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Banks will be losing their heads -
Along with the obvious over-valuing we're seeing just out in the streets, more than a fair amount of these properties were overvalued even when appreciation was present.
There's something called a "whip" - a variance allowed between what the bank actually finds as value, and the determined value on appraisals -
Lenders we allowing up to a 12% whip OVER the AVM value declared (Automated Valuation Model - sort of a fancy zilllow that's rarely off) even at 100% LTV.
I'm doing a refi for someone, I tell the appraiser to punch up the value - comps are sketchy and we're going for 100% LTV - the AVM comes in 12% under what I declare, I'll still make it.
There's the predicted amounts that RE are sliding, and there's the loan amounts owed against them, which in some cases the properties were over valued 12% even at the time of appraisal.
The actual $$$ amounts oweds will be worse for some. Depreciate 10%, be in the hole 22% over value.
rjp
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