Bill Black: How Many Lies Can the WSJ Pack into a Chart on Liar’s Loans?

Yves here. Bill Black is not happy about the revisionist history on liar’s loans. And separately, this piece is a useful exercise in the critical reading of narratives.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspective

This is the second article in my series prompted by the Wall Street Journal report that “big money managers” want to bring back “liar’s loans.”  Given that the best study of liar’s loans during the crisis found a fraud incidence of 90% — this is a startling proof of how openly addicted to fraud the “big money managers” remain.  It demonstrates some of the terrible costs of the Department of Justice’s refusal to prosecute the fraudulent loan originators’ controlling officers.

In this installment I lay out briefly the lies that the banksters made, and continue to make, about liar’s loans and why those lies are so harmful.  The WSJ chart on liar’s loans faithfully repeated those lies as if they were revealed truth.  The chart is shown below.  Let us count the lies.


Lies 1-3: “Dubbed ‘liar loans’ after they were abused during the housing crisis….”

That’s actually three lies in a single clause, which may be a record even for the WSJ.  First (and second), they were called liar’s loans well before the 2008 crisis – by the lenders making the loans, not their critics.

Third, they were not “abused” – as if they were victims.  They were the fraudulent “ammunition” that optimized the fraud recipe for a home lender.  As Tom Miller, the Nation’s longest serving state attorney general testified to the Fed a year before the acute phase of the crisis began:

[Many originators invent] non-existent occupations or income sources, or simply inflat[e] income totals to support loan applications. Importantly, our investigations have found that most stated income fraud occurs at the suggestion and direction of the loan originator, not the consumer.

The WSJ must think a 5.56mm NATO round is “abused” when it enters into a human body at supersonic speeds and is deformed by striking bone and tissue.  The American people, and that includes the borrowers, were “abused” by liar’s loans.  The banksters were made rich by liar’s loans.  Liar’s loans are designed by the lenders’ CEOs to be fraudulent.

Lies 4 & 5:  [continuing from the clause quoted above] “Alt-A mortgages ….”

“Alt-A” is a double lie.  “Alt” stands for “alternative” and “A” means “prime” quality loan – an ultra-low credit risk home mortgage loan.  Taken together, the claim was that the lender used an “alternative” underwriting process that ensured that the loans made were ultra-low credit risk.  Unless you think “not underwriting” one of the essential “4 Cs” of prudent lending (Capacity) is an “alternative” means of underwriting you know that word is a lie.  As even the WSJ admits “Alt-A” loans had, by 2010, a 90+ day delinquency rate of “26%.”  They were slime, not prime.  The industry deliberately creates these lies to help them deceive customers, regulators, and others.

Lies 6-9: The chart separates liar’s loans and subprime – creating the sixth lie that the two categories are mutually exclusive.  It then commits the seventh and eighth lies by purporting that subprime required and requires verification of the borrower’s income through “pay stubs and two years of tax returns” while liar’s loans purportedly required and require verification through “some combination of proof of assets, bank statements or tax returns.”  It was, in reality, common to lend to borrowers with subprime credit scores without “pay stubs” or “tax returns.”  By 2006, roughly half of all subprime loans were also liar’s loans.

The claim as to how liar’s loans were and are “documented” is more disingenuous.  The reader is never told of the “4 Cs” required for prudent real estate lending, which lets the industry and the reporter to play fast and loose with the entire concept of underwriting.  Note that the word “or” is used rather than “and” – “some combination of proof of assets, bank statements, or tax returns.”  These forms of documentation, given the use of the word “or” are inherently vague, but they are also deceptive because they are not nearly equivalent and only documentation of income was in fact virtually never used.

