Transcript PowerPoint 프레젠테이션

Shaky Foundation:
Rising Home Prices Cast Appraisers
in a Harsh Light
John Hechinger
The Wall Street Journal December 13,2002
GSIS IS502 International Finance
092SIS71 NANA WANG
The Agenda
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Summary of the reading
Terms and background information
Appraisers and mortgage brokers
Mania for home ownership
Conclusions
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“Why rent” program
Gene Percudani, a 51-year-old native of
Queens, New York, built a thriving home
-building business, running television a
ds offering New Yorkers new homes in
Pennsylvania. For only $1,000 down an
d $685 a month.
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“homes is built on shifting sands”
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Hotel worker Danny Ruiz bought a three-bedr
oom Cape Code in 1999 for $171,000.But whe
n he tried to refinance less than two years late
r, the home was valued at just $125,000.
A truck driver bought a three-bedroom colonia
l in a development called Pocono Country Plac
e in Tobyhanna, for $140,608 with a mortgage
of $126,450 in 1997. But in 1998, when they tr
ied to refinance he was told the home was onl
y valued at $100,000.
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The inflated appraisal
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With consumer and real estate company advocates,
state officials have sued an appraiser and builder, sa
ying they colluded to sell inflated Poconos property.
The state launched a criminal investigation.
Several appraisers found themselves as defendant in
the law sues. In Washington,D.C., James E. Golden,
appraiser, who was sentenced to seven years in pris
on for performing inflated appraisals on 45 local prop
erties mortgage fraud.
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Mr. Percudani became
“famous”
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In a law suit Mr. Percudani was accused of frau
d and conspiracy;
The lawsuits argue that Mr. Percudani misled ho
meowners into buying homes they couldn't affo
rd;
The homeowners and the attorney general in th
eir separate suits argue that Mr. Percudani soug
ht inflated appraisals to earn higher profits, and
offset the cost of shouldering homeowners' rent
payments.
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Mr. Percudani says he isn't surprised that later a
ppraisals, or even different appraisals made at
the same time, could result in different values.
"Appraisals are opinions," he says. "Value, like
beauty, is in the eye of the beholder."
"It's like buying a stock," Mr. Percudani says in a
n interview "The value goes up. The value goes d
own.
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Homes they can’t afford
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Many homeowners can not afford the payment an
d some refusing to pay because of inflated appra
isals. In the end, Chase Manhattan offered to for
give some of the principal amount owed on 258 l
oans valued at $35 million that it made through M
r. Percudani's Chapel Creek Mortgage. 205 home
owners accepted the offer, reducing the amount
outstanding by about $10 million.
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Resource is from http://www.thinkingaboutmoney.com
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Appraiser
An appraiser is one who sets a value upon property,
real or personal.
In England the business of an appraiser is usually combined
with that of an auctioneer, while the word itself has a similar
meaning to that of "valuer."
In the U.S., the most common usage relates to real
state appraisal, while the term is often used to describe a
person specially appointed by judicial or quasi-judicial
authority to put a valuation on property.
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Subprime mortgage
Subprime mortgage is a real estate property
loan made to a lesser-qualified borrower.
A subprime mortgage carries a higher
interest rate and more restrictive terms
relative to a conventional (also called prime)
mortgage. Borrowers of subprime mortgages
generally have low credit scores and past do
cumented credit issues.
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Mortgage fraud
Mortgage fraud is a term used to describe a b
road variety of criminal actions where the intent
is to materially misrepresent or omit information
on a mortgage loan application to obtain a loan
or to obtain a larger loan than would have been
obtained had the lender known the truth. In fed
eral courts, mortgage fraud is prosecuted as w
eir fraud, bank fraud, mail and money landing,
with penalties of up to thirty years imprisonment.
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Appraisal fraud
It Occurs when a home's appraised value is
deliberately overstated or understated. When oversta
ted, more money can be obtained by the borrower
in the form of a cash-out refinancing, by the seller in
a purchase transaction, or by the organizers of a forprofit mortgage fraud scheme. Appraisal fraud also in
cludes cases where the home's value is deliberaty un
derstated to get a lower price on a foreclosed home,
or in a fraudulent attempt to induce a lender to decre
ase the amount owed on the mortgage in a
loan modification.
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Mortgage broker
Mortgage broker acts as an intermediary who sell
mortgage loans on behalf of individuals or
businesses.
The majority of mortgage brokers are regulated t
o ensure compliance with banking and or finance l
aws in the jurisdiction of the consumer; however, t
he extent of the regulation depends on the jurisdic
tion. Only one state within the U.S. has no laws th
at govern mortgage lending.
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Real estate appraisal
It is the practice of developing an opinion
of the value of real property, usually its
Market Value. Some areas require no
license or certification at all, a real estate
appraisal is generally performed by a
licensed or certified appraiser.
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Appraisers & mortgage brokers
Spurred by low interest rates, mortgages
and refinancing rised 19% in U.S.,
2002. More unreliable appraisals
expose the shaky foundations of the
hot housing market.
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Appraisers & mortgage brokers
According to Mortgage Asset Research Insti
tute of U.S., says 21% of the cases it track
ed related to appraiser in 2000, which maki
ng appraisal-related schemes the fastest-g
rowing form of mortgage fraud
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Mania for home ownership
in U.S.
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Belief that housing is a good investment
Promotion in the real estate industry
Influence by the mortgage brokers
Crash of the dot-com bubble
Historically low interest rates
Risky but attractive mortgage products
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What’s after?
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Reference
http://cn.wsj.com/gb
www.mayaandmayainc.com
www.en.wikipedia.org/wiki.
www.ft.com
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Thank you !
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