Showing Appreciation: Inflated appraisals can create a house of cards

July 30, 2005 | The Patriot Ledger |
But a recent report by Demos, a think tank in New York, said the refinance boom has put many homeowners at financial risk because inflated appraisals that are used to refinance homes can leave homeowners with negative equity in their properties.
 
As falling interest rates transformed millions of U.S. homes into virtual ATM machines, critics say the real estate appraisal system has become rife with conflicts of interest as inflated appraisals justify ever-riskier loans.