In Predatory Equity you can take your pick of parties to blame.
Is it Fannie? Freddie? The ratings agencies? The landlords? The lenders? The special servicers? The recievers? Or, is it the appraisers?
NPR ran a great story on appraisers in February of 2009. In an interview with Chad Terhune, senior writer at Business week, they discussed “When Property Appraisers Go Bad”. Here’s an excerpt:
Mr. CHAD TERHUNE (Senior Writer, Business Week): What you had in many cases were homes being overvalued. And what would happen is mortgage brokers or lenders order an appraisal, either for a home purchase or refinancing, and they would ask an appraiser to hit a certain number, say $200,000, on a house to get the deal done when really the house is only worth 150,000. And oftentimes, an appraiser would go along with this because they wanted the business. If they refused, the broker or lender would just go to another appraiser until they found one that would go along with this number.
Now, why were lenders and brokers doing this? Well, oftentimes, if the loan is a higher amount, everybody in the real estate food chain gets higher commission. And if you’re a homeowner you say, well, what’s the harm? My loan closed. They got my refinancing. But what happens is a lot of people overpaid for their house. They took on way too much mortgage debt, and they were immediately what they call upside down on their house. They owed too much on their house than it was really worth.
Appraisals are rarely mentioned when it comes to Predatory Equity, but they certainly help fuel the process of speculation and assist banks in overvaluing their assets. Here at UHAB we’ve spent some time considering creative strategies – and here’s how YOU CAN HELP. Do you know an appraiser? Are you an appraiser? CALL US! (212-479-3336)
There are six buildings in the Bronx with your name on them, plus four more in Brooklyn. We want to publicly appraise New York Community Bank buildings and go to the press with the numbers. Speculation is driven by an air of inaccurate mathematics, and we need an impartial pro-bono appraiser to speak honestly about value. Please, get in touch! Let’s tell NYC why Real Estate needs to reevaluate what it is asking for.