Widespread Real Estate Appraisal Fraud
On Feb 21st, In More Housing News, we Nattered:
"Having been in this business in another life time, I can assure you from first hand empirical experience that underwriting is lax,
incomes are "pushed", debts are "shoveled", loan to debt ratios "fluffed" and appraisals "puffed" and that was then..."
On March 22nd re: the testimony of Roger Cole, Director, Division of Banking Supervision and Regulation,
"market investors and lenders have begun to implement more appropriate underwriting standards and to change their risk profiles."
We Nattered: "Too little, too late, the ship has sailed, 5 years of poorly underwritted loans, outright appraisal fraud to puff up values...
fees collected, loans booked, very few held, most portfolioed and sold to FNMA or as MBS to investors."
On July 5th in Sanguine on Ex-Sanguination Part IV, we Nattered: "Too many low-no down fixed & ARM loans with suspect underwriting, stated income...
and bogus appraisals will all combine to continue the spill over or bleed of sub prime "slime" into Alt-A and Prime.
And the quality of debt in this market is ALL suspect due to a blatant conflict of interest on the part of the ratings agencies and Wall Street brokers who have collected their fees.
This little party will really get started in earnest when supposed prime and "AAA" debt starts failing.
And that day is not far off as this market has been tiptoeing through "the tulips" and is about to stumble into a very nasty mine field."
And finally on Feb 5th of 2005, please read that date again, thats over 32 months ago, in Subprime Lenders at Work, we Nattered about Ameriquests Loan Practices:
"Appraisers in six states said in interviews that the subprime lender had tried to bulldoze them into inflating home values and, in some cases, lying about property defects.
Deceiving borrowers about the terms of their loans, forging documents, falsifying appraisals and fabricating borrowers' income to qualify them for loans they couldn't afford.
When these chickens come home to roost, I would not want to be holding CDO, MREIT or MBS based on these subprime loans.
Thank goodness foreign investors have bought alot of them."
Enough of this gratuitous backslapping and shameless self promotion, but man, when I am on, I am ON. And furthermore, today...
Daddy Cuomo didn't raise no fool...
Reuters reports that when asked about WaMu's ability to maintain its dividend, the company's CEO said its "hard to speculate" about the market environment in January. Cutting the dividend is the least of his worries...
Last week, New York Attorney General Andrew Cuomo sued First American Corp.'s (the largest U.S. title insurer), eAppraiseIT LLC unit for artificially increasing home values.
eAppraiseIT caved to pressure from WaMu, Cuomo said. WaMu is now at the epicenter of concerns after being accused of pressuring real estate appraisers to inflate the value of their appraisals.
Mr. Cuomo used the words "widespread and collusion" to describe the practice, between real estate appraisers and lenders including WaMu, of overstated valuation.
Both Fannie Mae and Freddie Mac were subpoenaed in this matter as the Attorney General is seeking information on the mortgages they bought from WaMu and other banks.
Mr. Cuomo said he discovered a "pattern of collusion" between lenders and appraisers. Fancy that? Do ya think theres going to be any spillover on this one?
"I don't believe it's just about Washington Mutual. I believe it's widespread. I believe it's the rule not the exception.
Every company that buys loans from Washington Mutual must be sure that the loans they purchased are not corrupted by this systemic fraud."
I know from first hand inside industry experience, realtors, title, escrow companies, appraisers and lenders have been duplicitous in this scam for years...
artifically inflating so called property "values" in order to generate higher; title & escrow fees, increased up front points & loan fees, and realtor commissions.
Higher appraisal values stoke lemming buyers into bidding war frenzy's. It is a common practice in a hot market.
The appraisor bases the "value" of a property on pending sales, rather than closed sales, because the closed sale values are "stale" and don't reflect current values.
This in and of itself is a self perpetuating market motion machine. Even if the pending sales fell out, the value was used to "usher" the deal through and keep the scam alive.
Mr Cuomo is absolutely 100% spot on and this story is not going to have a happy ending.
As many will soon discover, the collateral for the vast majority of loans made in the last 5 years was never worth anything close to the purchase price.
