When I read the story on Wall Street Journal about the inflated appraisals coming back, I had no choice but to think about the heady days on the Real Estate boom where we offered a $650,000 for a 4 bedroom home in King City, California.  My husband & I invested in a Florida new constrction home for $285,000 only to find out that only 1.9% of Tampa population could afford to purchase a home in that price.

Almost 40% of appraisers surveyed from Sept. 15 through Nov. 7 reported experiencing pressure to inflate values, according to Allterra Group LLC, a for-profit appraiser-advocacy firm based in Salisbury, Md. That figure was 37% in the survey for the previous year.

Data from Digital Risk Analytics, a subsidiary of Digital Risk LLC reviewed more than 200,000 mortgages, parsing the homes’ appraised values including the properties’ sizes and similar homes sold in the areas at the times. The review was conducted using the firm’s software and staff appraisers.  Bankers, appraisers and federal officials in interviews said inflated appraisals are becoming more widespread as the recovery in the housing market cools. While home prices are increasing generally, their appreciation is slowing, and sales have been weak despite low interest rates.

With infaled prices, the liar loans can’t be too far behind since to qualify more borowers for these high priced home, the lender will have no choice to relax their underwring guidelines.  That’s why in 2001 we were able to secure a 100% loan for a landscaper on a Stated income with no verification of assets.    And that’s not the strangest part of the loan processing either.  When the lender’s called the phone number listed for the landscaper, his 5 year old answered.  Instead of cancelling the loan as fraud, the lender called back the borrower and told him not to answer the phone so they could approve the loan.

Frigtehing part is that we have not our lesson from the real estate crash.  So, our hat is off to the watered down regulations that will not stop the cowboy bankers from crashing the economy one more time.