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Housing Fraud is Back – Real Estate Industry Intentionally Inflating Home Appraisals
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
Almost 40% of appraisers surveyed from Sept. 15 through Nov. 7 reported experiencing pressure to inflate values, according to Allterra Group LLC, a for-profit appraiser-advocacy firm based in Salisbury, Md. That figure was 37% in the survey for the previous year.
“If you thought what was happening before was an embarrassment, wait until the second time around,” said Joan Trice, Allterra’s chief executive and founder of the Collateral Risk Network, which represents appraisers employed by lenders and other companies and has been meeting with regulators to discuss concerns about appraisers being pressured into inflating values.
– From the Wall Street Journal article: Dodgy Home Appraisals Make a Comeback
When in doubt, just make shit up.
That seems to be the mantra of the U.S. real estate industry. A place where home values must always rise no matter what. After all, there’s nothing better for an economy than pricing out average citizens from their means of shelter.
As the WSJ reports, inflated home appraisals have become such a concern that the Office of the Comptroller of the Currency is looking into it. Which means precisely nothing will be done to stop it. After all, it is official government policy to encourage risky loans to keep housing bubble 2.0 inflated. Recall: Mel Watt, Federal Housing Finance Agency Head, is Pushing Banks to Make Extremely Risky Home Loans.
The WSJ reports:
Home appraisers are inflating the values of some properties they assess, often at the behest of loan officers and real-estate agents, in what industry executives say is a return to practices seen before the financial crisis.
An estimated one in seven appraisals conducted from 2011 through early 2014 inflated home values by 20% or more, according to data provided to The Wall Street Journal by Digital Risk Analytics, a subsidiary of Digital Risk LLC. The mortgage-analysis and consulting firm based in Maitland, Fla., was hired by some of the 20 largest lenders to review their loan files.
The firm reviewed more than 200,000 mortgages, parsing the homes’ appraised values and other information, including the properties’ sizes and similar homes sold in the areas at the times. The review was conducted using the firm’s software and staff appraisers.
Bankers, appraisers and federal officials in interviews said inflated appraisals are becoming more widespread as the recovery in the housing market cools. While home prices are increasing generally, their appreciation is slowing, and sales have been weak despite low interest rates. The dollar amount of new mortgages issued this year is expected to be down 39% from last year, at about $1.12 trillion, according to the Mortgage Bankers Association.
That has put increasing pressure on loan officers, who depend on originating new mortgages for their income, as well as real-estate agents, who live on sales commissions. That in turn is raising the heat on appraisers, whose valuations can make or break a sale. Banks generally won’t agree to a mortgage if the purchase price or the refinancing amount is higher than the appraised value.
Almost 40% of appraisers surveyed from Sept. 15 through Nov. 7 reported experiencing pressure to inflate values, according to Allterra Group LLC, a for-profit appraiser-advocacy firm based in Salisbury, Md. That figure was 37% in the survey for the previous year.
“If you thought what was happening before was an embarrassment, wait until the second time around,” said Joan Trice, Allterra’s chief executive and founder of the Collateral Risk Network, which represents appraisers employed by lenders and other companies and has been meeting with regulators to discuss concerns about appraisers being pressured into inflating values.
Digital Risk found that some appraised values were off the mark based on discrepancies that appeared unintentional, though, “at other times, the appraiser’s selection of [comparable properties]…is very hard to justify,” said Thomas Showalter, chief analytics officer at Digital Risk. The firm saw cases where values for decades-old homes were determined based on sales prices for newly constructed ones, and homes blocks from shorelines were compared with waterfront properties, he said.
Brandon Boudreau, chief operating officer at Metro-West Appraisal Co. LLC, a national firm based in Detroit, says he and his appraisers often feel pressured by aggressive real-estate agents.
Much of the pressure, appraisers say, is being applied by companies hired by banks to assign appraisal work, known as appraisal-management companies, or AMCs. A much larger share of appraisals have been filtered through these companies since the introduction of new financial rules and other requirements that seek to prohibit appraiser coercion.
Tom Allen, who says he has been an appraiser for 44 years, recalled appraising a house in April for about $450,000 for a loan application with J.P. Morgan Chase & Co. About a week later, Mr. Allen, 68 years old, says he received a request from the appraisal-management company to use two different properties as comparables that had recently sold for around $525,000 and $540,000. Mr. Allen says he refused because the homes were larger, in a more expensive neighborhood and built about 10 years after the property in question. Since then, Mr. Allen says he mostly accepts appraisal requests for homes that have several similar nearby sales.
A J.P. Morgan spokesman declined to comment.
Of course they did.
Freddie Mac has found cases of appraisers submitting a suspiciously high number of reports in one day, as well as reports for properties in places where they aren’t certified or licensed to operate, according to a spokesman. It has also received tips from employees at lenders and other insiders warning of inflated valuations, he said.
Is there any price in this economy that isn’t completely rigged?
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philly housing index just hit an eight year high
http://bullandbearmash.com/chart/philly-housing-monthly-finds-year-high-...
central banks are buying up this sector too - yep, we're all convinced - after six years, the recovery is still on
What?!? You mean self interest and human nature dont change - shocking!
Inflated house prices?
I blame Russel Brand
http://www.dailymail.co.uk/news/article-2857221/Millionaire-comic-Russell-Brand-loses-temper-march-Downing-Street-asked-London-home-worth.html
I just discovered yesterday a mortgage put out by BOFA that will allow somebody to borrow 500k for a payment of 700 per month for the next 10 years (in theory assuming rates stay stagnant).
Loan good for up to 2M. That should explain house values.
Is there any price in this economy that isn’t completely rigged?
On the national, governmental, fascist level? No. Reality has been expelled there. (And it will be an angry bitch when it comes back.)
On the local, small business, black market level? Sure.
well, debt jubilee is the way out.
With loans like that being pushed it makes me think deflation is about to unfold.
