First it was the robo-signers. Now automated appraisal programs are causing trouble for homeowners.
For a while, home appraisals were just a formality. Banks wanted to know what a home was worth and be sure they weren't lending too much. However, precision was not important when home prices rose. Appraisals generally came in high -- at least high enough for everybody to close a deal. Most appraisers are honest people who tried their best to arrive at a realistic value, but it was always better to come in high.
Banks got conservative during the mortgage crisis. They wanted a "true" appraisal value instead of a number that would get the deal through. In addition, new rules made it less likely that appraisers would grease the skids for loans to go through.
For some loans, banks have turned to computers (programmed to be conservative) to estimate a home's value. These appraisals are now criticized for being a little too conservative. Homeowners have had home equity lines of credit cut, and some can't refinance. The pendulum swings back and forth, and for now it looks like everybody -- including analysts who develop appraisal software -- thinks home prices can only fall.
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