“Proof of assets” and “bank statements,” like credit scores, are inherently incapable of answering the question (for any but the wealthiest few percent) of whether the borrower has the capacity to repay the loan – which requires verifying the borrower’s income, assets, and debts and other liabilities.  Only “tax returns” can be used to verify the borrower’s income.  But the purpose of liar’s loans is to inflate the borrower’s income, so the CEO of the lender is not about to verity the borrower’s income through checking his tax returns.  To create the appearance of prudence, lenders on liar’s loans routinely required borrowers to sign IRS 4506-T consents allowing the lender (and any purchasers of the loan) to obtain a “transcript” of the borrower’s last two years of tax returns.  (A transcript has all the key information boiled down.)  But lenders, and purchasers, virtually never used these consents – even after they were put on notice that the fraud incidence on liar’s loans was 90 percent.  Indeed, I do not know of any case where lenders verified the income reported on a sample of liar’s loans applications prior to funding them.  Even after making the liar’s loans and knowing about the 90% fraud incidence I know of only one case, Countrywide, where the lender made an ex post review of a sample of liar’s loans that they had funded.  Countrywide’s study confirmed that the loans were riddled with fraud – and Countrywide’s leaders responded by adopting what they called an “Extreme Alt-A” program modeled after Bear’s to dramatically increase the amount of fraudulent loans it made.

I have discovered even more amazing indicators of fraud in my pro bono efforts on behalf of alleged fraud “mice.”  One of the largest home lenders in America ordered its staff – in a passage that they put in all-caps to highlight its importance – never to verify the borrower’s income on liar’s loans even when the underwriters could have done so without any expense.  In particular, while the underwriter was permitted to call the employer and verify the borrower’s employment, the underwriters were forbidden to verify the borrower’s income even though they had the boss on the phone line staring at the employee’s records.  Everything about liar’s loans screams “accounting control fraud” by the lenders’ controlling officers.

The chart also prompts critical questions missed by the reporter.  It says that a borrower with a high credit score could get a prudently underwritten loan for 4 percent, but will pay 5.5 to 8% for borrowing the same amount of money through a liar’s loan.  This raises three critical analytical points.  One, the spread is sufficiently large over prudent lending that the attraction of the officers that run “big money managers” to make large numbers of fraudulent liar’s loan is shown by the fraud “recipe.”  Two, why is a borrower willing to pay up to double the market rate (4% v. 8%) to borrow through a liar’s loan?  Any honest borrower, even if self-employed, has the ready alternative of using his tax returns to verify her income – and save up to 400 basis points on her loan.  There are two obvious answers, and they are not mutually exclusive.  The borrower is the subject of predation by the lender and its agents.  The borrower may be unwilling to provide her tax returns because they show that she has been deceiving the IRS or a former spouse.  (One of the other 4 Cs that we underwrite to make prudent loans is “Character.”  Three, why is the spread so variable?  Who is being charged “8%” and who is being charged “5.5” percent?  Does it depend on race, ethnicity, or gender?  The WSJ doesn’t seem to be interested.

The lie that liar’s loans and subprime loans are mutually exclusive categories is one of the most damaging lies of the crisis, for it has done more than any other lie to deceive the public about the paramount cause of the crisis.  To understand that point the reader needs to know about a more subtle lie by the industry, one that the WSJ parrots.  The goal is to shift the blame to the home buyer, particularly poorer home buyers, and most particularly minorities.  The goal is to shift the policy blame to “liberals” and “government.”  Liar’s loans pose an insuperable barrier to any effort to blame the clever hair dresser (or exotic dancer in “The Big Short”) who is purportedly too smart for poor Bear and Lehman to defend against.  No government entity ever encouraged liar’s loans.  Even under Bush’s “Wrecking Crew” (Tom Frank’s title and book), the government regulators repeatedly discouraged liar’s loans.

The WSJ article conflates throughout “Alt-A” and “liar’s loans.”  That is a lie.  While the vast bulk of “Alt-A” loans were liar’s loans (ultimately, around 90%), “liar’s loans” were a far larger category that included “subprime” and supposedly “conventional” prime loans.  By 2006, roughly half of all the loans that the industry called “subprime” were also “liar’s loans.”  There is nothing mutually exclusive about “subprime” and “liar’s loans” – lenders loaned to borrowers with very poor credit histories without verifying their income.  Doing so is perfectly sensible for fraudulent lenders following the fraud “recipe.”  For any honest lender, of course, it was facially insane.

