(Original Text, "Mmm, mmm, mmmh. Go Figure" Posted in 2007 by Gary E. Geraci)
Mmm, mmm, mmmh. Go figure. What’s that you say Mr. and Mrs. Homeowner? Your bank is ready to foreclose on your home?
You mean that home I appraised about a year ago for $100,000, the value that at the time your loan officer said was “too low?” Didn’t you and your loan officer get after me and say that I was “killing the deal?” Didn’t your loan officer then “save the deal” by calling in another appraiser who appraised the home at $120,000, the exact amount needed to get a new loan? And you guys now owe $120,000 on a home that every buyer, investor, appraiser, and real estate agent alike knows will only sell for $100,000. Oh, I’m so sorry that you lost your job Mr. Homeowner. I understand that you are now forced to sell your home. You’re kidding me? No offers yet on your $120,000 sales price? And you must ask for $120,000 because you owe $120,000? I see.
Mmm, mmm, mmmmh. Go figure.
What’s that Mr. Banker? I agree, that incompetent appraiser! Who convinced him to appraise such property at $120,000 in the first place? Yeah, I know. What’s that? You’re not going to lose a minimum $20,000 on that $120,000 loan that you made last year? But you’re taking the house back aren’t you? The homeowners can’t make the house payment and the market is only going to pay $100,000 because every house in the area identical to the one you are taking back is selling for, at the most, $100,000, correct? What’s that? You already sold off the loan interests in Mr. Homeowner’s property in a Residential Mortgage Backed Security offering (RMBS)?
So a Wall Street investor bought the $120,000 note convinced that should the note go bad, the collateral, the home itself, could be sold for $120,000? So you have passed the risks out of your bank and into the hands of American investors? Brilliant! (No wonder your loan officers commit bank fraud so regularly!) The bank’s own investors don’t have to deal with such risks and even if you were found responsible for the bad loan your legal department could simply go after the appraiser and sue him for inflating the appraised value thereby creating all the losses. After all, your bank did hire an independent, third party appraiser to appraise that property correct? Nice to absolve yourself of any wrongdoing right? What’s that? Seeing a lot of foreclosures as of late? I see.
Mmm, mmm, mmmh. Go figure.
So a Wall Street investor bought the $120,000 note convinced that should the note go bad, the collateral, the home itself, could be sold for $120,000? So you have passed the risks out of your bank and into the hands of American investors? Brilliant! (No wonder your loan officers commit bank fraud so regularly!) The bank’s own investors don’t have to deal with such risks and even if you were found responsible for the bad loan your legal department could simply go after the appraiser and sue him for inflating the appraised value thereby creating all the losses. After all, your bank did hire an independent, third party appraiser to appraise that property correct? Nice to absolve yourself of any wrongdoing right? What’s that? Seeing a lot of foreclosures as of late? I see.
Mmm, mmm, mmmh. Go figure.
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