Clark Howard's Tips

May 9, 2008

Have you heard of anyone who wanted to refinance their mortgage and couldn't do so because the appraisal came in too low? This is the natural result of the pendulum swinging back after a spike in inflated real estate appraisals.

Months ago, Clark told you that 90% of appraisers say they've been pressured by mortgage lenders to artificially raise the value of a house. About 5 years ago, that number was just a little over 50%. Standards and ethics became much looser as everybody tried to make the deals happen.

Now we're in a time when many mortgage lenders are questioning appraisals because of the rapid decline of home values in many markets. Plus, they're scared of increased scrutiny of their lending practices.

Here's what's been going on behind the scenes: New York State Attorney General Andrew Cuomo has been pressuring the industry to change how appraisals are done. He wants to ensure that loan officers can't influence appraisers and would actually be separated from the decision of which appraiser is hired.

The Mortgage Bankers Association is fighting hard to overturn the new rules so they'll still be able to get "liar's appraisals." That's just shameful, according to Clark. We've had enough harm done already to families who got into homes they couldn't afford and are now being put out on the street.

Meanwhile, Countrywide has been under a cloud for cheating people on their loans by coming up with false paperwork saying they owe additional money. Clark already relayed the report about Countrywide fabricating documents when they got caught cheating a homeowner with inflated loan fees. But after being caught, the company reached an agreement with the homeowner to keep the documents secret. Thankfully a federal judge intervened and said these documents need to come out -- especially in light of similar allegations against the company all over the country.

Countrywide is going to disappear as a company; either Bank of America will go through with a purchase, or it will fail. It's a shame that a once-respected brand has been sullied. Yet a lot was built on false pretenses and foolish lending. Clark was surprised to learn that the company had internal procedures in place to cheat people, especially those in bankruptcy. As always, Clark would love to have a Countrywide representative come on the show and explain their position.

Consumer advice courtesy of