The bubble was hyper-inflated by liar’s loans, which grew much faster than non-liar’s loan subprime from 2003 until mid-2007 when the markets collapsed.  The percentage of subprime loans that were also liar’s loans surged from 2003 until the collapse.  Subprime loans that were not liar’s loans actually fell in number in 2006 and the first-half of 2007.  If you had to choose between “the subprime crisis” and the “the liar’s loan crisis” the latter would be far more accurate.  (I think that the phrase “nonprime crisis” is even better, for it includes all three categories – subprime loans made with full documentation, liar’s loans made to borrowers with subprime credit scores, and liar’s loans made to borrowers with higher credit scores.)

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  1. Thoughtful person

    Great post. I have a relative who is convinced that much of the ’08 bubble bursting was the fault of borrowers taking on loans for what they could not afford. This post helps to clarify what’s really going on – financial industry fraud. The absence of effective regulation is pretty obvious. That the regulators have been, for the most part, captured by the financial industry seems clear. A slightly hopeful recent development is that the amount of money politicians are taking from regulated industries is becoming more of an issue. Sanders campaign run, Carters recent statement…

    1. Skippy

      The issuers get Freedom and Liberty’s [positive (possessive) freedom] whilst the marks get Morals [negative freedom]….

    2. perpetualWAR

      If you read Sen Carl Levin’s Senate Investigation Report on the financial crisis, it explains in detail the fraud. It is very confusing to read that report and then observe no prosecutions.

      The report shows that the fraud was pervasive. So CONgress knows.

      1. Eric377

        The fraud mostly though was not against the borrower, but syndicated debt investors. To be a loan fraud with the borrower as the victim usually requires that the lender have an interest in seeing the loan fail. If by miracle the overextended borrower could hold it together and make the payments the lender was totally indifferent. It was making and selling the loan that was the big payday, not some complicated and dubious profit coming from the loan failing and somehow the lender getting the property back.

        1. perpetualWAR

          Actually, within Sen. Carl Levin’s Congressional Investigation into the financial crisis, are emails between former WaMu CEO, Kerry Killinger, and former WaMu CFO, Steven Rotella, that go something like this:

          Killinger: “Why can’t we sell more of these Option ARM loans?”
          Rotella: “Because the brokers believe that they are bad for their clients.”
          Killinger: “How much incentive do we need to pay to undermine this belief?”

        2. TedWa

          What about the balloon loans they were making? Get them in cheap so they could qualify for the payments and then hit them with higher payments when the short term balloon came due. Sounds to me like they wanted them to fail.

          The brokers were being paid kickbacks for every loan they could write, that is illegal. The banks knew they were destroying/clouding titles with these swaps and derivatives. That WAS against the law then, but not now it seems….. Title companies are laying the problem of who actually owns the property on the sellers. They and the banksters don’t want to be legally responsible if the title is clouded – which they pretty much all are.

        3. Ray Phenicie

          The fraud mostly though was not against the borrower, but syndicated debt investors.

          True that, however, many a mortgage, car loan or credit card was underwritten, agreed to or given out with the originator having one intention-to ensnare an already debt laden borrower to agree to more shaky-ridden with low chance of repayment- debt. Why would a mortgager, loan office or credit card company offer more debt to an already struggling client?
          Some thoughts
          ~By luring prospective borrowers to the signature line on a mortgage, the originator, in knowing full well that the loan will fail shortly (inside of three years or at the end of two with a built in balloon that is covered over initially), offers the chance for a partner in a subsidiary the chance to make some cash up front on closing the deal and then cash on the back end to foreclose. Easy, guaranteed income for some smooth talkers in ties and suits behind a desk.
          ~Repos on autos are a losing proposition so there is a gamble here but the upfront cash can be lucrative and refinancing six or twelve months into the deal offers more easy money with more fees and new interest rates that are much higher than the original. Ultimately the car will be taken back and the potential losses on the repo will be covered by all of the new deal making.
          ~And so it goes.

