Richard, great post but I need to disagree with you as there are some untrained appraisers who have been threatened with their livelihood if they didn't bring in a certain value.  The States in which these appraisers are licensed may have loose guidelines for their testing to get the licensing.  There were some mortgage brokers out there that did make a quick buck and then run while there were some really awesome lenders and bankers that really did are and were and are professionals.

I believe even if a bank employ they should be held accountable like you said.  However, the appraisers - alot of them don't understand what they really have to take into consideration.  I come from a strong family background in appraiser and I just reviewed a file for an estate whereby a family member set the brick building on fire.  The comparables used had different zoning and the PLA "price living area" with one zoning was $50 higher per sq. ft. then the properties real zoning.  Appraising isn't for everybody and yet I hear "it's a quick buck" all the time.  The appraisal is a well researched, validated from Realtors about the condition of the subject property instead of someone guessing the condition based on the MLS words in the comment section. 

Foreclosure is the last resort but I'm reviewing files where fraud was made on stated income because "i had to have it" yet they couldn't afford the building under normal conventional terms.  Greed got in the way, keeping up with the Jones' played a role, yet there were victims of mortgage fraud.  I've got a file right now where the seller used the equity in her property to buy another property and she is trying to unload her old one.  Because of a bad appraisal that said she was worth "x" and nobody in that area ever was worth "x" and she wasn't one of the top properties to even be worth "x" - she has to either get an equity loan on her new property to close out the old one or hold it with a negative monthly expense, plus needed repairs if she holds on to it that the lesser of two evils is a flip of a coin. 

There are signature loans to help those who have been responsible with their mortgages yet because of the adjusting market, the defaults on the loans, the loss of equity that prices have adjusted yet some markets are taking a bath because they never could afford and any form of workout sometimes is inevitable because they use their credit card to pay for groceries to keep their head above water to pay there obscence mortgage payment.  This isn't about whose to blame this is a credit crisis where programs hit the fan where everybody made money.  It was bound to happen. 

Nice dream trying to get everybody to love one another when it boils down to the way we could bounce back.  I am positive and I have been to DC about these matters as a strategist - it isn't as easy as it sounds.  I am from Michigan and my family has appraised the Western half of Michigan since 1911.  They are developers, engineers, builders, my grandfather, my father, my two brothers and now my nephews are appraisers. 

I agree that it can work but this world is not perfect and not everybody is honest.  Oh, I wish for the old days where deals were done on a handshake and that meant as good as a blood signature.  Look at the Constitution, it started out small and now we have amendments to amendments to the constitution.  It becomes complex.

I am greatful that Michigan has a strong accountability and wish other states would follow in her footsteps with such strong ethics.

Thank you. (formerly from GR)

Great post Richard, but I too agree with the last comment.  Some of this problem can be transfered to unethical appraisers who created a value that had no ryme or reason for.  Now granted not all appraisers were dishonest or are currently dishonest,  however I believe there are an equal number of Appraisers who fueled this mess as there are Mortgage agents.

I recognize there are both unethical appraisers and incompetent appraisers.  I only wish we could weed them out to better the profession.  Unfortunately, when standards are to be tightened, the lead time between the announcement and enactment allows too many to slip through the open window.  The recent changes taking effect in January of this year are a prime example.  Education requirements were to be drastically increased, specifically for Certified Appraisers; so a flood of appraisers hurried to attain their Certified level prior to 2008 and the enactment of the new guidelines.  I personally know many who were not qualified but slipped through because the state was deluged with so many upgrades they were unable to verify all the "experience" logs, many of which were fabricated.

But while all realize there are problems in the appraisal industry, I feel it's important to replace the horse in front of the cart.  I have been pressured as have about all appraisers to push values to make loans work with the threat of losing future work if I didn't comply.  Fortunately in my case, being a Certified General for over 15 years, there is ample non-lending work allowing me to stand firm.  I believe this is why so much emphasis is now being placed on distancing the originator from the appraiser - to eliminate that coercion.  Unfortunately, many healthy and prosperous business relationships between appraisers and lenders, which have been cultivated over the years through good service and mutual respect, are threatened by this new push to separate.  Many good lenders have favorite appraisers, not because they make every value, but because they are thorough and conscientious and treat the lender's clients in a professional manner with respect.  But back to the horse and cart, I do not believe that appraisers as a group realized that if they pushed values, they could locate some questionable lender to originate overvalued loans.  The appraisal industry did not develop No Doc, Zero Down, Negative Equity, dangerously explodable Adjustables and the long list of products which relied upon appreciating values to validate the loan in future years - and I also recognize that the consumers signed on the dotted line.  If blame is to placed more heavily on one than the other, then the lending industry needs to clean house and upgrade its member requirements.

But the purpose of the post was not to assign blame.  Rather to try to nudge some folks to get back to the basics of making GOOD loans and not penalizing even quality borrowers as we presently are doing.