So, after 10-years of making monthly interest payments, your principal balance is higher.
Great, they're bringing back 'negative amortization' loans.
Idiots...
I know this industry well. I would say that is low - 40%. I would also say commercial lending is worse. I would say 70% of the reports have overvalued the property.
All - and I mean every single one of them - national commercial appraisal firms are corrupt to the core and only care about how fast they can turn their error prone reports in to collect the fee. Analytical abilities are nonexistent. There data source is 50% accurate at best. They know if they keep their client happy they will keeping working for them. The coming correction will be horrific and made worse by greed and gross incompetence.
I don't entirely disagree with the article....however, Joan Trice is a fucking lying cunt that prostitutes herself to "regulators' and "too big to fail banks" whilst throwing "real" appraisers under the bus.
And, in essense, everything is overvalued whne you have a currency that is consistently devalued...
In the old days it was called a "second gear valuation" because the valuer slowed down to second gear as he drove past the house...
Does this mean that Linda Green can have her old job back? Or did she never quit?
http://www.correntewire.com/if_your_mortgage_document_has_signature_lind...
http://news.firedoglake.com/2010/11/24/linda-green-robo-signing-shows-ma...
https://duckduckgo.com/?q=linda+green+mortgage+fraud
Strawberry pickers rejoice. You can has new house.
http://www.cbsnews.com/news/the-big-short-offers-six-great-money-lessons...
shhhh, I'm selling my home, keep this on the down low. Don't worry, I'm buying gold and a Urban Evacuation Vehicle with the proceeds.
Oh give me a fucking break, "mark to fantasy" accounting is everywhere on Wall Street, D.C. and in corporate America.
"Real Estate Industry"?? There are few things I hate more than this term applied to buying and selling shit.
The only thing worse is the 'gaming industry'. Casinos are no industry
Don't forget the "financial industry".
Ohh I forgot "political science". Any fucking bullshit is science these days. Everything's being pimped up.
Rap "music".
Throw Economics/Economist on that pile as well.
Yes, even road side fruit vendors are in on the action.
At least the shoe shine boys aren't. Unless you count Jim Cramer.
The appraiser gig is a scam, it's pretty much always been like this....you work for the bank, you do your comps, and you better fluff it by %5 or the bank won't be happy.
Not entirely true. Many FIs use an AMC for their appraisals, which then contract an appraiser to do the job. My wife is an appraiser, and she's not pumping values, and she's got more requests for work coming in than she can take. Yeah, we've seen several appraisals that were ridiculous in the amount of shoddy work done, but not every appraiser is pumping up values. Then again, it says right there on the report "Opinion of Value". It's one appraiser's opinion, where another appraiser, looking at the same house, may come up with a completely different value. My wife can back up any value she comes up with by showing her research. She's not just pulling values from thin air.
unless your wife is curently valuing homes BELOW other homes in the neighborhood, then her value is....um....how can I say this...INFLATED.
And im gunna go wager to bet, her values at rhe very least MATCH the rest of the comps.
She may be "inflating" home values un-intentionally by the very way the system itself is set-up. I know this sounds horrible and just plain impossible, but when, noit if, this latest round of crap finally has the SHTF moment, she will look back, like so many other pelple I peronally know who were making $$$$$$$ in 2007 now look back and say "Yeah, it really was a completely BS system".
I lost quite a few friends over that breakdown...they got caught up in their own system, and lost 50% of their income when it SHFT'd, lost their houses, etc etc, Still have mine....I was "Prudent", or as they said I was "No Fun" back then. Now they are no fun 5 years into the "Recovery"
So, again, if your wife's valuations are coming in at or close to the other's, then its becuase she is using PREVIOUSLY inflated prices to VALUE the curent property.
Just because some other idiots paid too much recently for a property in now way means other properties are really "Vazlued" higher, it just means the system allows her to make the $$$ higher for a new loan, then when people stop buying and start selling, all those values she did will be...falling. Just like they did starting in 2007 when appraisers were STILL marking properties higher, whike the house down the street went foreclosed...Shhhhhhhhhhh, dont look there, LOOK HERE!
True, but those previously inflated prices were what people paid for them, giving us the market value. One thing that I found interesting is that appraiser has to 'bracket' values, both on the top line, or the raw sale price of the comp, meaning they have to find at least one comp that sold for less than the subject, and at least one that sold for more than the subject. They also have to bracket the adjusted values on the bottom line.
In a crazy market like we had in early 2014, it was very difficult to find a top bracket property because market prices were up 10% in just a few months. Appraisals were often coming in very much lower than the contract price. I can think of a few appraisals the she did that probably threw a wrench in the deal, or at least casued the buyer to have to come to the table with more cash/equity.
Appraisers are supposed to (and I stress supposed to) value a property at what the lender would reasonably be able to sell the house for should the borrower default. It's the realtors that really drive the bubbles. They're the ones that convince the buyer that their property is a MUST HAVE, all while convincing the seller that their property is falling down around them. Lenders also play a big part by loosening underwriting standards to approve a borrower.
Are some appraisers complicit in inflating the bubble? Sure. But good ones do the job as a true dis-interested third party. That was the reason for the increase in the AMC industry. It sucks to squirrel a deal because a value can't be supported, but if you have ethics, you can't let it bother you.
As for the foreclosure/short sale issue, sometimes that's the market. If an area is rife with 'under-market' sales, that's what a FI will have to compete with if they need to fire-sale a property. A good appraiser will NOT ignore those types of properties because they're actually supposed to be working for the FI's risk team, not their sales team. They're supposed to be giving the FI a realistic price should they have to foreclose or short-sale.
I agree, and its exactly in this type of an environment where we have "Perma-Rise" in home prices where valuations keep going up.
This didnt end well in 2007, and house prices then fell for 4 years. During those 4 years, the valuation based on previous sales were actually grossly inflated because by the time the new home could sell, prices actually fell.
