Help is On the Way. Your Colorado State government wants to protect you. In a surprising demonstration of bipartisanship, a democratic state senator and a republican state representative are sponsoring a bill aimed at protecting consumers from fraudulent appraisals. This proposed legislation is the result of Colorado's un-enviable position as a leader in foreclosure rates. The theory is that the main reason for this situation is fraudulent appraisals. The new legislation would make it illegal for anyone involved in a transaction to coerce an appraiser to render a value other than the "true value" of a property. Mortgage brokers and Realtors can face numerous penalties to include loss of license and felony conviction. I am certainly relieved. This new legislation combined with a new law requiring mortgage brokers to undergo criminal background checks and become licensed should go a long way towards reducing the foreclosure rate in Colorado and protect home buyers from experiencing the nightmare of foreclosure.............NOT... Many of the so-called fraudulent appraisals are the result of the inexactness of the appraisal process. In some cases, it is necessary for lenders and real estate brokers to argue with appraisers in order to arrive at a value that is more consistent with a projected sale price than the value the appraiser obtained using the accepted techniques. There can be no exact estimate of what a reasonably informed buyer should be willing to pay for a property. For example, I was willing to pay more for the house I own here in Texas because it was located next to a lot that I already owned. Buying this house gave me a wooded acre with 160 feet of lake frontage. Had I not already owned the lot next door, I wouldn't have bought this house. This brings us to one of the most important rules of real estate. The value of any property will always be relative to the needs of a buyer and the perceived benefits offered by the property. Appraisal will always be an inexact process and the opinion of value of buyers, sellers, mortgage brokers and Realtors is often as reliable, and sometimes more reliable, than that of an appraiser educated in theories of valuation.
Is Regulation of Mortgage Brokers a Good Thing? I seriously doubt it. There are a number of laws on the book that should limit what I consider to be the biggest abuse in mortgage lending: deceptive advertising. Regulation Z of the federal Truth in Lending act would stop virtually all deceptive advertising if it were enforced. It is already illegal to not be truthful in loan applications. They could stop 90% of foreclosures by tightening underwriting guidelines and doing away with limited or zero documentation loans.
Even More Dangerous Than a Crook....is an honest man who doesn't know what he is doing. I think the mortgage industry is full of those. If you want straight answers on your mortgage, send me an e-mail or give me a call.
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