Lenders Allow and Even Encourage the Mortgage Broker to push the Buyer - the Borrower into loans that they cannot Afford. The Buyer is All for it Believes the Mortage Broker when they tell them that everything will work out. The Mortgage Broker gets an appraiser that will consistently come in at the price they need, the Lender "accepts" this Over Valued appraisal though they know that the Appraiser has stretched the limits of the appraisal.
This becomes the normal routine, and after a few months or a year, when the borrower Re-finances and the loan is stretched even higher then the borrower - buyer has gotten more equity out of the home then it will ever sell for. The Mortage Broker and the Realtor makes the Borrower - the Buyer thinks that, Believe that their home is really worth what the appraiser says and that their is no problem with the loan. The Lender accepting this appraisal creates a Comp, a Sold, a Closed Loan that is now used as a Comparable Sold for the Next appraisal and what the Lender Allows in the First Loan will increase in the Next loan, other appraisers will use this information to create comps for New Loans - for Buyers and the Price of Home Keeps Falsly Rising.
Another way to Stretch an Appraisal is in Commercial and in Ranch Appraisals - the Appraiser can use Statewide Comps, which is quite often not what should happen. For example a Bozeman Montana Ranch is Certainly has way more value to it then a Ranch in Troy, Montana. However, if they are "similar" or can be made to look like they are similar then they are Valued the Same... though an Educated Buyer Would Never Pay the Same.
The Lenders, the Mortgage Brokers, the Realtors and the Pressure they Put on the Appraisers is Responsible for the Lending Crisis we are Currently in.
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