Thus, we have All home valuation right now inflated by the very nature of the current scenario. It works until it doesnt. Then everyone burns.
I remember back in the early 90's...the appraisers actually looked for reasons to value your house LESS so the bank could then lend less and force a bigger down payment. Thats when interest rates were 9%, and anything less than 10% down was (outside CA and NY and FLA) literally laughed at. back then and before, except in isolated hot spots, there just were not incentives to constantly have house prices increase 5, 10, 20% per year.
House prices are still, looking at a 30-year income-to-house price ratio, WAY overvalued. If interest rates ever rise, look out below...valuation made today will be as inaccurate as the ones made from 2002 thru 2007, when Everyone said they were good, even the "honest" folks. There simply is no reason for even an honest person to quesiton the system as long as that system is the source of bread, milk, water, and a few carribean cruises.
I may be being a bit cynical here, im just pointing out that using inflated prices to justify the "value" of a house, is a bit like comparing test results of students who cheated :-). The "Value" of a house is quite literally WHATEVER ANOTHER HUMAN BEING IS WILLING AND CAPABLE OF PAYING...NOW. Once there is no longer a person willing or capable of paying NOW and thus demands a lower price, the "value" has just magically fell, and will continue to fall as long as buyers either say no, or simply cannot afford.
This current environment can go on for years, but it will end, with another bang. In the meantime, enjoy the ride :-)
I can't disagree with anything you said.
The word NOW is the important one in your response. The appraisal is a snapshot based on current market conditions. Yes, the appraisal will essentially be meaningless when the bubble eventually pops and values tank. The same could be said for a rising market as well. If another buyer is willing to pay $50,000 more for the same house in 6 months, today's appraisal is equally worthless.
My wife works really hard, probably harder than she needs to based on some of the appraisals I've seen that have been accepted, trying to get a good value, but she can sleep at night knowing she's researched her property thoroughly, and can document the basis for her opinion of value. There's nothing that irritates her more than when the homeowner comes back to the AMC and screams "But the house two doors down sold for a bazillion dollars! Why didn't you use THAT house as a comp?!". I've told her a couple times to respond by asking the homeowner to provide their Certified Appraisers License. She hasn't done it yet, but she's come close...
Basically, appraisals become worthless the second the transaction closes.
The industry is different than it was 15 years ago when I got into banking*. The AMC piece of the equation has made things more arms-length, but there are still some FIs that engage their appraisers directly, and those are the ones that should be scrutinized.
*Don't worry, I saw the error of my ways and left the dark side, and now work for a credit union, where we actually try to help the member rather than the shareholder.
Good for the wife.
Many people just don't understand that it is not the appraisr's job to decide if the whole market is nuts and prices are too high in an area. The appraiser can only refer to recent area sales and make some adjustments for size and finish.
A broader case example is Manhattan real estate. What appraiser can justify $1,000,000 for a 900 sft apartment with no place to park the car when elsewhere in the US that cash would buy 4,000 sft on 5 ac.
Appraisers have to somewhat ignore decisions of nutty buyers and accept it as the "market" in action.
Bingo.
A significant percentage of the population is fiscally ignorant and are subject to the 'gotta have it' mentality in order to let them keep up with the Joneses. All things being equal, the real estate market is truly a market, with a willing buyer and willing seller agreeing on a price. The realtors are the ones guiding the market, based on their knowledge of which way the wind is blowing on the macro sense.
well to be somewhat fair, a Lot of "valuations" are driven by computer algorythms now...wasnt so up until around 2002+ before then, there was a lot of elbow grease involved.
Even if an appraiser does the hard work today, that cmputer still spits out a magic number.
My house went up in "value" by 75% since 2010. Really, thats what the comps say. Its not that the house changed, or that anyone is making 75% more now than in 2010, the interest rates are even a tad higher. So what changed? What made my house go UP by 75% in 4 measly years:
1) Banks resuming to offering 3% down loans to almost anyone.
2) Banks being able to borrow for 0.25% and drop interest rates by 0.5% (billions of $$ this adds up)
3) Relaxation of Banks underwriting, a 680 score is now OK, used to be a 720, change the rules, more people "Qualify"
4) More people able to Qualify because of 1, 2, 3 above = MORE BUYERS.
5) PERCEPTION of those buyers - as more people were allowed to take on loans, other people took note and said "Hey, I can do that too"
6) Due to 1 thru 5 above, people will now spend 75% to 100% more now on the exact same home as they did in 2010 when banks were VERY strict on loans and were not qualifying people.
Any questions?
When this current cycle ends, it will get Ugly. I mean really...how many people are paying 75% more for cars 4 years later :-)
It kills me that more FIs are going to the AVMs (Automated Value Model) approach. You may as well look up the value on Zillow and go with that. The first bank I worked for started using AVMs for some home equity products and we bankers all hated it because it was only marginally more accurate than throwing a dart at a wall covered with random numbers.
And yeah, it'll be ugly for sure. That's why we're being that 'no fun' type ourselves. No equity ATM for us, we actually have a net worth that's in the black.
Lead ballons.
Just leave it at "lead". That's the only way this shit is remedied
Housing Bubble 2.0 lead balloon.
Tech Bubble 2.0 lead balloon has better graphics.
Nobody could have seen this coming... Fuk!
They've already created the miracle million-dollar home with no pool. What could possibly be next?
Good ole USSA!! Doesn't matter, they will eventually be Corzined.
How else can they get LTV to sell the bitch to Fannie????
