Last month, a survey of the national appraisal industry conducted by October Research Corp. reported that 90 percent of appraisers feel pressure to inflate the value of homes to meet expectations — be it a purchase price or an estimated value for a refinance.

Of course, this isn’t the first time evidence of appraiser pressure has been aired. Just four years ago, during the boom, a similar study found that a full 55 percent of appraisers had had lenders, brokers or owners attempt to inflate their values. In 2005, Jonathan Miller, appraiser and bubble blogger, launched Soapbox to "vent" about the "pressure myself, my firm and my profession was under to make the number ‘or else.’"

"It seemed that no one really cared about ethics or the risk placed on [the] banking system," he wrote recently. "Appraisers were fast becoming the enablers to fraud and a whole lot of ‘gray areas’ that I wanted no part of."

In a boom market, meeting the expected price was not as hard to do. Everyone was making lots of money and less anxious about each individual deal going through. But now that sales volumes are down, re-fi fever has cooled and some markets have softened, mortgage brokers and even lenders try to set their target value in advance of hiring their appraiser. This leaves the appraiser caught between a house and a hard place.

"Internet-based mortgage companies call all the time," says Curt Thor of Real Estate Appraisals Association of Northern California and a Marin appraiser with North Bay Real Estate Appraisals for over 20 years. "They’re fishing for appraisers. They tell me what the number is and ask me if I can match it."

Thor says he typically won’t even look at such offers because if he can’t match the number once he visits that house, he knows he’ll find himself battling with mortgage brokers over being paid for his time. Once when this happened, he filed a complaint about the broker with the Department of Real Estate and copied the broker’s boss. "I got a check very quickly," he told me.

 
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Sub-prime is today’s dot-com – the pin that pricks a much larger bubble.  Seven years ago, the optimists argued that equities as a broad asset class were in reasonably good shape – that any excesses were concentrated in about 350 of the so-called Internet pure-plays that collectively accounted for only about 6% of the total capitalization of the US equity market at year-end 1999.  That view turned out to be dead wrong.  The dot-com bubble burst, and over the next two and a half years, the much broader S&P 500 index fell by 49% while the asset-dependent US economy slipped into a mild recession, pulling the rest of the world down with it.  Fast-forward seven years, and the actors have changed but the plot is strikingly similar.  This time, it’s the US housing bubble that has burst, and the immediate repercussions have been concentrated in a relatively small segment of that market – sub-prime mortgage debt, which makes up around 10% of total securitized home debt outstanding.  As was the case seven years ago, I suspect that a powerful dynamic has now been set in motion by a small mispriced portion of a major asset class that will have surprisingly broad macro consequences for the US economy as a whole.

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CHICAGO (Reuters) - Jillayne Schlicke’s father used to tell her that mortgage banking was the "highest calling of all" because it involved helping people live the American dream of homeownership.

"I learned how to spell ‘mortgage’ when I was about 6 years old. It was on a flash card," said Schlicke, the daughter of two mortgage bankers and co-executive director of the Ethical Lending Foundation near Seattle.

As a widening crisis over nontraditional and subprime mortgages gone bad threatens to force millions of people out of their homes, Schlicke worries that mortgage brokers are well on their way to overtaking used car salesmen on the list of professions least trusted by consumers.

"We’re in ethical chaos in mortgage lending," said Schlicke, who followed in her parents’ footsteps and became a mortgage banker and now teaches classes for real estate agents, lenders and consumers on ethical mortgage practices.

"All you have to do is open up your spam (e-mail) bin and you see porn spam, and you see Viagra spam, and you see mortgage spam," she said, adding that the unethical behavior of a small minority of brokers was tainting the entire industry.

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