It was not too long ago that shady Subprime loansand crashed the US economy. But we had predicted that the liar loans won’t be too far off with inflated appraisals that were appearing on underwriter’s desk. Well, we are happy to report that Liar Loans are back now.
In fact, I recvieved a flyer from a Wholesale lender who is advertising NO Income, No Asset Loans for both Commercial and Residential loans. The programs is offering 70% LTV at ZERO point with a starting rate of 7.125%. And just to make sure they incent the Loan Brokers to participate in the fraud, they are offering 1 point rebate.
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.
The scary 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. This should be a warning sign for the FSBO home sellers to spend more time on the buyer qualification to make sure that the loan used with the offer is not a risky subprime loan.
Haven’t we seen this movie before? It does not end well. What happened to all the noise about the banking regulations to prevent these kind of fraudulent practices?