Years ago, I moved out of NJ, and as several friends of mine who did the same will tell you, NJ is "a good place to be from", I never regretted it. But now as an outsider looking in, I realize that may have been the best thing I ever did, as they are now #1 real estate taxes in the US. 6 to 18K a year tax on homes where in other states would be $800-$2,500. When you take out a mortgage, you are actually financing a loan to pay real estate taxes, (and maybe someday buy the house)? This is just insane. Retire in NJ, even if you own it outright? Not on a social security check. That won't even cover the property taxes! WTF!?! No wonder people there are sh_tting their pants to get the valuations up. No matter, you can't sell to people with no money on 30 hour a week jobs and $45K student loans. Good luck, Garden Staters!
silverer... you are so right. None of the BS used to matter. If you were in commuting distance to manhattan your house was worth money. Quality of life is good if you can make a good living. Unfortunatly everone is unemployed now. There is no wall st anymore. No garment district.No advertising, just a bunch of rich eurotrash
I have been screaming about this since 1997 !!!! No one listen to me then and now SOME people are finally agreeing with me now ......but it's too late, New Jersey is dead ......killed by corruption and the public takers......lived here for 40+ years......everywhere I go just looks old and run down, even the shore is finished since Superstorm Sandy. ...... we are all just lying to each other , hoping someone comes up with a new scam.......sports betting is all they have....HaHa
http://www.newearth.media/press-release-war-crimes-drama-in-washington-d...
spoils of war...
Guys!
Delaware has filled up w NJ people. The styate has rezoned the entire central corridor frm NOrth to South because of NJ demand in Delaware. It is truly unbelievable. One-time 2 horse towns are blowing wide open!
Every time while coming back from liberty international I take wrong turn and end up somewhere in Newark. What a err feeling.
In my low tax and conservative state, tax valuations (appraisals) after the 2008 crash took 4 years to even get close to what you could sell your house for.
Just like prices at the pump trailing crude oil/barrel by months, but worse.
After the real estate crash I went in to pay my taxes.I asked the clerk if revenues were down as home values had crashed. His straight faced response as he looked up at me, " home values never go down". Alternate reality reality.
Fuck Jersey. One's a victim in alot ways. Can't carry a gun, fuckin taxes, traffic, tolls, arrogant North Jersey orange people. South Jersey use to be ok.
While I have no doubt that there is significant fraud in many home and other property appraisals ('cause there's money in it), sometimes the "pressure" is to come in with a valuation slightly greater than the appraiser's sloppily chosen comparables in order to meet the price on the sales contract.
In a rising market, the appraisal guidelines are written so as to act to supress rising prices rather than to reflect property valuations in light of current market conditions. Ironically, in a depressed market where prices are falling, it is common for "appraised values" to come in above the contract price. That leaves the seller screaming that they are getting ripped off as if the "apparised value" is a purely objective figure.
Spot on, but now "time" adjustments have become more prevalent, used to adjust for increasing/decreasing market conditions. Appraised value is subjective (an opinion of market value). Anyway, an appraisal doesn't matter when loans are given with only 3.5-5% down, to barely qualified borrowers.
1) Feds "encourage" banks to lend in non-lendable areas
2) Banks securitize crap mortgages to Wall Street creating a second market for crap mortgage bonds
3) Non-lendable, crap homeowners lose their homes, market for crap mortgage bonds crashes.
4) Feds bail out banks, tighten lending standards, DC pols claim to save the world
5) Banks adhere to tighter lending standards, economy still in the crapper
6) Go to step 1. Repeat.
now that is real comedy there! taken from the limbaugh comic strips?
who do you think owns the gov trolls that set that policy to begin with?
the fucking banks.. you know the ones.. the ones your victim story paints as the victims.. those por banksters on wall st.. forced to comply with libtard legislation to make bad loans.. what were they to do.. but create CDO, MBS, etc as nauseum, then infintie derivitives off those obscene instruments.. all to satisfy the evil gov?
wtf is wrong with you?
gov is a sock puppet of the banksters, jack ass
did get a chuckle from reading your victims story.. the one carefully crafted by the predators for sheeple like you to tell on their behalf..
Hey Mr. 23 weeks maybe you should look around here before making idiotic posts. Your post is OLD NEWS to the posters here. They know banks have infiltrated the government - just look at Obama's cabinet and officials - full of Goldman Sachs' alums. The government is complicit in all of this and if you believe the government is not a problem, you are the sheep.
Thank you for mentioning Mortgage-backed Securities.. the herd of elephants in the room. The securitization of the American Dream (debt, debt, debt) is not sustainable. Odd how it seems those cashing in on MBS remain eerily quiet to any mention of them.
I am sure the buyers and sellers aren't complaining either. Maybe the bankers at the top aren't the only sociopaths, but the biggest, or best. Funny how people are willing to overlook these things when it's in their favour.
real estate appraising has always been a scam, same as everything else
Rreal estate has always been a scam. FTFY ;-) ...and the realturds face mammon six times a day and kowtow. They fit the BAD (Broker, Agent, Dealer) scum mold perfectly.
I bought a $17,500.00 foreclosure in Hooterville, TX and am as happy as a pig in shit...
;-D
Injection of new muni bonds, higher property taxes, and the blind taxation to give your local union civil servant a pay raise.
Make the banksters hold the mortgage.
Appraisals will clean up real fast....
hold it long enough to push the burdens to the taxpayers anyway... CRIME OF THE CENTURY.
Not in my experience they don't. I had two of them done in 2012 and 2013 and both of them came back low. Caused me to have to drop FHA applicants in order to sell for what I owed which pretty much cut my applicant pool by half. Luckily someone with some cash wanted the house and bought it so I could get out from under it and break even after 10 long years of illegal alien/section 8 fuckery in the neighborhood.
When assessments go up, so do property taxes, so the banks aren't the only interested parties.
I had a jack off appraiser do our house after I built it, there was no 4 bedroom houses to comp in the area so he gave us 2000 for the bedroom and 2000 for the 1100' shop I built. WTF, his appraisal was less then what it cost to build it so its a scam either way.
What? Your house wasn't built by a big name builder with a stock listing on the NYSE?
Terrorist!
He forgot a zero... each bedroom should be approx. $20,000 worth of value.
The bank (or AMC, whoever engaged the appraiser) should have asked for a revision, or an explanation of why the appraiser didn't go outside the area to find an actual comparable property. My wife does that all the time in rural areas, and then comments the crap out of the appraisal to explain why she did so.
