Lenders and some appraisers deny the home values are intentionally inflated. They point to comparable home sales to support the appraised property. They say the different appraisals may be the result of changes in the economy or real-estate market. They point out that the appraisals were done years apart. The change in value may also be attributed to lack of maintenance by the homeowner.
Lenders say they stand to lose the most by overstating a loan that goes bad.
EquiCredit made the loans to Howard and Glasgo. Inflated appraisals tend to occur more with refinancing subprime and predatory loans than with home purchases, according to those familiar with the practice. That's because the borrower already owns the house and is less likely to question an inflated appraisal that might be viewed as a sign that the property increased in value. Many of the high-cost predatory loans would not get approved unless the property value was overstated, according to those familiar with the practice. Predatory lending is a term used to describe companies that exploit unsophisticated borrowers with misleading marketing and hidden fees.