Resolving the mortgage fiasco is going impossibly long, and while words like 'fraud' and 'scam' have been floating since the beginning, they are really only now making big news. Unfortunately they still haven't much referenced the collusion between the lenders and appraisers, and in taking it a step further, the local assessor officials. I began blogging at the beginning of this mess, Not Rocket Science and Confessions of a Mortgage Broker, trying to illuminate the 'Big Picture' in my view regarding the chain of events and participants. Appraisers and local property assessors played a bigger role in my situation than has been discussed in any meaningful way, and as events unfold it becomes more and more clear that my situation mirrors the national situation pretty closely. That having been said, I do not suffer from a 'impending doom' adjustable mortgage, and I did manage to buy my properties before the effects of what was happening hit the actual prices.

I will blog more about my own story another day, for now I just want to re-state the chain of events as I see them:

• Interest rates drop to insulate us from the global economic decline of late '80's early '90's.
• Home mortgage rates decline a sufficient amount (8% to 6%) to spur massive refinance loans.
• Increase in refinance opportunities spawns massive increase in new lending company openings.
• Increase in new loans spawns massive increase in new appraisal company openings.
• Rate decrease lowers monthly payments on small 1st time buyer type homes enough to entice marginal buyers.
• Greed Kicks In.
• Inexperienced or questionable lenders target sub-prime market, develop/enhance 'no document' type loans.
• Above spurs 'Sellers Market' in home sales, agents take cue and raise sales prices.
• Lenders 'acquire' friendly appraisers to bump values and justify newly raised prices.
• Lenders/Underwriters accept new valuation methods from appraisers.
• Local assessors looking to boost revenue make record number of rate increases over 10 year period keeping up with market values.
• Lull in action spurs intense ads targeting sub-prime market with adjustable rates.
• Refi's and new purchases slow, huge pool of lenders look to create business, increase 'no document' type loans, rates stay low, prices continue to rise without value.
• After the first few rounds of adjustables become due, large numbers head into default causing loan qualifications to tighten. Borrowers look to refi as instructed but find qualifying tougher, and lower home values no longer match loan amounts.
• Massive defaults of sub-prime adjustable rate loans.
• Lower values make even fixed rate loans virtually un-refinanceable.
• Lenders (also the President and Mr. Mccain) blame irresponsible borrowers.

The rest, as they say, is history. A huge number of other things contributed to our situation, had all of these things happened at any other time it may not have ended with the same result. We need to clearly identify the failings in the system and make adjustments. This is a very good example of how a 'Free Market' approach with no real oversight or regulation doesn't come close to being a good idea. Free market for razor blades and cabinet doors, sure, but lets get together on things that effect our country as a whole like lending, health, transportation, energy and lets not forget military.

How Fraud Fueled the Mortgage Crisis:

"Brokers pushed borrowers to lie, lenders misled and ratings agencies looked the other way.
The debate over what caused the mortgage mess and how best to fix it is now taking a sharp turn, as new problems surrounding liar's loans and payment-option mortgages reveal the pervasive fraud, lying and deceit that permeated the market at its height.
As loans made to borrowers with decent credit begin to fail at a surprisingly rapid rate, it's becoming clear that widespread fraud helped support the entire mortgage system - from borrowers who lied on their loans, to brokers who encouraged it, to lenders who misled some low income borrowers, to the many lenders, investors and ratings agencies that conveniently and deliberately looked the other way as profits rolled in."

"Despite its widespread role, fraud hasn't yet been at the forefront of proposed rescue plans, which center on refinancing people out of loans now resetting to higher rates. That may begin to change as the mortgage market continues a meltdown that seems to have no end. As fraud becomes a focus, the question of who did most of the lying and cheating will be crucial in deciding who deserves help in any housing rescue plan. "

"Many people point the finger at investors playing the market or homeowners who bought more expensive houses than they could afford - the "irresponsible" borrowers cited by both President George W. Bush and probable Republican nominee Sen. John McCain (R-Ariz.). "
By Mary Kane 
The Washington Independent