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Posts Tagged ‘Redlining and Predatory Lending’

Lip Service: Inadequate State Staffing Makes Appraisal And Mortgage Enforcement A Clerical Function

October 16, 2005 | 8:02 pm |

Ohio is beefing up its enforcement of predatory lending. They hope to add 14 additional staff to their [Valuation Review] 25 person department that overseas 10,000 mortgage brokers and loan officers. The small number of employees in Ohio as well as other states to oversee this industry represents the lack of commitment or understanding as to how big a problem this really is and what the cleanup will cost in the future.

A key dynamic here is that some states are not authorized to spend all the money they bring in. The VR story says that Ohio collects $5.8M but can only spend $4.3M.

This sounds eerily similar to the problem facing the states in regard to the appraisal industry. The average state has about three officials to enforce appraisal-related laws. With about 75,000+ appraisers certified nationally, these staffing levels would appear to be woefully inadequate for any meaningful enforcement.

As the real estate market cools, there will likely be more issues with appraisal and mortgage fraud as individuals need to make up the shortfall from the drop in business.

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NCRC: Hitting The Campaign Trail For Responsible Appraisals

September 26, 2005 | 9:48 pm |

The National Community Reinvestment Coalition (NCRC) has initiated a Responsible Appraisals Campaign [NCRC] and has published some of the most direct anti-preditory lending materials I have seen to date.

NCRC was formed in 1990 by national, regional, and local organizations to develop and harness the collective energies of community reinvestment organizations from across the country so as to increase the flow of private capital into traditionally underserved communities.

The focus is primarily on the appraiser, who is commonly pressured to “hit the number.” This web site provides extensive descriptions on predatory lending practices and who the appraiser is typically involved. The documentation seems to place more blame on the lender but there is still plenty left for the appraiser.

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Bill Getting Eaten By Predatory Lending Concerns

September 8, 2005 | 11:07 pm |

Officials from 4 states today came out agains the pending Ney-Kanjorski bill would weaken laws against predatory lending.

“The Ney-Kanjorski bill pending in Congress and supported by much of the lending industry would gut the strong laws in these states. Another bill, sponsored by Rep. Miller of North Carolina and supported by consumers and civil rights groups, would let states keep strong laws and protect their consumers.”

I do find it odd that the lending industry is nearly unanimously in favor of more restrictions (this bill) since subprime lending has been very profitable for many. The appraiser component of the bill, is more of an empty but magnanimous gesture. In a prior post, I felt that the bill has language intended to protect appraisers from pressure, but the reality is that there are no real preventative measures included. In other words, nada.

See: [The Responsible Lending Act (HR 1295)]

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Fannie and Freddie Now Have To Tell

August 20, 2005 | 11:48 pm |

Its hard to imagine its finally happening, but regulations proposed in early 2005 were just finalized that make Fannie and Freddie now responsible to detect and report mortgage fraud to OFHEO [Office of Federal Housing Enterprise Oversight [Note: PDF]].

This is a first step (albeit tiny) in creating some sort of enforcement activity against mortgage fraud considering the trillions of mortgage dollars under their watch. However, I am not sure what ability they will have to undertake this responsibility.

Now its time to turn attention to state enforcement, to ensure they have adequate budgets to fight appraisal fraud.

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Predatory Lending Results From Overzealous Efforts To Increase Homeownership

August 11, 2005 | 9:40 am |

Predatory lending has run largely unchecked. Here’s one of the best articles I have seen written on the topic….Wolves in Small Print


Buyers aren’t the only ones screaming. Nationally and in Fort Worth, some of those working in the real estate and mortgage business are also coming forward to charge that the real estate lending business is fraught with fraud. Those professionals say that appraisals are being inflated to buoy up higher housing prices, bigger loans, and higher fees for the industry. First-time home buyers without down payments and with poor credit histories are being pushed through the mill, critics say, and come out the other side with loans they have little chance of repaying. That in turn is pushing foreclosure rates to alarmingly high levels.

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