Sorry. How can anyone guarantee that a property value won't depreciate at all over the ownership period? It can't be done. Property ownership is an investment and a gamble. That means with the good can come bad just like with any other investment. Should we make companies guarantee that stock values do not depreciate? What about people who invest in gold and silver, or mutual funds?

There is just no way to manipulate supply and demand to make sure that values do not drop. It is impossible. The market sets itself, one can't set the market. What if the neighborhood turns to crap, crime rises, employment changes, an airport is built next door, the school system collapses, the home is not maintained and is falling apart and so on?

Wagner, How in the world can you guarantee an investment wont depreciate? You would have to have the ability to control supply and demand and all other external factors.

Still trying to understand your plan here. We will leave aside the illegal activity, as you suggest above. Now the homeowner will get a home, and if it goes up in value, he wins. If it goes down, the bank will guarantee it. Is that a fair summary?

If so, the nearest analogy that I can come up with is vehicle leasing. However, in leasing, the homeowner doesn't get title, just the right to use the asset (with a potential buyout clause). That just seems a lot closer to renting a home rather than owning a home.

If the banks offered this financing for purchases, they would spread the risk over all of their customers, who would pay collectively for this service. Sounds a little bit like socialism. What are we missing here?

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Not twisting your bro but how are the responses you gave in post #41 an answer to my question?

I honestly fail to see the logic in your answers or for that matter your logic in your initial solution to the problem. But let's re-visit you solution again.

Make lenders responsible for the value. If they appraise and loan money based on a 'value' they must honor that same value, regardless of market, for any refinancing or other adjustment measures as long as the paper stays with the originating bank?

Here are the questions again.

#1 The most common type of fraud that MARI found pertained to employment history and income. Many applications exaggerated how much borrowers earned and misrepresented their job descriptions.
(In what way will your solution solve this problem)

#2 The biggest increase came from a jump in the number of undisclosed or incorrectly reported debts, liens and judgments.
(In what way will your solution solver this problem)

#3 Most fraud involves average home buyers whose lending officers feel compelled to tweak their applications. But some involves criminal enterprises.
( In what way will your solution solve this problem)

As you consider your answer please keep in mind that the area where real estate is located may be different. For example in California some lots are worth more than the houses that sit on them and therefore the variables in value depends to a great degree on both land and real property sitting on it.
So Making lenders responsible for the value of something may not work as simply as you put it.

Finally to say that "a lender must honor that same value, regardless of market, for any refinancing or other adjustment measures as long as the paper stays with the originating bank" makes no sense whatever. Not even you would do that.

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All right, all 3 at once

1) Loans such as sub-prime and int. only or reverse are gone.
2) Many people purchase a home as that, a home, not something they plan on drawing equity from on a whim or using to bulk up a portfolio.
3) The value assigned to the property is the assumed value by the buyer.
4) The assigned value to a property is the estimated lowest value of the home on the real estate market.
5) Banks pad their initial risk with interest rates.
6) Banks essentially assume no risk after the loans are sold in bulk on Wallstreet.
7) If the loans go belly up, the new package holding bank has the bag.
8) If the lender is doing their job and forecasting value of an area, why should it be such a risk to assume the value? How long has it been since there has been such a housing crisis (20+ years by my count if you go back to the early 80's)? The over-valuing of a property is what leads to a problem like we have now. Supply and demand are a part of the problem. A product is being given a false price tag, the return is a domino effect on every aspect; from selling a home, to refinancing a home, to purchasing a home, to equity against a home. All based on an initial false and inflated figure.
9) It shouldn't be possible for someone to lie, especially in these numbers, on a loan application. It is the lenders job to discover that prior to cutting a check. But that is a whole other topic, lending money as opposed to valuing an asset.
10) Sounds nothing like socialism, no one dictates you buy a home, no tax payer covers it. What we have now is completely corrupt Capitalism. And our collective response has been "well we will help with tax money", that is socialism.
11) And leasing a car or buying a car is in no way comparable to a home in which a person may stay their entire life. And I fathom that 99.9% of vehicle owners understand that purchase of a car will depreciate in value over time. Which is exactly it, there is nothing that is comparable to the situation of valuing a home.

