Can 11,000 Appraisers Be Wrong?
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Gee, golly, mention the idea of pressuring appraisers to come up with the “right” valuation numbers and you’re hardly alone. There seem to be a large number of appraisers who have encountered efforts to distort their valuations. Say 11,000 of them.
That’s how many signed on at AppraisersPetition.com. And what, exactly, is their beef? As the site explains, “pressure comes in many forms and includes the following:
___”the withholding of business if we refuse to inflate values,
___”the withholding of business if we refuse to guarantee a predetermined value,
___”the withholding of business if we refuse to ignore deficiencies in the property,
___”refusing to pay for an appraisal that does not give them what they want,
___”black listing honest appraisers in order to use “rubber stamp” appraisers, etc.
“We request that action be taken to hold the lenders responsible for this type of violation and provide for a penalty on any person or business who engages in the practice of pressuring appraisers to do dishonest appraisals that do not provide for independent judgment. We believe that this practice has adverse effects on our local and national economies and that the potential for great financial loss exists. We also believe that many individuals have been adversely affected by the purchase of homes which have been over-valued.”
The Same Old Story
I have had these arguments before. Long ago I advocated that real estate brokers should be allowed to represent buyers and not act merely as seller sub-agents. Nope, can’t be done, I was told. Today buyer brokerage is everywhere. NAR reports that 42 percent of all purchasers had written buyer brokerage agreements in 2008
Option ARMs are great, I was told. Just look at the credit scores. Right. But the credit scores did not account for vastly higher mortgage payments down the road, after the loan was originated.
Stated-income loan applications are fine, it was said. Why do we have to verify income when we have so many other ways of measuring borrower finances? Sure. Consider what the Mortgage Brokers Association for Responsible Lending found in one study: “A recent sample of 100 stated income loans which were compared to IRS records (which is allowed through IRS forms 4506, but hardly done) found that 90% of the income was exaggerated by 5% or more. MORE DISTURBINGLY, ALMOST 60% OF THE STATED AMOUNTS WERE EXAGGERATED BY MORE THAN 50%. These results suggest that the stated income loans deserves the nickname used by many in the industry, the ‘liar’s loan.’”
Now we’re told that accurate and independent appraisals cost too much and take too long. Right.
The idea of appraisals is to have a fair, accurate and independent property valuation to protect borrowers, lenders, mortgage investors, and lender shareholders. That’s not something you get when appraisers are bullied to come up with the “right” number, as 11,000 appraisers can explain.
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