But we already knew that, because wage income and rents never kept pace with the unjustified price increases.
"Having been in this business in another life time, I can assure you from first hand empirical experience that underwriting is lax,
incomes are "pushed", debts are "shoveled", loan to debt ratios "fluffed" and appraisals "puffed" and that was then..."
On March 22nd re: the testimony of Roger Cole, Director, Division of Banking Supervision and Regulation,
"market investors and lenders have begun to implement more appropriate underwriting standards and to change their risk profiles."
We Nattered: "Too little, too late, the ship has sailed, 5 years of poorly underwritted loans, outright appraisal fraud to puff up values...
fees collected, loans booked, very few held, most portfolioed and sold to FNMA or as MBS to investors."
On July 5th in Sanguine on Ex-Sanguination Part IV, we Nattered: "Too many low-no down fixed & ARM loans with suspect underwriting, stated income...
and bogus appraisals will all combine to continue the spill over or bleed of sub prime "slime" into Alt-A and Prime.
And the quality of debt in this market is ALL suspect due to a blatant conflict of interest on the part of the ratings agencies and Wall Street brokers who have collected their fees.
This little party will really get started in earnest when supposed prime and "AAA" debt starts failing.
And that day is not far off as this market has been tiptoeing through "the tulips" and is about to stumble into a very nasty mine field."
And finally on Feb 5th of 2005, please read that date again, thats over 32 months ago, in Subprime Lenders at Work, we Nattered about Ameriquests Loan Practices:
"Appraisers in six states said in interviews that the subprime lender had tried to bulldoze them into inflating home values and, in some cases, lying about property defects.
Deceiving borrowers about the terms of their loans, forging documents, falsifying appraisals and fabricating borrowers' income to qualify them for loans they couldn't afford.
When these chickens come home to roost, I would not want to be holding CDO, MREIT or MBS based on these subprime loans.
Thank goodness foreign investors have bought alot of them."
Enough of this gratuitous backslapping and shameless self promotion, but man, when I am on, I am ON. And furthermore, today...
Daddy Cuomo didn't raise no fool...
Reuters reports that when asked about WaMu's ability to maintain its dividend, the company's CEO said its "hard to speculate" about the market environment in January. Cutting the dividend is the least of his worries...
Last week, New York Attorney General Andrew Cuomo sued First American Corp.'s (the largest U.S. title insurer), eAppraiseIT LLC unit for artificially increasing home values.
eAppraiseIT caved to pressure from WaMu, Cuomo said. WaMu is now at the epicenter of concerns after being accused of pressuring real estate appraisers to inflate the value of their appraisals.
Mr. Cuomo used the words "widespread and collusion" to describe the practice, between real estate appraisers and lenders including WaMu, of overstated valuation.
Both Fannie Mae and Freddie Mac were subpoenaed in this matter as the Attorney General is seeking information on the mortgages they bought from WaMu and other banks.
Mr. Cuomo said he discovered a "pattern of collusion" between lenders and appraisers. Fancy that? Do ya think theres going to be any spillover on this one?
"I don't believe it's just about Washington Mutual. I believe it's widespread. I believe it's the rule not the exception.
Every company that buys loans from Washington Mutual must be sure that the loans they purchased are not corrupted by this systemic fraud."
I know from first hand inside industry experience, realtors, title, escrow companies, appraisers and lenders have been duplicitous in this scam for years...
artifically inflating so called property "values" in order to generate higher; title & escrow fees, increased up front points & loan fees, and realtor commissions.
Higher appraisal values stoke lemming buyers into bidding war frenzy's. It is a common practice in a hot market.
The appraisor bases the "value" of a property on pending sales, rather than closed sales, because the closed sale values are "stale" and don't reflect current values.
This in and of itself is a self perpetuating market motion machine. Even if the pending sales fell out, the value was used to "usher" the deal through and keep the scam alive.
Mr Cuomo is absolutely 100% spot on and this story is not going to have a happy ending.
As many will soon discover, the collateral for the vast majority of loans made in the last 5 years was never worth anything close to the purchase price.
But we already knew that, because wage income and rents never kept pace with the unjustified price increases.
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