So a good friend of mine wrote a nice explanation article about the current foreclosure market we are in- a view point not seen by others and a great read:
The public has been duped into believing that the foreclosure crisis is due to over eager mortgage brokers and appraisers inflating values for personal profit. While I’m sure there were cases where corrupt intentions existed (as in nearly every US industry), was this really the cause of the downfall? Are the guilty parties truly being held accountable? Or are the mortgage brokers and appraisers just another scapegoat to cover for political malpractice. More rules, regulations, and laws only hinder and/or control the honest people dedicated to following them. Unfortunately it opens wide the doors for those that can afford lofty lawyers to find creative ways around them – thus again nudging the wrong majority toward success and control of the industry’s future. Someone with 1st hand knowledge has to take the time to shed some truthful light on this crisis many are calling “the housing bubble”.
I read an AOL “Housing Watch” news article by Sheree R Curry released on 02/01/2010 labeled “Are Appraisals the New Organized Crime?” talking about “greedy appraisers who put lofty valuations on properties to please lenders and line their pockets” playing a large role in the housing bubble. If you follow the money trail for all those “bad loans”, it doesn’t lead to the appraisers who were just doing their job the best way they knew how…simply trying to make an honest living. The money trail leads to the banks and lenders who, by the way, have their own underwriters that thoroughly review every loan package along with the appraisal to ensure it’s reasonable and well supported. The government would have you falsely believe that nobody was holding the realtor, mortgage broker, or appraiser accountable – that mortgage loans were blindly handed out relying only on the integrity of those professionals. But who was responsible for dreaming up and promoting “Dumb Loans” such as stated income, zero down, interest only, 100% financed, and ARM’s where the borrower only has to qualify for a loan with minimal monthly payments? You remember all the promises. Everyone deserves to have the American dream. Bad credit, NO PROBLEM! No money down, NO PROBLEM! Get an interest only loan, pay off your other debts, and then come back and refinance. Five years later the interest rate jumped along with the payment, the borrower is 100% financed and has paid NOTHING toward the principle, and nobody told them you couldn’t refinance 100% of the homes worth? And they’re saying the crime was committed by the appraiser? Now the borrower can no longer afford their loan payment and has no equity, forcing another FORECLOSURE, and the appraiser is somehow responsible. It’s mind boggling the nonsense that ignorance can come up with.
So the government bails out the banks that sold their political driven promotions giving the American Dream of owning a home to everyone that could sign their name on a loan application. And we’re surprised that a monster of a crisis stands before us in the wake of the largest housing boom our country has ever witnessed. Now they have the solution that will fix everything. The New York AG Andrew Cuomo bullied into action the HVCC (Home Valuation Code Of Conduct) that went into affect on May 1st of 2009. You want to talk about organized crime? Here it is! HVCC has enabled the largest AMC (Appraisal Management Company) rule the industry has ever seen. For those of you that don’t know all the intricacies of the appraisal and lending process, the loan originator now requests an appraisal through an AMC who randomly selects (from a pre-constructed exclusive roster) the cheapest appraisers (over the most qualified and diligent) willing to work for half of the appraisal fee (while the AMC pockets and profits from the other half), and that will produce the fastest turnaround (giving no compassion or compensation for the necessary time consuming research for any particularly unique or complex assignment). And who owns 2 of the largest AMC’s that reportedly pocketed over $500 Million in appraisal fees in 2009 at the appraiser’s expense? Only the 2 largest banks in the country (who’s names I’ll spare for now)!
In any case, the same political forces that godfathered our housing crisis now desperately needs someone to blame for the mess they’ve created. A little research will reveal a massive current government funded “witch hunt” going back 4 to 5 years in an attempt to bring “mortgage fraud rings” to justice. Unfortunately a technicality, coincidence, or a desperate plea bargained false accusation may be enough to get you indicted. Most professionals in the real estate industry are barely surviving in today’s economy and don’t have the financial means to protect themselves in court against the deep pocketed prosecution rings of the FBI or local DA’s. Though justice prevails in some cases, many lives are being ruined, careers lost, and freedoms revoked in the interests of saving face. The few that refuse to offer themselves up as sacrifice will still lose everything in proving their innocence, while only the lawyers will be the true victors in the end.
Political agendas are now at play again (working against the housing industry’s best interest) by allowing home purchases and refinances without appraisals all together. Saving the home buyer $400 for an appraisal, on a home that they now have no idea of its worth, is somehow supposed to improve our current economic condition and repair the housing bubble. BRILLIANT! Now that the appraiser is out of the picture altogether, who will host the blame for the next fall when a couple years from now home owners again realize that they still owe more than their home is worth? Oh, I forgot to mention that there’s now yet another political promotion which allows a home owner in financial distress to refinance their home (taking advantage of low interest rates) with up to 110% of the home’s value financed. While that may sound like good intentions at work, isn’t that only a temporary fix with potentially greater repercussions? Now if the home goes into foreclosure the bank is going to lose 10% more than they would have otherwise. And how do they know that they’re only financing 110% of the homes value without an appraisal? Who is determining reliable LTV’s? Where is the “check and balance” system? Nobody is holding the government accountable! How many innocent, honest, and hard working real estate professionals (appraisers, mortgage brokers, realtors, etc) must fall before true justice is realized and served?
I believe it was Thomas Jefferson who once said, “a government big enough to supply you everything you need is a government big enough to take everything you have”. As long as we have our Ivy League educated (seemingly too smart for their own good) politicians running and setting all the rules for all of the professions that they know nothing about, things will only continue to get worse. And as long as the media continues to cast fabricated spins on how the public perceives reality, we’ll all be kept in the dark and hidden from the truth.