How home appraisal fraud works; How Emma Watson can avoid being typecast as Harry Potter’s nerdy friend

“I hope that Chairman Bernanke is right when he says that a slumping housing market will not affect the broader economy, but I would not bet the house on it.” — Senator Chuck Schumer’s (D-N.Y.)

For loan refinancing– especially cash-out refinances, where you trade the equity in your home for cash in your pocket– lenders typically lend a certain percentage of the cash value of your home. If that’s not as much as you hoped, you can always get an appraiser to claim it’s worth more. Mortgage brokers may even have over-generous appraisers on tap– they want to loan you more money, after all, and once they’ve cleared the loan they don’t have to worry about you repaying it.

And it’s not that bad a lie, really, not in a surging market: after all, if the house isn’t worth a half-million now, it will be next year, right? As long as the market keeps going up, and as long as the client makes the payments, the lie goes undiscovered. If the rate resets and the payments go up, the client can refinance again, or sell the house in that surging market. If the rate resets and the payments go up and the market tanks… well then, we’re all in trouble.

Later: watch as I try to sort out the difference between “an investment” and “an expense.”

OK, the promised Harry Potter thought: Emma Watson could get out of being typecast as Hermione Granger by starring in a sex tape with Miley Cyrus. Seriously. It would be at least as effective as Dan “Harry Potter” Radcliffe appearing bollock-naked in “Equus.”

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