What is mortgage appraisal fraud?


The way property values are calculated allows for mortgage appraisal fraud. The industry admits that in order to make some loans work, appraisers are asked to exaggerate or down price a house valuation.

Why does mortgage appraisal fraud happen at all?

Well, homeowners simply want their loan. Sometimes they simply want a home equity loan and their house equity is as much as they want to get, and the lender may push the appraiser to raise numbers a little to get that borrower's business. Also, if the loan-to-value ratio turns out too great, a borrower will have to get worse rates.

Mortgage appraisal fraud is particularly important to avoid with a new home purchase and this is where lenders are more careful and require third-party licensed appraisers to perform thorough home inspection as it is important not to buy property at twice its original cost. However, refinancing and home equity loans sometimes allow for a little twist on the numbers - just a little adjustment of the appraiser's valuation to get that refinance is sometimes practiced. It is difficult to control since the appraisal is subjective to the appraiser's opinion and it is normal two different appraisals ordered on the same property to have a several grand variation in price.

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