MASSIVE Developer-Appraiser-Lender Fraud in the Poconos (PA)

[Anonymous]

Chase Manhatten last week agreed to lower the mortgages on a bunch of properties that were going sour due to over
optimistic appraisals in a ongoing case of massive fraud perpetrated on unsuspecting people.

Class action by 600 homeowners against appraisers, lenders, and developers so overwhelmed attornies that they had to call in reinforcement from Philadelphia. ( that's no good for anyone)!!

Yet the state doesn't want to do anything it seems and it overwhelms the small part time-county DA as he doesn't have the expertise or money to investigate or prosecute.

The Pocono Record has about 20 links to the expose. Fascinating reading.

www.poconorecord.com/report/price2high/

 

[bobburnitt]

Yup,
I've read it.

It is amazing how much reading material you can find if you simply type 'appraiser fraud' into your search.

I was at my Republican Party County Convention yesterday. A resolution that I introduced at my Precinct Convention the night of the primary election made it to county and was approved to go to the State (Texas) Republican Convention in Dallas this summer. The resolution states that the Rupublican Party favors strict enforcement of all laws and regulations that were designed to prohibit predatory lending and appraiser fraud. If it becomes party platform (not likely) at least lawmakers will be aware of the grassroots interest.

I know it is spitting into a headwind, but gotta try something.

The article you mentioned is one that I have included in a packet I am circulating amongst some of the people attending the convention.

We'll see.

BB in Texas

 

[jtrotta]

Frank,
I understand everyone's concern, but the article mentions the increase from 1990 @ 120 to 1999 @ 529 (approximately) Forclosure's. There are several questions that poped into my mind immediately after viewing the article. It notes also that the properties were Selling for $180K +/- and are now worth approx. $80K - and the particular owner in the article owes about a $140K in mortgage debt.

Not knowing all of the details involved (and I'm sure there are many) - this will get attention and as much BAD press, as possible; but will it receive a "proper investigation" :?: I doubt it, it will get a partial, just enough to point fingers, but a real investigation appears out of the question for monetary reasons. Money, caused the problem and money will prevent the real resolution in this case.

Good Luck 8)

 

[Austin]

In another thread I butted heads with an appraiser the other day because I made the statement that you could not support a time adjustment of 4% or less in a years time because with only three comparable sales the margin of error was 7% or above due to general randomness in the market. The appraiser retorted that Realtors had a 1% per month price increase built into the market. I have had this same argument with other appraisers on this board. One appraiser in Charlotte, NC, told me that prices were increasing so fast that if you didn’t make a time adjustment every appraisal would be a low ball appraisal.
The point I keep trying to make about this issue is that this can’t happen unless you swallow this time adjustment argument. Mathematically it is not possible for prices to increase if you use comparable sales without a time adjustment. The only way this kind of situation can come about is somebody is making gross time adjustments. It is matter of degree. It is a state of mind. I have an appraisal to do this morning and I did the inspection last Friday. I appraised it two years ago and it is being re-appraised to refinance again. It is a mobile home on 14 acres in the most remote out of the way location you can imagine. If the mobile home is depreciating at about 3% per year, in this economy, how can the price be higher than it was two years ago? Prices can’t go up 5% per year forever. Sooner or later you wind up with a story like this one and everybody is asking, “how could this happen.” That is how it happens, time adjustments on top of time adjustments compounding into these crazy prices and news stories.

 

[Austin]

PS TO ABOVE POST: Concerning the nature of real estate appraisal as to time adjustments and other characteristics of the appraisal process: I just arrived at my office and was browsing a magazine from the AI about the programs they are having at their Summer Conference in Hawaii. One of the seminars was on discounted cash flow analysis and the emphasis was how to test the dcf for reasonableness. Think about that concept, “reasonableness,” for a minute. What it means is that before an appraiser ever starts an appraisal, he/she has a pretty good idea what the answer is before they ever start the analysis. In other words, if the cap rate is not close to 10% then you know you screwed up big time because anything else is not reasonable given equity and interest rates. To me, the most powerful statement in USPAP is this one: “An appraiser will never report a value opinion that knowledgeable people would not consider to be reasonable.” What does that mean? It can only mean that we all know the approximate answer and if an appraiser comes with something other than what we anticipate as being the answer, the price estimate is not reasonable.
The point is that appraisal is a circular reference model, but it is altered in such a way that the circle never closes but is actually a spiral made possible by time adjustments that play games with reasonableness. It is OK to be a little unreasonable, just don’t over do it. The difference between a good and bad appraiser is that a good appraiser just cheats a little bit to survive given the nature of the appraisal business environment, but a bad appraiser does not know the bounds of reasonableness.
Another test of reasonableness is depreciated cost. For example, I use to build houses and I know about what it cost to build a 1,000 square foot rancher and I know enough appraisal theory to know that if it cost $75,000 to build the dwelling and it has a 20 years effective age, then the price should be some around $60,000. Anything else would be unreasonable. Sounds reasonable to me, wouldn’t you agree.

 

[Anonymous]

The fourth approach to value is that you sit in the car, on the curb or in the diner and think, "what the hell is it really worth?" they don't teach that anywhere. THAT"S where reasonableness comes in. Add a little common sense, knowledge of the market and you can confirm your own question. It's knowledge by age. so it goes...

 

[jtrotta]

Austin
"An appraiser will never report a value opinion that knowledgeable people would not consider to be reasonable".

Your comments are noted, but need to inquire - does this mean a "reasonable investigation" will be conducted :?:

This is where the problem begins, how is it determined who was being reasonable at the time; the Bank :?: the appraiser :?: The Buyer :?: the Seller :?: the Town Assessor :?:


8)

 

[Anonymous]

since you're the one licensed/certified by the state to give your opinion of value, you gather from all sources for your value. Could be bank, buyer, seller, agent, assessor, all or none.

collect, collate, formulate, disseminate (from my Mil Intel days )

so it goes again and again...

 

[Austin]

Jtrotta: There is a philosophy that teaches that all human beings are born with a subconscious universal knowledge base. We call it common sense. Education is the process of remembering what is embedded in our human sub consciousness. Genius is the ability to recall great knowledge from this mysterious source. I subscribe to this theory. There is evidence of this all around us. The concept of reasonableness is just another evidence of it. The connotation of reasonableness is that the observe activity does or does not fit the requirements of the objective universal truths we all have access to, to differing degrees. A genius has great accessibility; a fool has little. The ability to access these truths is an acquired talent and the ability to access the truths can be lost by denying these universal axioms and theorems and substituting our own self-serving set of truths. An example is the political Left. If this were not so, how would we distinguish good from evil; just from unjust; reasonable from un-reasonable; or right from wrong?
The most significant question ever asked throughout human history was: “What is Truth anyway?” The answer is that Truth is the perfect model by which me make judgments. Without a universally accepted set of Truths, mankind could not co-exist on this planet because without a set of universal Truths we could not make reasonable decisions. The Truth is the light of the world and has been visible to those who have eyes since the beginning of time.
Does that clear it up for you?

 

[wyecoyote]

I read through several of the articles provided. Pretty intersiting read. The only question I have is that most of those were printed in april and july of 2001. This has been a year ago any recent word on what is happening up there?

Ryan