    3. Eric377

      These loans went sour at a high rate specifically because many such borrowers could not afford them. Okay, that they got such loans is pretty terrible, but the actual failure of the loan was specifically that they could not afford them. Your relative is quite accurate. Have you gone to many property closings? At least in my state the purchaser using debt is hit over the head about 3 times in the proceeding with: you will have to pay $x in P&I and taxes are $y (and sometime if the downpayment it low, insurance is $z). The borrower might have had someone urging them to lie on their application, but before taking title they absolutely understand what the nut is going to be and one supposes that they do understand their true income even if the loan documents said something different.

      1. legendary bigfoot

        At the time and in the aftermath it was repeatedly alleged and reported that in many cases there may have been no actual buyer. Mortgage brokers were allegedly using stolen identities to fabricate loan documents to feed the demand for these financial instruments. Elderly people and others were pressured to sign documents that were changed after the fact. Brokers and banks have been pasting fake signatures on documents delivered to courts, sometimes editing and resubmitting them when the information doesn’t match the names of the people hauled into court. If you could fog a mirror, you could sign a loan, and even frequently if you could not fog a mirror.

        Fraud committed by a vertically integrated organized criminal enterprise that has rigged the system from top to bottom so that it can’t lose and will never be prosecuted.

        1. Ray Phenicie

          Another technique was to have the client sign stacks of paperwork, which looked great on the first ten-fifteen pages. Pages 60-80 say were the real deal but the client was pressured to not read down the stack too far; at the end of the day the top 59 pages are trashed and the client never sees them again. The Shark has wet ink on paper on a cracked deal.

  2. Jim A

    Of course the reason that bad loans were good business is that somebody else would buy them. No doc loans are best regarded as a statement by the originator that ” We only wrote down whatever crazy shit about income and assets that they told us.” Because it was in the further pooling and tranching that the “financial magic”(fraud) really went on.

    1. diptherio

      I have a friend who bought two houses during the wackiness, both of them with “liar’s loans.” At no point was he asked any questions about his income or assets. As Bill Black points out over and over, the lies in liar’s loans were put there mainly by the lenders, not by the borrowers. Credit where credit is due.

    2. perpetualWAR

      That’s actually untrue.

      The loan brokers were submitting these loan docs 3, 4 and sometimes many times to ensure funding. Hint: a loan doc should only be submitted ONCE to underwriting.

      So, the “crazy shit” was actually being made up by the loan brokers, not the borrower, in most cases.

      1. TedWa

        righto – the banks were illegally giving these brokers kickbacks for every fraudulent loan they wrote. There’s your incentive

  3. Paul Tioxon


    He’s said it before and he said it again last night on national TV: Wall St = FRAUD!

    Why hadn’t the lying public swindled their way to home ownership by lying before being offered sub-prime, no doc or Alt-A loan programs? Because previously, conventional lending verified everything on the mortgage loan application. Verification of Employment, from the employer, Verification of Assets with bank statements and Verification of income with paystubs, W-2s, signed tax returns, analysis of credit report derogatory items with explanations in writing that made sense, divorce decrees with property settlements if necessary, and on and on and on. The average person felt like they went into a grand jury investigation during the lending process.

    Lying at any point destroyed your chances of an approval. The introduction of weak or non existent verification of information about the applicant was the introduction of the opportunity to turn in a higher volume of loans for securitization which is exactly what happened. People applying could have always lied but the difference before sup-prime, no doc lending was that they were easily caught by the underwriters. Because that was their job, to weed out the risk. People did not all of sudden start lying to get loans in huge numbers adding up to $Trillions annually, lenders starting offering loans that allowed any information at all to pass muster by relinquishing underwriting, by stopping risk management!

