FHA Mortgages & Inflated Appraisals

by Peter G. Miller
November 11th, 2007

New York state attorney general Andrew Cuomo has created a firestorm by alleging that appraisals have been systematically inflated. In response, the Mortgage Bankers Association defines the issue this waya>:

“Accurate appraisals are one of the fundamental components of the loan decision because a borrower’s credit and willingness and ability to repay are only two of the three ‘Cs’ (credit, capacity and collateral) used by lenders to make lending decisions. In the event a borrower is unable to meet the payment obligations of a loan, the underlying property serves as the collateral for the obligation. Appraisal estimates are expected to be unbiased reports. With increased concerns about lending practices brought about by current market conditions and the rise in delinquencies, anti-predatory lending proposals with a focus on altering existing appraiser and appraisal standards are keen on legislators’ minds. MBA is especially concerned that policy-makers will increase industry regulation where it already exists to ban coercion on appraisers to artificially inflate values and expose lenders to additional liability and expense.”

Given the damage done to homeowners, investors, Wall Street and neighborhoods by the current foreclosure mess, why shouldn’t lenders have a huge liability when they cheat the system by inflating appraisal values or pressuring appraisers? Lenders who play by the rules would be unhurt and unbothered by credible regulation.

Besides, what current “industry regulation” is there to increase? Has anyone ever heard of a lender or loan officer paying a fine for pressuring an appraiser?


This entry was posted on Sunday, November 11th, 2007 at 12:24 pm and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “FHA Mortgages & Inflated Appraisals”

  1. Dustin Aliff Says:

    Im a first time home buyer who purchased a home in 2006 where as you know the market was booming and the prices were high. Anyway i purchased a Townhome for about 300,000 and my monthly payments were about 2400 a month which back then making the payments. Well now ive come to this fork in the road where i can no longer afford to pay this payment and my mortgage company will not let me refinance without a hefty down payment. so not an option. Of course i do not want to forclose so im looking and asking around for other options. Any suggestions?

    Thank you for your time


    Dustin Aliff

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