This week there have been many articles on the problems with the FHA reserve fund.
In recent years in my Region, as prices came down, the FHA loan became an ever larger part of the housing market sales. More so since the $8,000 credits became available.
This program allows many people who cannot qualify to own a home, to be able to buy one. That sounds great on the surface, but in fact it is bad when you realize what happens to them. They become preyed upon.
Typical transactions have nothing to do with the Market Value of a property, only in the structure of the deal, which, when all worked out, results in an agree upon Sales Price.
All is well for all who are involved from the sales or lending side, escrow and title too. Except, and unless, the appraiser assigned to the case figures out that the property is not worth the Sales Price.
Since the S&L Crisis of the 1980's after which appraisers were licensed for the Public Good, one might expect that the appraiser would be the best friend of a buyer who is otherwise being preyed upon.
That might be the case if there were any structural support for the honest appraisers. There isn't. Instead, there has been a continual conditioning of the appraiser by the client, to hit the Sales Price and call it Market Value regardless.
Those appraisers who would not play this dishonest game, were routinely not used.
No wonder now, that the loan losses are mounting, that the insurance fund reserves are being eaten up at an alarming rate. Not to mention the fact that Congress has been plundering them.
How will FHA survive? They will have to sue the appraisers and recover their losses on the Errors and Omissions Insurance policies.
This should be kept a secret, or it might scare the tens of thousands of accommodating appraisers who make a living hitting the Sales Prices.
The sadest thing is that there is no support or reward for the honest and competent appraiser. No one involved in selling or lending on real estate wants them.
FHA Appraisers work under constant pressures to inflate Values
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