26 Apr Inflated Appraisals
Inflated appraisals are one ofthe many abuses ofpredatory lending. Lenders and brokers earn more from higher loans, which are based on inflated appraisals, because of thecommissions, fees, and interest.Even the borrower benefits in the short term from borrowing more than otherwise would be, or should be, available. But things can go south in a hurry.
Consider this: A borrower sues on a loan based on an inflated appraisal, perhaps to defend against a foreclosure. Here’s the cross examination:
– “Did you borrow the money?” “Yes.”
– “Did you want to borrow the money?” “Yes.”
– “Did you spend the money?” “Yes.”
– “Were you happy to borrow the money? “Yes.”
– “Would you have borrowed more if it were available?” “Yes.”
– “Then, what are you complaining about?” “???”
But another examination would go this way:
– “Why did you borrow all this money?””I trusted the bank to lend me an amount I could afford to repay.”
– “Were you warned that you might not be able tomake the high payments?” “No.”
– “Were you warned that you would lose your homeif you could not make the high payments?” “No.”
– “Were you told that you could not sell your home in the foreseeable future, because the mortgage loan was so much higher than your home’s real value?” “No.”
– “Were you told that you wouldn’t be able to refinance your home either, for the same reason?” “No.”
– “Would you have borrowed all this money if you knew you could not sell or refinance your home again, and that you likely would lose your home?” “No.”
That’s the evil of inflated appraisals and inflated mortgage loans.

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