    Offering fraudulent loans was entrapment. The fact that so many fraudulent loans were offered is the only reason that all of sudden there were so many bad loans when previously there were not. What changed to cause this? People lying more or sub-prime, no doc lending processes? People had not changed, but the loan products had. And the army of unlicensed sales people increased the volume of lending, originators filled out the paper work, frequently over the phone and the applicants formally signed paperwork after getting an approval. This is entrapment, offering an opportunity to apply to what was little more than fraud, fraud which originated on Wall St, not by the people who lived on Main St.

    1. perpetualWAR

      YES! It was the underwriters and the loan brokers [fueled by the incentives, of course] to push these loans through underwriting.

      All people have to do is read Sen. Carl Levin’s Congressional Investigation into the financial crisis. In this investigation are emails between former WaMu CEO, Kerry Killinger, and former WaMu CFO, Steven Rotella, that go something like this:

      Killinger: “Why can’t we sell more of these Option ARM loans?”
      Rotella: “Because the brokers believe that they are bad for their clients.”
      Killinger: “How much incentive do we need to pay to undermine this belief?”

      1. Skippy

        …and it goes on…
        “A Washington judge may decide as early as this week whether two of three former Washington Mutual executives, the three, including former WaMu CEO Kerry Killinger, who were accused of taking gambles that led to the biggest bank failure in U.S. history are entitled to $23.1 million in “golden parachute” payments.”

  4. R. Seckler

    Many who took out loans were “coached” by lenders.

    I stopped reading the WSJ years ago when I realized their reporting was skewed towards promulgating myth instead of reporting facts.

    It’s just another tube in the echo chamber.

  5. dee preston

    There’s been a void in a huge component of the Alt-A loans and it was the appraisal piece. The appraisers went out of neighborhoods and used comps that were no where near comparibles in the neighborhood. This was done with fraud in mind. If they came up with double the value they could also use LTV as low as 50% or even lower. This helped fuel the fire. Brokers also played a huge part in putting borrowers with good credit into a loan with a margin or floors (so interest rates could never fall below the margin) and these were anywhere from 2-8%. Brokers made huge commissions on margins and ALT-A loans and they should have been held accountable as well. They swindled people out of a good loan and placed them in a dangerous neg am loans knowing what would happen. And then there is the robosigning! All fraud. Deep intentional fraud to confinscate homes with fraudulent paperwork. AND then there are ALL the flawed titles! NTC anD LPS played the devils hand with the government. Our county records are destroyed and no one seems to care. So liars loans is a perfect description of all the lying that took place by the felons that should ALL be in jail. This theft and deception was intentional and nO ONE went to jail. I could go on and on…..look who owns all the foreclosed properties now– hedge funds do. More fraud. Its a vicious circle and I have a feeling its not over. God bless all those whom are worthy and for the rest, let the devil have his full dues!

      1. Ian

        Lambert- i enjoy your posts and links- but haven’t seen servicer IT before- what is it? And I take it that your sarcasm is at play here?

    1. STOLTE

      Good job on what is just the front-end piece of the fraud. Brokers did not fund these liar loans but were shown as “lender” on the loan docs. This hid the identity of the actual lender who was usually the sponsor(fabricator) of a bogus trust(virtual vehicle) that issued certificates to investors that thought they were buying value of safe mortgage-backed securities. In reality, these trusts did not own any loans and the “fabricators” sold them multiple times through the securitization process along with derivatives(smoke based on smoke). Many complex layers were created to hide the fraud, circumvent existing regulatory law, and to facilitate the inevitable resulting foreclosure process. Servicers followed scripted unscrupulous procedures designed to screw borrowers under stress produced by the terms of their designed to fail mortgages. In short, their debt rose and they were foreclosed upon anyway. The servicers hired the despicable foreclosure mill law firms like Stern in Fla. to create phony paperwork signed by robo-signers that would ensure their success in court against any borrower naive enough to seek justice through the judiciary. The bottom line is unconscienable enrichment of the parties involved in the biggest financial scam in U.S. history. MILLIONS of families have lost their homes, and millions more will as well while the responsible parties go unpunished. Unpunished but not undetected.The above steps are not isolated events, but a massive pre-designed systematic process that continues to operate without disruption. What will they have an appetite for next?

