Released: April 21, 2007

Negative impact of appraisal inflation

Source: Kenneth R. Harney, Washington Post

Have inflated appraisals helped fuel the surge in foreclosures on credit-strapped borrowers? Are such appraisals at the core of many mortgage-fraud schemes?

The four largest trade groups representing appraisers say yes—and they are asking federal financial regulators to crack down on lenders and loan officers who put pressure on appraisers to raise valuations to allow overpriced deals to go through.

Led by the 22,000-member Appraisal Institute, the groups told regulators April 11 that subprime lenders experiencing high rates of foreclosures often have been guilty of “systematic inattention” to the accuracy and the sources of the valuations backing the mortgages they funded.

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