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Wednesday, May 2, 2007

Will new real estate wrinkle punish Plainfield?


Things fall apart, the Center does not hold;
Mere Anarchy is loosed upon the World,
The blood-dimmed tide is loosed, and everywhere
The ceremony of Innocence is drowned...
-- W. B. Yeats
The Baltimore Examiner reports today on lenders arbitrarily reducing the APPRAISED VALUE of properties being refinanced.

This is a new wrinkle that threatens the real estate market's recovery.


The story behind the story is that this signifies that lenders are recognizing that a linchpin in the real estate transaction chain -- the property appraisal -- is being considered suspect.

Little acknowledged, most of the real estates scams to which the buying public has been treated over the years have involved phony, pumped-up appraisals by appraisers who were in a wink-wink, or worse, situation vis-a-vis crooked loan officers.

Appraisers are a key link in the chain of trust that makes the real estate market go round. Legitimate buyers, sellers and lenders rely on fair and accurate property appraisals.

Corrosion of this link of trust that is necessary for the efficient functioning of the real estate market does not bode well for buyers, sellers or those refinancing their homes.

For the present, the story indicates, it is SUB-PRIME BORROWERS who are being targeted.

But make no mistake: Until lenders feel the appraisal process is less corrupt, fiduciary prudence on their part will cost those in the market, whether in higher rates, higher down payment requirements or reduced equity.

Will the scalawag appraisers ever be brought to book? Who would do it?

Meanwhile, for the rest of us, the 'ceremony of Innocence' is drowned.

-- Dan Damon

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