http://money.cnn.com/2008/08/25/real...ion=2008082606

Apparently the industry still sucks. Could it be that it is a result of being the only industry that can tell the consumer to advance money based on a value, then change the value?

For example:

If I told you a brick was worth $60.00 and you should take out a $55.00 loan against it, because you'll still be ahead. Then a week after you take the $55.00 out I say, oh sorry that brick was only worth $35.00. Would that be fair? Would you have taken the $55.00 out if I told you the brick was only worth $35.00? I'm trying to think of another common industry that has this overwhelming ability to manipulate its market

Possible solution in:

Make lenders responsible for the value. If they appraise and loan money based on a 'value' they must honor that same value, regardless of market, for any refinancing or other adjustment measures as long as the paper stays with the originating bank.

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In a way the lenders are responsible for it. Say they loan $55 on a $60 brick and the market turns bad, now the brickowners are strapped for cash and want to refinance and take out $65, but their brick value has decreased to $45. Now they cant afford the payments anymore and have to let the brick go into foreclosure. Now the bank is stuck with at least a $10 loss and will probably sell the brick for $30-$35. At the end of the day the lender is the one who took the biggest financial loss.

Another way to help reduce fraud, IMO would be to put mortgage brokers and loan officers on salary. Right now the industry is commission based. That means all these lenders and brokers are scrambling around to close any loan they can so they can get paid. Whether the loan is good for the homeowners or the bank is irrelevant to some of them. That is where the problems can start. The loan officers work for the bank, but in some cases they are actually the banks worst enemy.

I have been an appraiser for nearly 8 years and work for a reputable company and am in the process of starting my own. The company I work for has lost a few clients because we would not inflate or "stretch" values as far as other appraisers. That hurts in the short-term, but keeping your license and coming out the other side of this downturn with your reputation intact is much more important.

This whole thing is weeding out a lot of bad appraisers, mortgage brokers, loan officers, agents and so on. They are also making it much harder to become an appraiser and are coming down much harder on the ones who are caught doing things they shouldn't. It was something that the industry needed a long time ago and this whole bust helped push things along. It is far from perfect, but at the end of this recession I think the industry as a whole will be much better and more legit.

Not to over simplify the "what if i told you story" but in all honesty these days the average buyer just want's to know where they need to sign so they can own a house. God forbid they have to think about the financial aspects of the loan based on numbers and the additional what if's ect. ect. ect.

Fraud on the other had indeed is another matter which as time passes will get worse. It's a sad state of affairs that society has gotten to the point that measures have to be taken to force people to be honest. What a pathetic situation we are faced with.

That's what i like about you Wag. It bothers you as much as it bothers me.

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People pay for what they do, and still more for what they have allowed themselves to become. And they pay for it very simply; by the lives they lead.
James A. Baldwin

I agree. It is sad that people have to be forced into be honest and that doing what is right not only for you, but for others doesn't come very naturally to some people.

You are also right that people want instant gratification and will deal with the reality of it all later. It is the whole, Oh, I cant afford the payments on this house, but if I get an ARM I can afford it attitude.

I do disagree on one thing though, the mortgage industry will be more legit when this is said and done.

I will be very interested to see what this industry looks like when this thing is over

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RIP Equality, It was nice to meet you this summer...

I can only really speak from personal experience on the Atlanta metro area, but here is what I have noticed; appraisers, loan officers and agents are dropping like flies, the educational requirements to become an appraiser have been raised, the experience/education level to move up to a higher license designation as an appraiser has been raised, lenders are actually taking the time to read the market analysis section of an appraisal report (they are not just assuming that every area is doing well and increasing in value anymore) and working with the appraisers to better understand the market, the requirements for a borrower to obtain a loan have been raised and so on. Basically everything is under the microscope and these are all positive things.

Like I said, it is FAR from perfect, but I do think it is slowly moving in the right direction. It was so out of hand before that it will take some time.

The market will recover once the dust clears. There is only so much real-estate and even less available in prime locations. Sure the earth is still creating more land which could eventually be used for real-estate but that process is VERY slow and much of it is under water. Also factor in the amount of land that is destroyed or transported into the earths mantle via the tectonic plates.

The problem and why we are where we are at today is because real-estate has always been a long term investment. Flipping houses is a recent phenomenon where the industry was perverted to allow quick inflated returns which could not possibly be sustained.

Everyone who lost was either greedy, foolish or just plain stupid.

Besides the things you listed one might consider that some folks we're uneducated. And being uneducated means you may have to rely on the
honesty of others. Sad to say I have met people who fall into that category and due to no fault of their own they become victims of every sort of folly.

Sure but I'm a big personal responsibility kind of guy. Aside from being held up at gunpoint theft by scam still involves choice. Mental deficiency due to disease, age or accident excluded of course.