The cost to build doesn't always equate to market value
You could actually say "usually doesn't" and be right. Rarely do you get dollar for dollar in upgrades to your house. Kitchen is usually the closest to parity, with landscaping giving you an awful rate of return in appraised value, but may make the house more marketable.
No, but when your buddy is the builder, and you are the electrical, HVAC,Gas, and plumbing and tile contractor I would go up against any appraiser that thinks it can be done cheaper. Funny, in the end it appraised at just over 5000.00 what our builders contract was, not including all the stuff I was responsible for.
Someone should have told that to the guy that appraised my home for 20% less than I paid at the supposed market bottom.
As with everything else, it's all bullshit.
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Nobody went to jail from the last crimes. Just pay a small fine and make it bigger next time.
Eric Holder says he can't and won't prosecute.
This time make it much, much bigger!!!
More counterfeit fiat production via fabricated home equity. Now that the FED's QE program is "over", there have to be stand-ins for the liquidity flow.
Appraisers, like anyone else, know who they work for.
Round up the usual suspects.
Who's appraising the appraisers?
FUCKING BLACKSTONE / JPM PONZI
I just built my house.
$160k for the land. $30k for nothing house I scraped off if. $550k all-in building costs.
Finished in oct.
Assessed for $1m.
Why don't I just buy every lot on the block and do it again? Made 35% in 9 months without even walking in the door.
The words "total fucking bullshit" come to mind. Not necessarily in that order.
Why don't I just buy every lot on the block and do it again?
That's not bullshit, that's development and capitalism. Re-development is a good gig in the right market. Now think about doing that in a really bad market where the all-in costs is $550,000 and the market value is $475,000. It happens. A real estate bubble isn't uniform. Pockets can be higher and pockets can be lower, the trick is to guess right when you dive in.
Up arrow for that. Wonder why somebody would choose to down-arrow that... Maybe somebody doesn't like the fact that development sometimes results in profits and sometimes in losses?
Let's socialize so that we always profit! Yeah, that'll solve everything.
Assume a family of 4 with 2 working parents. It will take them a combined 60 years of labor to pay off their house (30 year mortgage). 60 years!
10 hour time-lapse Amish Barn Raising...10 hours cooperative labor...
https://www.youtube.com/watch?v=AsTB0HnM6WM
And now you know 60% of the reason I bought the most expensive house I could afford.
My house is "up" 25% since I bought it in December 2012. Ride the tide of corruption. That's all there is left.
Now the trick will be to get out at the right time.
It will work until it doesn't...
I agree HOWEVER the ONLY problem is your taking shelter NOT a piece of paper. .....what are you going to do even if you time the top to the exact minute of the exact day ????
This is what pisses me off about the Tribe who runs this scam...run all the paper scams you want.....BUT STOP FUCKING WITH PEOPLES SHELTER AND SECURITY OF THEIR HOMES !!!!!!
Yeah I am with you on that but I can't control it, and I really have no effective way to fight it, so I plan accordingly.
Trulia believes they’re the cutting edge appraiser in the market.
http://www.trulia.com/sell/?ts=trulia&tscamp=global_nav_sell
Realtors will encourage lower sales price to close a sale, hungry for commission check. The snake eating its own tail principle.
My property value didn't go up at all since we bought, but fiat value dropped by 220%.
If you bought a house for $500,000 how can you sell it $400,000 ????? Bring $100,000 to closing !!!......HA HA HA HA.....GAME OVER.
Oh dear the shit on the books companies A B C D E + FED are sitting on at 20% book value!
As I am nearing a conclusion to the five+ year clusterfuck that is my father's estate, after which I will no longer be able to speak in negative terms about the bank in question (the one that has the name of a Big country in it) because of the non-disparagement clause which said bank insists upon, I would like to point out that banks and bankers are the cause for almost all pain and suffering in this world, thanks to their endless greed, corruption and lack of moral compass.
Even after I sign the "cash for keys" and endless stipulations in our "agreement" said bank may just as well sell the information on me and my co-inheritants of the estate to one of their "lesser" brethren, so as to unjustly and illegally torment us after the fact, in clear violation of their agreement.
Of the few reasons for discontinuing my litigation against the bank, the most prominent is the mental anguish caused by uncertainty about the future. I have a solid case on good legal footing, though that in no way implies that I might win. There's also the unending appeals which would certainly accrue in case of a victory by my side to consider.
So, I said, F it, give me some dough and I'll turn the house over to you crooked bastards. The bank will no doubt turn the property over to another unsuspecting victim, mortgage the thing to the hilt and collect their "rent."
Banks and bankers are the absolute scum of the earth. I rate murderers, pederasts, politicians and pimps above them on the scale of humanity.
Sadly, I admit to being worn down by them, but I have taken my pound of flesh in terms of five+ years of no rent, no taxes and now a payment from them in order for me to vacate, but, I cannot, in good conscience, escape the feeling that I am part of the problem, allowing them to win, even after a long and valiant struggle.
Banks will eventually own the world and rent it back to us. It's simply slavery, dressed up as "civilization."
Sick bastard pricks, every one of them... and their lawyers, too.
BZ for the effort brother.
sadly, though, you are right. we are laregly already monopolized, owned, by the banksters.
The bankers and lawyers totally suck, like you say.
Making it worse are the "courts" that have become nothing more than collection agents for the banks. They will never find anything wrong because the scam is so big. Due to outrage fatigue I can't even get mad about this any more.
Here's a short list of things OCC won't be able to find.
chunga, nice list. I'm making a copy of it to read to the bank attorney next time I talk to her.
You left one off, though, one which I only recently discovered:
Violation of consent decree
In all these settlements with the DOJ, SEC, OCC and various state Attorneys General, consent decrees were issued, wherein the banks made commitments to act in certain manners and do certain things, in certain ways.