And IMO the lot vs house cost in Cali, is the sole reason Cali is one of the WORST sub prime markets. Viewing a home as an equity driving portfolio asset is not common place. That is a recent 'phenomenon'.

Again, IMO, you don't have to agree and I've yet to see a concrete reason why backing the value wouldn't work. It is essentially what a Fannie/Freddie backed loan is to Wallstreet.

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"promote the general welfare, not provide the general welfare"

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

A home can be purchased as an investment, as a consuption good, or a combination of both. The reason of the purchase does not take out any risk of ownership.

Ever hear of a bidding war. Sometimes in desireable areas people will actually pay more than the market says for a home because they want to live in that particular house so badly. Thus, sometimes people who buy their home as a consumable good (as you stated) will acutally pay more than the investor. Should the banks guarantee that value?

What is a husband and wife get divorced and need to sell their home to divide assets. The sell is quick and less than they paid for it a year ago. Does the bank need to eat that loss? Same thing with an estate sale if someone passes away? Someone loses their job and needs to move fast and sells for less than market value, should the bank eat that too?

Are you going to limit the number of houses that builder can build or that people can put up for sale on the market at any given time? Is the bank going to be able to tell you when you can sell your home? If it is a bad market, maybe they won't want you putting your house up for sale until it gets better to get you a higher value.

A house is just something that you can't set the price on, or guarantee that it's value wont fluctuate up or down. Your concept just cannot work. There are too many external factors that affect homes values that NOBODY has control over. Building costs, demand, supply, schools, neighborhood, employment, transportation, interest rates, population, amenities/entertainment, how people in the area are maintaining their homes, etc. There is no way that a lender or anyone could guarantee anthing like this. You really need to step back and look at what you are saying. The real estate industry is an open market that cannot be set by a handful of individuals. It is set by millions of buyers and sellers and other factors.

Appraised value and sale value are not one in the same.

__________________

An unwavering defender of those I see worth protecting.

"promote the general welfare, not provide the general welfare"

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

I am an appraiser. I know that.

The only way your plan could ever work is if the lender could manipulate supply and demand to keep your homes minimum value at a certain number. How do you suggest they go about doing that? How do you suggest that they go about controling uncontrolable variables?

Do you understand that there is no way that anyone can positively tell you that your homes true value will not decrease at some point?

If I had answers to all those questions, I'd be Sec. of the Treas.

As an appraiser you should know then that your basis of value comes from values assumed in the area. If values are artificially inflated, any you base your estimates off those, you continue to expand the problem.

I never stated that they should guarantee the value never falls. My point is all the risk mitigation is done on the banks end with nothing in regards to the consumer. The interest is risk mitigation, sale on the market is risk mitigation, with all this risk mitigation the lender can assume the risk limits of value. Problems as we see now will occur time and again in a market in which values are over-estimated for sale on a larger market. Until the lending institution is someway accountable to the consumer, no method of legislation will change the outcome.

__________________

An unwavering defender of those I see worth protecting.

"promote the general welfare, not provide the general welfare"

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

You can only do so much as an appraiser. Once again, we don't set the market. If that is what homes are selling for, then that is what we have to report. That is a misconception. Appraisers do not give or set values. We report what the data tells us. Having said that, good appraisers will give less value to outlying sales (high or low) and look at the majority of similar homes in the area. There really isn't anything else that we can do. If typical homes in a particular area are selling for x amount of dollars then it is what it is. For better or worse, that is the market and we can only report it. There are always going to be fraudulent sales or sales that sold much higher than market value and the appriser should be able to differentiate between these and market value sales and not include them in a report.

I was under the impression that your whole argument was that banks should guarantee the value of the home never decreasing and take responsibility for hte loss. Isn't that what you are saying?

The bank is there to make money, not protect consumers. The consumers have choices on whether to buy or not. The bank simply provides those who chose to take the risk of home ownership the opportunity to do so. There are guidelines on what the bank will lend. It is not as if they are intentianally lending twice as much as the house is worth to screw the buyer. There are good decision and some that are a bit more risky. It is up to the buyer to determine which purchases have a good chance of doing well/appreciating and which dont, IMO.