portals, revenue sharing, comp checks, directed appraisals,
appraiser pressure, etc. etc. – there are plenty of shady tactics being
employed by the lending industry with the customers $300 appraisal
fee.   

Please download a copy of "The Fraud of Appraisal Regulation" by
Larry Levy (posted in the public file) and pass it along to a friend or
two. Take care and may GOD Bless you and your families!

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