They're all online, available for perusal by interested parties. Just guessing, but I'll go on record that they've violated the principle, if not the substance of most of these consent decrees. I would love to bring these matters up on my own case, but, as I've stated, I'm taking the money and running. Of course, the bankers and their lawyers would probably just laugh the whole thing off, as they usually do, pay whatever fines and move on to more lucrative criminal enterprises.
The fuckers laugh all the way to where they commit their heinous crimes (the bank).
Without doubt, we are not lacking for government agencies and departments; we have the DOJ, the SEC, OCC, CFTC, FINRA, OTS, etc., not to mention the legions of committees and panels in existence both past and present. An argument can easily be made that, in reality, they exist in a state of intense over-abundance.
The problem is: the majority of the group of people running these things have paths that travel through a constantly revolving door between government agencies and commercial banks.
I am sad to inform that we are not living in a black and white movie. This is not Bedford Falls and we are not dealing with Bailey Building and Loan Association, an institution vital to the well-being of the townspeople. In the real world, George Bailey no longer exists and Mr. Potter did indeed steal and keep Uncle Billy’s $8,000.
The stern looking bank regulator not only approved and encouraged this theft but also helped Mr. Potter convert that money in to trillions of dollars of unregulated derivatives; conspired to pay no taxes then proceeded to conceal that fact. To allow this charade to persist would be catastrophic.
Since the banking and financial industry has frequently touted their innovations as “products”, let’s look at them in the context of product liability. Allow me to name just a few of them: “Option ARMS”, “Collateralized Mortgage Obligations”, “Credit Default Derivatives”, “Mezzanine Tranches”, “Asset Backed Securities”, "Pay-Option Adjustable Rate Mortgages" “Cancelable Default Swaps”, “Negative Amortization Loan”, “MERS”, “Leveraged Default Swaps”. It is somewhat unsettling that, apparently, it is entirely appropriate to affix the term “synthetic” to virtually any of these products.
Moving on to product liability…the government has projected that homeownership will fall from roughly 60% to 40% in the coming years. As been their habit, this estimate is probably low and the staggering 20% drop will more than likely require revision (upward).
But we know approximately 1/3rd of the people have no mortgage; so when we multiply 2/3rds (the number of people with mortgages) by 1/5th (the number of people projected to lose their homes) we get 2/5ths or 40%. It’s fairly safe to say nearly half of these “products” will result in foreclosure.
The banks have repeatedly referred to their financial junk as “products”. They have used the term again and again; they were “innovating” new financial “products”.
So the banks amazing new “products” failed about half the time; an astonishing rate. Imagine any other product that failed half the time resulting in massive damages. Lawyers would be lined up for blocks suing on theories of product liability.
It would be as if a car company released and financed a car that blew up half the time…then said that all the people whose car blew up – half of them – used it incorrectly and should be forced to pay for the financing. The banks have created a defective albeit miraculously profitable array of products then managed to blame the people it injured.
The point I am trying to make here is that the very perpetrators of this unprecedented fraud stand alone as its sole and exclusive beneficiaries; toting neither consequence nor ramification.
This is in sharp contrast to the Savings and Loan debacle that shellacked so many…yet is pint-sized in comparison to the disaster staring us in our battered faces today.
It is not possible to belabor this point enough, so let’s belabor it some more. No one is in jail. There reaches a point in time when those responsible for putting people in jail, yet repeatedly fail to do so in the face of enormous magnitudes of evidence, belong in jail themselves.
Many of these outfits are already bankrupt both morally and financially. Those that aren’t financially bankrupt would be if it weren’t for reckless tax-payer bailouts that were angrily objected to by the taxpayers themselves. To foolishly continue this dishonest course may very well bankrupt the entire country if not the world. To further suggest that should these zombie banks suffer their demise as a result of their own bad acts, it would spell undoubtful doom for *all* with no other option but to salt the earth and burn the churches.
This is ridiculous. The only ones that would be doomed would be them. The vacuum that would be created by their rightful rejection would be filled by honest institutions that are not financial predators. Unfortunately, it's probably too late for that.
This and they just lowered the standards for issuing credit for home loans to individuals with bad credit (again).
This shit just never ends...
Any time you can make 29 years and 11 months of payments but not make the last payment for whatever reason and LOSE the whole thing is a CRIMINAL SCAM....Bankers suck....
and perpetuating this story is a piece diana olick from CNBC ran yesterday:
Home equity is back and homeowners are loving it
http://www.cnbc.com/id/102227326
its friggin amazing to me that this is happening yet again. if regulators could do ONE FUGGIN THING could it be that to simply PREVENT the mistakes of the past? i realize they are too fuggin retarded to detect new ones, but this makes me absolutely nuts. i've always said that even in my biz, i have NO PROBLEM making mistakes; its the repeating of them that IMO is simply unacceptable. IMO its IMMORAL and should be ILLEGAL to take equity OUT of your house. what i learned from the real estate blow-up is that if anything, you should put it IN so to blow-out the mortgage.
in other words, we here in america could give 2-shits about our neighbor and this proves it. when the housing market gets hit again, the smuck (that would be myself) will get burned because the dopes to my left, right, front, and back we so friggin selfish and only gave a shit about putting a new pool, game room, etc. so the pro is that ill own my house outright but the con is that without my knowledge, all my neighbors can take the entire neighborhood down because they saw on the television machine prices were going up the past 5-6 years and once again, got caught up in it.
In my neighborhood in southern California the banks are still sitting on a lot of forclosed houses. they keep them off the market to keep the prices going up. how long are they able to hoard the inventory?
@sainchaw - ill do u 1 better. i went with my girl to the bank as she had found out about a house that was about to enter forclosure. she was EXTREMELY interested and wanted to buy it. bank told us she couldn't bid on it because it was going into their "shadow inventory" list. here we are now, over a year + later; she bought a house in the same neighborhood & the house is still vacant. so, instead of allowing someone who was going to buy the house, fix it up, and take care of it, they opted to stuff it in their back pocket & allow it to do things like grow mold, get broken into, etc. - basically, the place will eventually become unlivable & most likely get condemned. sheer brilliance.