      1. perpetualWAR

        What’s also not mentioned very much is that the public employees, meaning Governors, legislators, councilmen, Attorneys General, JUDGES, etc., all their pensions are tied to the toxic mortgaged-backed securities. And the bank lobbyists have been instructing them that if they act to halt the foreclosures, well then their pensions will be at risk.

        Why do you think there’s been no prosecutions? Why do you think they haven’t halted the unlawful foreclosures? Because these fools think that money can still be recovered! It’s so tragic it’s laughable!

    2. crittermom

      Dee, you’ve added an excellent point about the liar appraisals that accompanied our loans.

      When I refinanced into a predatory loan to pay off bills following illness, my ranch was appraised at $260,000 (which, of course, immediately increased my property taxes a great deal).

      I only refinanced for $140,000. Enough to pay off my old loan as well as bills I’d rung up due to being out of work (not one penny for anything else).
      I figured I still had over $100,000 in equity on my ranch, right? (Ha, not!)

      Then my business went under a while later so I entered HAMP.
      I was happily making (& current on) my modified pymts on a $140,000 loan for a year when Chase began sending my pymts back & stole my home, instead.

      After Freddie Mac acquired it with a “bid” at auction that was $50,000 more than I even owed, they then sold it for a mere $65,000 on the open market in less than a week. Less than it was appraised for at that time, even.

      So yes, those liar appraisals gave us a false sense of security—just as they planned.

      I’ve yet to hear much mention of how those liar appraisals increased our property taxes, too, costing us even more.

      1. Clarabelle

        Good point about the tax bills. I just looked at my county’s rules on getting the value these corrected. We had three years from the time of purchase to do it. After that, tough luck. Doesn’t matter when you found out.

      2. TedWa

        Hi cittermom. The way it worked was Chase bank and Eappraiseit had over 240,000 fraudulent appraisals all across the country (and that was only 1 of the companies they looked in to). Once these fraudulent valuations become recorded sales, the assessor had to include these sales as comparables in their tax assessed values – as it’s based on market sales.

    3. perpetualWAR

      In Washington State, the Seattle City Council are concealing a report from McDonnell Analytics showing how fraudulent the titles to Washington property really is.

      Of the 195 Assignments of Deed of Trust examined, all of the assignments are either void or void ab initio! ALL ONE HUNDRED AND NINETY FIVE ASSIGNMENTS WERE VOID.

      And each and every one of the Seattle City Councilmembers are complicit in this cover up along with our pathetic Attorney General Bob Ferguson.

    4. TedWa

      Chase and Eappraiseit hired only appraisers they could control – they couldn’t control the independent appraisers so they hired those that had the education needed but couldn’t find work anywhere else. As they couldn’t find work anywhere else, they would get any value the banksters needed. Plus the banks were illegally giving kickbacks to the brokers for every loan they wrote and it didn’t matter about collateral. NINJA loans for instance as you describe. The problem with liars loans is that the brokers were lying to customers so they could get them in a loan.

          1. Clarabelle

            I admit to being surprised that my loan servicer’s proof of claim in the bankruptcy I chose rather than give my house away 5 months ago included an assignment of deed of trust that was signed and notarized in 2015, days after I filed. My loan servicer’s own VP (was supposed to have) signed as a MERS asst secretary, but just to make it worse, it isn’t the VP’s real signature. And the deed was assigned to the loan servicer. The assignment makes no mention of a note, which I’ve heard is a fatal flaw. The chief thing is that an obviously forged signature didn’t stop the loan servicer from presenting this as proof of claim in a federal courtroom. “Fraud upon the court” is so serious it has no statute of limitations.

