One reader has news on the appraisal aspect of the housing bubble. "Is everyone aware that they changed the new Fannie Mae forms to place more liability with appraisers shifting away from lenders. It’s an old tatic of blaming rouge individuals instead of the system. As a long time appraiser in the SF/Bay area, I am worried about how this will shake out.I am interested in what other appriasers think out the changes in the forms."

The Kansas City Star has this related report. "Many Americans no longer can trust appraisals to accurately reflect their home’s value. An independent and unbiased appraisal, once considered the bedrock of any home sale or loan, today is often built on shifting sands, according to concerned appraisers in Kansas and Missouri as well as nationwide."

"The FBI estimates that last year loan fraud bilked lenders and consumers of more than $1 billion, twice the loss reported in 2004. Concerned appraisers who talked with The Kansas City Star, however, say that the problem goes far deeper than that. They contend that thousands of homeowners across the country, from the urban core to the suburbs, are unwittingly victimized by an epidemic of inflated appraisals."

"'I’ve seen appraisals where descriptions and prices were totally fabricated, it can have a disastrous effect on consumers,' said appraiser Jack Shelton."

"A go-go real estate market is partly responsible for the inflated appraisal epidemic that gives consumers a false sense of their home’s worth. One disastrous result: mortgages and refinanced loans that exceed the value of a home and create crushing debts that can take years to pay off or lead to foreclosures."

"Annie Lewis knows what that feels like. 'It’s a very sick feeling,' said the Lee’s Summit woman, who fears losing the recently built condo she bought in 2003 for $94,000. In 2004, she responded to an Ameriquest TV ad to consolidate her debts by refinancing her home. She was delighted when an appraiser sent by the company valued her condo for $129,000, a 37 percent leap in value in little more than a year. She paid off bills and settled for a 7.7 percent adjustable rate mortgage."

"But it was too good to be true. This past year, six lenders rejected her efforts to get a new, fixed-rate loan to keep her interest rate from rising. All said her condo was overvalued and is only worth $108,000. Now, because of all the debts she consolidated, Lewis owes more than her home is worth, what’s called being 'upside down.' What’s more, her adjusted interest rate is set to jump to about 10 percent."

"Besides victimizing homeowners, overstated appraisals can lead to higher property taxes in a neighborhood, or losses to banks that relied on bogus appraisals to lend money. If home prices suddenly plunge, the much feared bursting of the 'housing bubble,' many loans could default."

"Wildly inflated values were partly to blame for the savings and loan debacle of the 1980s, which cost financial institutions and taxpayers billions and created a drag on the economy for years."

"Appraisers said the problem began to grow with the housing boom and low-interest rates that spurred aggressive loan brokers to encourage consumers to refinance their loans. The carrot dangled in front of consumers, in thousands of direct-mail campaigns, TV commercials and Internet ads, is freed-up cash to consolidate debts. But to make such high-dollar loans pass muster with underwriters, unscrupulous loan brokers chasing big commissions pressure appraisers to meet predetermined values. In other words, artificially inflate the value of the homes to justify the costlier loans."

"Appraisers say many have succumbed to pressure from brokers and some real estate agents to stay in business, if not to grease their own greed. 'If you don’t hit the right number, it can kill a deal,' said Steven Smith. 'I’ve had mortgage brokers flat out say, ‘Can you bring in this house at this or another number?’ If you say no, they’ll call someone else. They’ll just keep calling until they get someone who will give them that number,' added Smith, who said his business is down two-thirds because he has refused to exaggerate appraisals."