New York – New York Attorney General Andrew Cuomo said Thursday a major real estate appraisal company colluded with the nation’s largest savings and loan companies to inflate the values of homes, contributing to the subprime mortgage crisis.
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Cuomo announced a lawsuit against eAppraiseIT that accuses the First American Corp. subsidiary of caving in to pressure from Washington Mutual Inc. to use a list of “proven appraisers” who he claims inflated home appraisals.
Driven by a hungry market for bonds backed by home loans, mortgage lenders expanded subprime lending dramatically in 2005 and 2006. In many cases, they made loans to people at low initial “teaser” rates, which reset substantially higher one to three years later at levels some borrowers couldn’t afford.
“The independence of the appraiser is essential to maintaining the integrity of the mortgage industry,” Cuomo said, citing several e-mails between the companies’ executives. [wabc]
Appraisers are 100% responsible for the mortgage problem. “Hitting the numbers” that lenders gave them during refinancing is only the tip of the iceberg. Anybody facing a foreclosure right now should be suing the appraiser who appraised their house. 9/10 are proving to be fraudulent.
The S & L bailout was based upon S&L In house appraisals pressured by management to meet the earnest money offer. The WSJ reported a developer who went to his local S & L and said he was going to build 1,000 apt units on the edge of town… there were no plans,permits or security…he was given a check for 100% of the project by the close of business.
When GWB Sr was faced with oversight of S&L appraisals he created an exemption to certified appraisals of all houses below $249K.
The new regs said a Real Estate agent or tax records could be substituted for a full appraisal.
The the CDO’s created private contracts without standardized contract provisions left a pandora’s box of exempt appraisals, irregular mortgage standards that maximized profits to mortgage brokers, S & L’s and regular banks.
It was all sent down the pipeline to individual pension plans like your 401K… as junk bond mortgage investments. The rating agencies collected fees and have no liability for rating these junk bonds…
GWB went along with this because real estate equity had upheld the economy. without the CDO’s the economy would be flat for the past five years. cuts in car sales, cuts in travel, cuts in remodel industry…
the chickens have come home to roost just like the S& L bail out of 20 years ago.
The Appraisers are not the only ones to blame. The [sub-prime]mrtgages would [in most cases] not have been appproved if all other negative factors would be taken into consideration.
the truth is that the prices were driven up by investors and developers. The new values were an incentive for people to cash out. Zoning changes and higher rates took care of the developers and investors and now people have mortgages that are more then the value of their homes.
The going is far from good as home prices have fallen substantially and will continur to fall.
How many frum and not frum mortgage specialists were responsible for the mess. They actually were hungry to sell mortgages so they came up with numbers that convinced people they can get a no money down loan, low teaser rates…etc. (This is avoiding discussing cases of real fraud)
You could say that only an idiot falls for it but the reality is that the pressure to do business helped create an envoirnment where everybody glossed over the negatives because usually, once the deal is done you can take your profit and run.
How many from the frum community are going to be hurt by this?
One should drive around frum areas and see the many homes for sale, from people hoping to get out while the getting out is good.