Let The Borrower Pick The Appraiser

[J Grant]

Predatory lending is a term that was in wide use to describe the high risk loans made. Your odd statements such as nobody held a gun to buyer's heads have nothing to do with the fact that was a widely used term. While there is plenty to blame on greedy borrowers, lenders knew the loan products with teaser rates and fast rising adjustable rates etc were garbage.

 

[J Grant]

TMD, we can go on endlessly about what caused the bubble or who should bear the most blame.

Yet appraisals and pushed appraisals are their own topic...why is it always circled back to what went on with lending and borrowers...aka easy credit, no income docs etc.... I have work to do this is distracting , interesting as it is.

 

[timd354]

TMD, are you capable of making a post without derogatory personal comments and simply address the issues? I can be a lot tougher on you btw because some of what you are writing about the appraisal end is weak. Such as this:

"It is not an appraiser's job to stop a credit bubble or to save lenders from themselves. The appraiser's job is simply to report what is happening in the market, nothing more and nothing less. "

Really? The appraiser does not simply report the market, we are supposed to analyze the market and report our analysis in the appraisal.

Nice try at deflection, but reporting the market in a USPAP compliant appraisal report would include reporting the results of the appraiser's analysis, that is a given and really did not to be stated as exactly what I meant was very obvious, even to you.

This does not change the fact that it is not an appraiser's job to try to influence the market or to try to stop a bubble as you seem to think based on your comments.

 

[timd354]

Predatory lending is a term that was in wide use to describe the high risk loans made. Your odd statements such as nobody held a gun to buyer's heads have nothing to do with the fact that was a widely used term. While there is plenty to blame on greedy borrowers, lenders knew the loan products with teaser rates and fast rising adjustable rates etc were garbage.

Of course many lenders were very bad actors, but the term predatory lending was invented by leftists (like those at ACORN) purposely to absolve and excuse borrowers from their own personal responsibility for the situation, which sadly has become an ongoing trend in our society. I consider the term to be a great example of propaganda and the propaganda worked as many borrowers were let off the hook by having their loan balances partially forgiven and/or their payments reduced while still retaining the home or by being allowed to walk away from the mortgage without any personal liability.

 

[Eli]

Mortgage fraud was a part of the easy credit that I am talking about but the bankers were well aware of it and could care less. The No Income/No Asset verification loans were designed for exactly the purpose of handing out money to borrowers without qualifying those borrowers. This easy money is the root cause and #1 factor that caused the bubble to inflate. Take away the easy credit and that particular bubble simply would not have occurred. Sure, there other things that marginally made the bubble worse such as flipping fraud and some appraisal fraud and overvaluation, but there things were not the ultimate drivers of the bubble....the bubble was driven in very large part by easy credit and all of the other crap that went on can in large part be traced back to easy credit.

The "easy" adjective is being overly nice.

 

[George Hatch]

Our assignment involves valuing a specific subject property as of a specific date and in relation to the current market conditions. An appraiser can volunteer an opinion that the entire market segment is overheated and unsustainable, but even if they are right about it that information isn't going to be perceived as being meaningful to the intended users of that appraisal.

We do observe and report, not fortune telling.

 

[J Grant]

Our assignment involves valuing a specific subject property as of a specific date and in relation to the current market conditions. An appraiser can volunteer an opinion that the entire market segment is overheated and unsustainable, but even if they are right about it that information isn't going to be perceived as being meaningful to the intended users of that appraisal.

We do observe and report, not fortune telling.

How do you know such a comment is not meaningful? And I would not comment in exact words, but certainly describing flipping, affect on prices of no money down etc can describe a market in a meaningful way.

We don't just observe and report, we analyze the market, impact of conditions and prevalent financing on prices , and state our opinions and conclusions from the market analysis in the appraisal.

Applying the MV definition as it is intended, and adjusting for undue stimulus or not prudent buyer behavior as of effective date is not fortune telling.

 

[timd354]

Our assignment involves valuing a specific subject property as of a specific date and in relation to the current market conditions. An appraiser can volunteer an opinion that the entire market segment is overheated and unsustainable, but even if they are right about it that information isn't going to be perceived as being meaningful to the intended users of that appraisal.

We do observe and report, not fortune telling.

That is exactly correct and thank God for that.

If JGrant's view of an appraiser's duty was valid, then we would have unlimited liability for changes in market conditions that others claim that we should have foreseen and appraisers as a group would have been sued out of existence.

Thankfully, although some entities attempted to sue appraisers based essentially on that premise, the courts by and large have rejected this and it happily turns out that it is actually very difficult to successfully sue an appraiser in most jurisdictions.

 

[J Grant]

Thou prosteth too much comes to mind.

What are you saying...that an appraiser is not supposed to say anything about market conditions ? It has nothing to do with fortune telling. There is nothing to be proud of if you shirked responsible reporting during the bubble and did not describe market conditions for what they were, or portrayed the market as stable with no spike in investor activity or flipping or stimulus due to financing of no money down etc.... (misleading)

What did you report about the market back then? Generic canned statements leading to no realistic picture of what was going on ?

 

[timd354]

Applying the MV definition as it is intended, and adjusting for undue stimulus or not prudent buyer behavior as of effective date is not fortune telling.

So, in 2006 and early 2007 right before the bubble burst did you adjust every comparable sale in every appraisal due to "undue stimulus" or "not prudent buyer behavior) since by that time over 50% of mortgage originations were Alt-A/subprime loans and there had already been 4 - 5+ years of very large increases in sale prices/property values?

Yeah, I didn't think so.

By the way, by what standard did you judge buyer behavior not to be prudent during the bubble and how did you determined the amount of the adjustment for "imprudent buyer behavior"? Was the buyer who bought a property in 2004 or 2005 using a 100% LTV interest only loan when markets were appreciating at 25% or greater per year in many areas imprudent when that buyer flipped the property 12 months later at a very substantial profit? Or was a similar buyer only imprudent when he made a similar transaction in 2006 and did not flip the property in time before the bubble burst in 2007?