Are Real Estate Appraisers and Mortgage Brokers to Blame For the Current Economic Crisis? Am I?
Did mortgage brokers start the whole downturn in the economy? I don't think they are the only ones to blame, but as a former real estate appraiser I do think they had a major hand in getting things started in that direction.
But so did the real estate appraisers who should have been regulating the mortgage brokers.
The following is my short lived time in the real estate business in Southern California.
The time was about 5 years ago in Southern California.
Home prices were soaring, mortgage rates were dropping, and everybody was talking about how much more their house was worth than what they paid for it.
Times were good, especially for people involved in the real estate business.
So good, that I decided to join up as a real estate appraiser.
Seemed like a good idea at the time.
Not so much now.
As I was getting started working for another appraiser it was incredibly busy.
My training to work for this appraiser was basically one week long.
That is probably not what you wanted to hear when the purchase of your $500,000 house was relying on me.
My training involved two days of working on typing reports and what goes into them.
It was mostly cut and paste with a few simple changes such as correct address and property information, and neighborhood boundaries.
My next day involved choosing the right comps.
Comps are nothing more than comparable properties to the property being sold.
To choose the comps involved getting a list of properties sold over the last year within a certain range of size of house, lot, number of bedrooms, etc...
As my told me, "Just list them by price and choose the five highest.
The market is going up anyways.
" I was beginning to have doubts about all of this, but was still hanging around.
My final two days involved going out and measuring the house and taking pictures.
This wasn't much different than the other days.
I was told to not worry about getting exact measurements because they could fudge the measurements on the computer to make the measurements match.
I was also told to make the pictures of the house being sold to look as good as possible, and to make the comps look as bad as possible in the picture.
That was it.
That was all of my training from this well known professional appraiser.
The next week he was sending me assignments that I would go do on my own, write my own report and email it to him.
He would then sign it and send it to the mortgage broker.
He would not even go out and look at the property and he was signing that he did and that it was worth enough to qualify for the loan! Anybody starting to get upset about that $400 appraisal fee yet? Now on to the mortgage brokers, these guys were great while the market kept going up.
Things changed a little bit as the market started dropping.
These same people that were telling you to your face how they were going to help you really only cared about closing your loan and getting paid.
No matter how they did it.
As the market dropped they would go from one appraiser to another until they got a value that they needed to close the loan, and the only appraiser to get paid was the one who came up with the value that was needed.
These guys were trying to get everyone they could into an interest only adjustable arm mortgage by telling them that the market was still going up.
They were doing this because they made more in fees on these types of loans, and knew if rates went up in a year people would come back and refinance again.
The people you thought were helping you get the American Dream were making money putting you into the American nightmare.
I knew my time had come to get out.
I felt like I did an honest job doing appraisals and I could not get work anymore because dishonest appraisers would inflate the values.
I was done.
So who is to blame? Was it the real estate appraisers who just wanted to keep the mortgage brokers happy? Was it the mortgage brokers who just wanted to close as many loans as possible? Was it the homeowner who was greedy or was talked into buying something that he couldn't afford? Was it the financial analyst on Wall Street who bought these mortgage backed securities without knowing what was going on? I think that everybody involved in the process had a hand in starting this financial crisis.
Everybody from the homeowner who knew they couldn't afford the house to the financial analyst who should have done their homework on these subprime, no documentation loans had a hand in getting our country into this economic mess, including myself.
But that's just my opinion.
But so did the real estate appraisers who should have been regulating the mortgage brokers.
The following is my short lived time in the real estate business in Southern California.
The time was about 5 years ago in Southern California.
Home prices were soaring, mortgage rates were dropping, and everybody was talking about how much more their house was worth than what they paid for it.
Times were good, especially for people involved in the real estate business.
So good, that I decided to join up as a real estate appraiser.
Seemed like a good idea at the time.
Not so much now.
As I was getting started working for another appraiser it was incredibly busy.
My training to work for this appraiser was basically one week long.
That is probably not what you wanted to hear when the purchase of your $500,000 house was relying on me.
My training involved two days of working on typing reports and what goes into them.
It was mostly cut and paste with a few simple changes such as correct address and property information, and neighborhood boundaries.
My next day involved choosing the right comps.
Comps are nothing more than comparable properties to the property being sold.
To choose the comps involved getting a list of properties sold over the last year within a certain range of size of house, lot, number of bedrooms, etc...
As my told me, "Just list them by price and choose the five highest.
The market is going up anyways.
" I was beginning to have doubts about all of this, but was still hanging around.
My final two days involved going out and measuring the house and taking pictures.
This wasn't much different than the other days.
I was told to not worry about getting exact measurements because they could fudge the measurements on the computer to make the measurements match.
I was also told to make the pictures of the house being sold to look as good as possible, and to make the comps look as bad as possible in the picture.
That was it.
That was all of my training from this well known professional appraiser.
The next week he was sending me assignments that I would go do on my own, write my own report and email it to him.
He would then sign it and send it to the mortgage broker.
He would not even go out and look at the property and he was signing that he did and that it was worth enough to qualify for the loan! Anybody starting to get upset about that $400 appraisal fee yet? Now on to the mortgage brokers, these guys were great while the market kept going up.
Things changed a little bit as the market started dropping.
These same people that were telling you to your face how they were going to help you really only cared about closing your loan and getting paid.
No matter how they did it.
As the market dropped they would go from one appraiser to another until they got a value that they needed to close the loan, and the only appraiser to get paid was the one who came up with the value that was needed.
These guys were trying to get everyone they could into an interest only adjustable arm mortgage by telling them that the market was still going up.
They were doing this because they made more in fees on these types of loans, and knew if rates went up in a year people would come back and refinance again.
The people you thought were helping you get the American Dream were making money putting you into the American nightmare.
I knew my time had come to get out.
I felt like I did an honest job doing appraisals and I could not get work anymore because dishonest appraisers would inflate the values.
I was done.
So who is to blame? Was it the real estate appraisers who just wanted to keep the mortgage brokers happy? Was it the mortgage brokers who just wanted to close as many loans as possible? Was it the homeowner who was greedy or was talked into buying something that he couldn't afford? Was it the financial analyst on Wall Street who bought these mortgage backed securities without knowing what was going on? I think that everybody involved in the process had a hand in starting this financial crisis.
Everybody from the homeowner who knew they couldn't afford the house to the financial analyst who should have done their homework on these subprime, no documentation loans had a hand in getting our country into this economic mess, including myself.
But that's just my opinion.
