Real estate appraisers, whose jobs are dependent on referrals from realtors and mortgage brokers, are pressured to assess homes at inflated values.
Loan brokers are now routinely "dialing for values," [appraiser Alan] Hummel said. "They call up appraisers and say, we've got this sale at $335,000 at such and such an address. Can you get to that number?" If an appraiser answers yes, he or she gets the assignment. If not, the appraiser is bypassed.The winners? Realtors who take 6% on inflated deals. Sellers who cash out at inflated prices. Buyers who get undisclosed cash-back deals.
Worse yet, Hummel said, when an appraiser comes back with a market value estimate that is lower than the sales contract price, the appraiser may not get paid for the work, and may be blackballed by the mortgage broker or real estate agent.
The losers? Lenders stupid enough to lend 90%, 95%, or 100% of an inflated price and end up foreclosing on a deeply underwater house.
I don't want to point fingers, but Countrywide (CFC) did this, with no questions asked, for Casey Serin, an unemployed 24-year-old who lied about his income and who took cash back from the seller based on the appraiser-inflated price.
The chickens are coming home to roost. The roosters are shorting CFC.