Actually, given the sick perverse incentives running our economy, it is sheer brilliance. If they allowed that house to be sold, they would have to enter a value for it. That could have severe repercussions on the value of the who-knows-how-many times the mortgage on that house has been sliced and diced and resold. Heck, the bank is probably showing that house's mortgage as a performing asset, and they can and will until it's sold and the title has to be transferred and all the paperwork done up.
I keep getting past due notices from OCWEN, the lowest of the low of the mortgage debt-buyers, for the 3-owners-ago owner of my house. He's dead, by the way. And the notices are for second mortgages he took out and didn't pay back after he was murdered. But in the Bizarro-World of the debt-buying market, that paper is listed as a valuable asset. Heck, with interest and penalties, that worthless paper is probably worth more than my house.
Of course in a real economy not based on unlimited usury and abstract value superseding real value, nobody would let a house fall down before selling it for whatever the market would bear. Therefore we do not live in a real economy, QED.
Five years, more or less.
http://www.occ.gov/publications/publications-by-type/comptrollers-handbo...
Hey...why don't they just do what China does? Build ghost cities and then everyone will be working and buying the ghost homes and then you can just vaporize the entire city and build it all over again thereby creating money out of thin air, jobs out of nothing and lower the unemployment rate to zero. There are hundreds of millions of people on welfare that will buy them. Right?
Well all I can say is I am SHOCKED! JUST SHOCKED! that fraud exists in the real estate industry. Let's see now, no one can find a job...ok
Easy entry into the real estate mortgage industry as a mortgage broker, let's see hmmm....only commission salary you say??? Oh well that should be a problem, just find someone who will well.....tell a little white lie...just so that I can feed my family of course. No one will get hurt. After all its backed by Freddie??? Ya..ya....that's it I'll become a mortgage broker. Make a fortune telling little white lies. No ones gonna get hurt right. Just in the sub prime area so no big deal. They had it all under control and contained the thirtieth time around....(ya this has been happening for a long time fellow ZH'ers). However who cares what is right any more. No one else does so it's "OK".
Fucking unbelievable pile of shit. Boy are we in need of "REAL" production and dam soon.
The real question: "Is there any price that is not completely rigged?"
Answer: It does not appear that there are any prices that are not completely rigged.
However, it is worse then that. Not only are the prices rigged, but then the metrics to measure the rigged prices are also rigged to indicate that prices are not what they are (seasonally adjusted of course).
So, prices do not reflect fair market value and then the statistics are lies. Why? To benefit whom? Why?
And, in case you missed it, in May 2014 new FHFA regs for a database of detailed personal information about single-family home borrowers, including "life events". wtf
http://www.realclearmarkets.com/articles/2014/05/07/national_mortgage_da...
Watch Bird 1: It's like this. If you are up to your eyeballs in debt then you will get that job / promotion so you can service your debts. If you have little or no debt / live within your means, then you will not be hired until you take on more debt / sell your assets at artificially high prices that indebt someone else.
Am I being paranoid? Sour grapes? Dreaming up excuses to disguise social ineptness / incompetence / laziness?
All of the above.
But they now have the technology to screw the populace into maximum indebtedness and I wonder why they would NOT use it.
My wife and I bought our starter home in 1996 for $49,500. That was the last second before prices skyrocketed in Minneapolis. The home was a little 840 square foot (finished) with the same sized unfinished basement. 2 beds, 1 bath, stucco, built in 1920. We had an FHA first-time buyers mortgage with a floating rate. In 2003 I became convinced that rates were going to go up (because they should have, in an unrigged economy), so we decided to refinance. Our appraisal came in at $135,000. We rolled in an old debt and took out a $60,000 refi. The lender thought we were crazy, leaving $75,000 on the table.
We had 2 kids, and decided we needed them to have their own bedrooms, so we started thinking about buying the move-up house in 2008. At the end of that year, all hell broke loose, and I lost 75% of my repeat business for 2009 (I'm a self-employed consultant in a weird corporate niche). So we decided we had to do the deal in 2009, before I had to file taxes for that year. We went to our very conservative credit union, and they qualified us for $417,000 because they didn't do "Jumbo" loans. They said we could get more if we went elsewhere.
But my wife and I knew how much money we really had, and decided we wouldn't pay more than $1,000 per month no matter what anyone said. So we looked at houses that would land us at about that payment. Our realtor thought we were nuts, because on paper we could "afford" 3 times that much. Eventually he figured out what we were up to and was extremely helpful.
We put our little house on the market for $119,000. We got 6 offers in 6 hours, and took the one for $139,000 cash. When we retired the old note and paid off a car, we had $100,000 to put on the next house. That bumped us up a level from what we had been looking at. We bought a house for $226,000, putting down $100,000, so we bought a $126,000 loan. That gave us a monthly payment, with property tax and insurance, of about $1,045. The house we bought had sold, pre-bubble, for about $125,000, at the time we bought our starter for $49,500.
So in effect, we skipped the whole bubble. We took the bubble-created equity from the first house, and used it to buy out the bubble-inflated price of the move-up house, and are paying on a pre-bubble value for the new house. Lucky us. That's all it was; dumb luck, coupled with the stubborness of two people who grew up poor and knew that you can only afford what you can afford and not to promise to pay a penny more than that.
Funny note: a couple months after we moved into the new house, I got a call from the City Assessor's office. They hadn't been in the new house since before it had been remodeled in the '90s. They sent out an assessor, who came through, measured everything and checked it all out, and came back with a valuation of...$226,000. Amazing. I managed to negotiate a deal for EXACTLY what the house was worth. Aren't I shrewd? Or maybe, to be a bit cynical, it's all bullshit? But hey, it's a good enough house and we can afford the payment without much trouble. We feel like we managed to drive safely around a nasty chain-reaction multi-car pileup on the freeway.
