Why has my property dropped more than 25% in value if housing prices have, in general, dropped approximately 25% over the past several years? According to Gary A. Newland of Newland & Newland LLP, a trial lawyer involved in helping families and small businesses recover from the housing crisis, the answer maybe fraudulent bank appraisals in many circumstances.
Many appraisers were under pressure by banks and mortgage brokers to appraise properties at contract prices even though properties actually were not worth the appraised value. The appraisers wanted to continue to get appraisal business and if they did not appraise properties for the contract price mortgage companies and banks would use other appraisers that were willing to play along. The consumer believed that the bank was willing to appraise the property out then it must be a good investment because why else would the bank loan money on the property.
The consumer justifiably so relied on the banks sophistication to justify taking out loans. The fix was in, however for the consumer. Appraisers were directed to go outside of the immediate area of the properties to find comparable home sale prices and use other methods to over inflate value. The problem was epidemic in the banking industry. As a result when unemployment hit and the housing market dipped it became evident that those houses that were over-appraised would crash in value significantly more than properties which had true and accurate appraisals. The failure of the banks to apply their own underwriting standards to appraisals resulted in many homes having dipped in value more than 25% and some more than 50%. As a result, even if a consumer put 20% down on a property they are still significantly under water in many circumstances and they have lost their hard earned savings. The consumer may still be entitled to a
loan modification and may also be entitled to a reduction in principal or even a foreclosure defense if in fact the consumer was a victim of a fraudulent appraisal.
The impact on our society has been significant because at the current time 1 in 5 foreclosures are actually strategic defaults wherein values have plummeted and even if people can make the payment it makes greater financial sense to go into default then own a home that is a liability.
Gary A. Newland is a trial lawyer in Newland & Newland LLP. Gary has made a living fighting for the rights of those being taken advantage of by banks and insurance companies. He writes a column on the Foreclosure issues and the Banking crisis. For more information, please visit Newlandlaw.com
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