  6. Steve

    Anyone can make assumptions about what happen between the borrower and the mortgage whore they slept with but the borrower had NO way of predicting the lender would not verify the income after signing the 4506-T form. The felony of falsifying loans rests solely on the loan broker. The only up to date discipline the loan brokers faced is a new rule requiring them to take an eight hour class on ethics. Can’t beat that deal for multiple felonies.

    1. crittermom

      And under HAMP we were required to submit a new “4506-T” each month.

      In fact, a common reason for denying us permanent mods was that our 4506-T was outdated.
      What a farce. (Hey, I’m trying to be ladylike)

  7. crittermom

    Not to mention they also required I send ’em the same year tax return no less than nine times as they would say it was no longer in my file & couldn’t complete my mod without it.

    Upon the tenth request for the same paperwork, I finally asked if they thought my tax return would be any different for that year this time around?

    So many lies…..

  8. Tom Stone

    Lambert neglected to mention “Teaser Rates” which were often as low as 1%. Before the madness I worked as a loan broker and made a decent living, once the teaser rate arms, ninja loans, and other “Creative” financing became popular I got out of the business.
    The small loan brokerages were a “Beard” for the big lenders who could point to the reps and warranties and and assure anyone who bought their paper that the little guys would make the loan good if there was fraud. One local outfit went from 30 offices to 2 in 2 years…anyone notice that once underwriting came back in style that there was no growth in loan brokerages?

  9. Knute Rife

    Yep, liars’ loans were nowhere near Alt-A, and the WSJ knows it. It also knows liars’ loans typically did not require even the documentation it lists for subprimes. But then it’s well established the WSJ will say anything.

  10. Procopius

    Well, well, I learn something new again. I always thought “Alt-A” mortgages were the mortgages with low teaser rates that spiked up to high interest after three or five years. Now a Google search tells me those are properly called “adjustable rate” mortgages. Of course they were popular with speculators, because they figured they’d be flipping the house before the higher rate kicked in, but a lot of poor people got sucked into using them, too, apparently without understanding that their monthly payments were going to go way up.

  11. TedWa

    I’m an appraiser that got out of the business from 2006 to 2008 when I saw home values, that has steadily risen at about 3% a year for at least the last 10 years, rise 10-20% a year. My office, in about 2004-2005 was being deluged by brokers yelling and insisting that I get the values they needed to make the loans work. I just hung up on them, but appraisers that couldn’t find any work anywhere else, listened and did their bidding. The banks were giving these brokers kickbacks (illegal) to write as many loans as they could. This illegal incentive by the banks was so lucrative that it actually led to roving bands of brokers that took their high pressure pitches from state to state across the country. But, still they were not creating enough loans. So the banks in 2005-2007, led by Chase owned Eappraiseit and WAMU, set about taking these compromised appraisers that they had found across the country through these brokers, to commit even more obvious frauds in home valuations and touted Values will Never Go Down – incentivizing small speculators to take out more loans for 2nd and 3rd houses and investments. A task force found over 240,000 fraudulently inflated appraisals over this period – all across the country. That is enough to skew over-inflated values in every state. This task force was led by Andrew Cuomo who decided not only not to prosecute, but who decided all on his own that companies like Eappraiseit were vital and needed to be protected by law through his HVCC so that these bank owned companies that created the mess, could stay in control of the these complicit appraisers. No one noticed that Cuomo had been a chair of a company just like Eappraiseit.

    Honest appraisers were mostly not a part of this as they had been excluded by being black-listed by the likes of WAMU and Eappraiseit for not getting the values they needed and being too independent. However, even good appraisers got sucked up into this because once these over-inflated homes sales were recorded, they had to be used in the process going forward.
    Tax Assessors also had to use these inflated valuations to measure the market – I state this to let some know how your high appraisal turned into a higher tax assessment.

    That said, Mr. Bill Black is my hero for getting it, it’s a complicated matter but one I know all too well.

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