Excellent synopsis. But what you really described was real estate becoming a casino.
You got lucky, as you said.
If you were living in another bubble area....you could have been slaughtered.
That's the saddest thing. Real estate was always like driving a school bus. Slow and steady rise, with almost no real donwturn.
Now it's like driving a Pinto with a turbocharged engine.
Hope you don't get rear-ended.
Welcome to the casino everyone!!
Very true. A casino where you have no idea how many decks of cards there are in the shuffling machine. Is 4 aces good? I don't know. Could the guy next to me have 5? Maybe.
So, if the Fed's optimum "target" inflation rate (or the "bestest of the best" theoretical inflation rate, for all you Krugmanites) is 2% per year annualized... then can someone PLEASE explain to me how prices could/would/should rise at any annualized rate faster than that in the utter absence of any basic econ101 supply/demand factors?
home builders are building- housing starts are climbing, resales inventories (aka "listings" are climbing - and yet nomnal wages/incomes are flat (at best) while real incomes are falling...
so HOW are house prices managing to rise faster than 2% if there isn't any "gaming" going on?
Retardation abounds - but loans are cheap - so get 'em while they're HOT.
regarding the appraisers (and the appraisal process in general) - DUH- of course they are returning favorable valuations.
The appraisal process is the ONLY gateway to stopping a bad loan from making it to signature - and these appraisers do not make enough cashola to be the "wet blanket" that the industry tries to paint them as... I've known a LOT of housing loan apprasiers over the years- NONE of them has ever been an economist - and ALL of them have wanted to "do whatever it takes" to help the the loan make it to filed paper... if the comps say the house is worth 125k, but the loan being hocked is for 130k, then that new granite counter top in the kitchen is all they need to jack up the appraisal that additional 5k.
Exactly. That was the thing that freaked me out in 2003, in my long-winded personal story right above you. If I bought a crackerbox house in 1996 for $49,500 and that was a fair price, and worked for our income at that time, how the hell could it have been worth $135,000 barely 7 years later? The kind of people who would have bought that house were just like us; young couple starting out, about to start a family. Those people hadn't had a 272% appreciation in income. Interest rates were not significantly different, nor insurance rates, so the monthly nut would not have been smoothed out. People were just paying nearly 3x more for a monthly housing payment. WTF?
Serious gaming going on, and has been for over 15 years. Dating back to, I don't know, the late '90s frenzy to completely exempt Finance from any rules of law or what used to be considered Finance?
Free market capitalism!
funny, when i left mortgage lending in 2008; new rules were put in place to make the loan originators 'blind' to who got the appraisal--so we couldnt call them and argue the value.
so it now appears these AMCs do the complaining on behalf of the banks...looks like we have a new bag-holder.....sure wouldnt think these are wholly owned subsids of the banks....anyone?
easier credit, inflated values both to keep the train moving while pricing out most people (we live in a finite world despite Krugmans theories). fuse it lit, but what will blow first: home loans, prob not; sub prime auto; junk energy bonds; uninsured student loans maybe all at once?
just a little hiccup in personal incomes will cause loan defaults; just a little miss in Eps will make P/E look really expensive; a delcine in oil will cause junk rated drillers to go bust and default and sink capex. AND as usual the Fed has begun to tighted LATE inthe cycle, just like 2007.
2015 should be HIGhliarious!
The Agents know who the Appraisers are... The bank doesn't even HAVE to know.
The Agents know that if the appraisal falls short, then the loan never funds, and the Agents' 3% cut of the deal flies out the window...
So the Agent is always right there, following the appraiser around the house, making sure they see every possible "market worthy upgrade" and whispering in the Appraiser's ear that the Appraisal only needs to come back "about 5% above the comps"
The whole system is a racket.
Not that anyone is going to read the bottom of the post, but I have a friend in Merced, CA - a region worse than Las Vegas in terms of overbuilding and real estate crash from 2008. This place has thousands of finished lots all over the place, but no houses on them. Unemployment runs over 20% and none of those jobs pay more than 30K/yr.
a third of the town lost their homes in the crash, the OREO shadow inventory still persists with banks and agents keeping local inventory down to 21 days. In any subdivision of 500 homes you might find 2 houses with signs in the yard.
Last Spring some builder rolls into town and buys two dozen lots tring to sell less than 100sqft for $220K - call it $146/sqft - with finished lot he bought for nothing. Builds them all. Can't sell one of them. Turns them into rentals which still won't cash-flow and waits.
Later Summer this year. Another builder comes to town. Buys 2 dozen lots and options another 100. Builds 4 models to boot. The city is so desperate for any development they approve anything. Asks something north of $280K for under 2,000/sqft - the same general $146/sqft.
You think those are going to move too?
If wages have been deflating for a decade (or two) how can anything else continue to rise in price and still have disposable income too?
All one needs to do is track those zillow prices. They creep up about $1000 a week on no comps.
The same algos that run wall street "value" main street too.
The only way my builder can make money now is by getting lots for dirt bag cheap, under 20K and putting a 1500' house on them. His costs have gone up over 25% in 3 years and no one can qualify for a mortgage in our area that is over 200K, so he builds low end homes that people can afford. I built a high end home in 2010 for less then 70 a square foot, if I did it again today it would be over 110.00 a square foot, but theres no inflation.
Real Estate? More like Fake Estate.
Everything is shit right now, politicized, inflated, leveraged, talked up. Nothing is real.
This sh*t is spot on. I bought my first home this past May, Fannie foreclosure, in a 260 home planned community. Mostly original from 1992 with the exception of new egg shell white paint and new ugly brown carpet all thorought the house. Akin to putting lipstick on a pig. Agreed to a price of $195k, but the appraisal came back at $260k! A completely remodeled home on the same street just sold for $265k.
How was my Fannie owned turd worth $5k less than a gem?